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InfoBytes Blog--Buckley Sandler, LLP

On January 29, the New York Department of Financial Services (NYDFS) announced an order adjusting the minimum rate of interest that New York State-chartered banks and other New York State-chartered financial institutions (collectively, “covered institutions”) must pay on certain mortgage escrow accounts. Prior to the order, covered institutions were required to pay a minimum rate of two percent per annum on certain residential escrow accounts. To more closely align with requirements for federal banking institutions, the order adjusts the minimum rate of interest that covered institutions must pay to the lesser of two percent or the six-month yield on United States Treasury securities.

InfoBytes Blog--Buckley Sandler, LLP

On January 26, the Maryland Financial Consumer Protection Commission (the “Commission”) and ranking officials from the Maryland legislature announced bipartisan “Interim Recommendations” of the Commission for State and local action in response to the federal government’s “efforts to change or weaken […] important federal consumer protections.” New legislation in response to the recommendations is expected to be released in the near future. Key recommendations include, among other things: (i) requiring credit reporting agencies to provide an alert of data breaches promptly and provide free credit freezes; (ii) adopting new financial consumer protection laws in areas where the federal government may be weakening oversight; (iii) addressing potential issues with Maryland’s current payday and lending statutes; (iv) adopting the Model State Consumer and Employee Justice Enforcement Act that addresses forced arbitration clauses; and (v) adopting new laws that address new risk, such as, virtual currencies and financial technology.

Bankers Advisory--Robert Harrison

The Arizona Office of the Secretary of State amended provisions relating to notary public fees: Arizona Administrative Code Section R2-12-1102. These amendments require a notary public to:

• keep a fee schedule posted at all times in a conspicuous location;
• select a standard fee for a notarial act ranging from “no charge” up to $10;
• use the template in Exhibit 1 of Section R2-12-1102when posting fees; and
• inform the requestor of the service what the fee will be before performing any notarial act.

Fees a notary may charge in Arizona have not increased in 21 years; up to $2 per signature notarized. A notary may increase fees under these new provisions; for acknowledgement or jurat, a notary may charge up to $10 per notary signature, up to $10 per page certified for a copy certification, and up to $10 per notarial act for an oath or affirmation.

These provisions are effective on March 5, 2018. The full text of these provisions can be found in the following document: http://apps.azsos.gov/public_services/register/2018/3/contents.pdf

In an effort to promote and assist our regulated financial institutions in achieving greater protection against increasing risk of cybersecurity attacks, the Department will be enhancing its supervisory oversight and examination process by adding a number of specific questions relating to cyber security to its first day letters, which will be issued by the Department in connection with its examinations of institutions starting in January 2018. Specialist examiners will be called upon as the need arises.

This new process is intended to assist our regulated financial institutions in identifying their risks of cyber security threats and in managing such risks by taking necessary steps and adopting measures designed to protect and secure the financial system, consistently with DFS’s landmark cybersecurity regulation. DFS examiners will work with institutions to enhance governance and controls, and seek to protect the security of data and financial systems. In light of the increasing volume and sophistication of cyber security threats, the Department encourages all institutions to view this as an integral aspect of their overall risk management strategy and programs.

Bankers Advisory, Compliance Monitor--Robert Harrison

Ohio House Bill 199 amends multiple sections of the Ohio Revised Code to create the Ohio Residential Mortgage Lending Act (the Act) for the purpose of: regulating all non-depository lending secured by residential real estate, limiting the application of the current “Mortgage Loan Law” to unsecured loans and loans secured by other than residential real estate, and modifying an exemption to the Ohio Consumer Installment Loan Act. This bill was signed by the governor on December 22, 2017 and is effective 91 days after filing with the Secretary of State. Some of the important changes are discussed below.

“Mortgage Loan Law” changes

What was previously referred to as the “Mortgage Loan Law,” Ohio Revised Code sections 1321.51 to 1321.60, governed non-depository lenders that made loans secured by a mortgage, loans secured by something other than real estate, and unsecured loans. The Act limits the application of the Mortgage Loan Law to unsecured loans, and loans secured by something other than residential real estate. Under the Act, non-depository lenders that make loans secured by real estate are now governed by the Act.

The registration requirements have been modified; a lender must obtain a certificate of registration issued by the Superintendent of Financial Institutions in order to make loans, and lenders are not subject to the prior bonding requirement. The Act also eliminates the “mortgage loan originator” license that covered individuals who were compensated by a registrant.

The Act requires advertising for loans subject to sections 1321.51 to 1321.60 of the Revised Code not be false, misleading, or deceptive. The Act removes the description of what “false, misleading, or deceptive” advertising includes and states in any advertisement, a registrant shall comply with 12 C.F.R. 1026.16.

Ohio Residential Mortgage Lending Act

The Act is enacted as new Revised Code Chapter 1322, with the purpose of regulating all non-depository lending secured by residential real estate. It provides for the registration of mortgage lenders and mortgage brokers and the licensure of mortgage loan originators. Sections 1322.04 and 1322.05 provides for exemptions from the Act, including, but not limited to:

• Any entity chartered and lawfully doing business under the authority of any law of Ohio, another state, or the United States as a bank, savings bank, trust company, savings and loan association, or credit union, or a subsidiary of any such entity that is regulated by a federal banking agency and is owned and controlled by a depository institution.
• Any entity created solely for securitizing loans secured by an interest in real estate, provided it does not service the loans. For this purpose, “securitizing” means the packaging and sale of mortgage loans as a unit for sale as investment securities, but only to the extent of those activities.
• A credit union service organization, if it utilizes services provided by registered mortgage loan originators or it holds a valid letter of exemption issued by the Superintendent of Financial Institutions in accordance with the Act;
• A depository institution not otherwise required to be licensed under the Act that voluntarily makes a filing on the Nationwide Mortgage Licensing System & Registry as an exempt entity for the purpose of licensing loan originators exclusively associated with it, and it holds a valid letter of exemption issued by the Superintendent of Financial Institutions in accordance with the Act.

Section 1322.07 states that “no person, on the person’s own behalf or on behalf of any other person, shall act as a mortgage lender or mortgage broker without first having obtained a certificate of registration from the superintendent of financial institutions for the principal office and every branch office to be maintained by the person for the transaction of business as a mortgage lender or mortgage broker in this state. A registrant shall maintain an office location for the transaction of business as a mortgage lender or mortgage broker in this state.” The Act prohibits acting as a mortgage loan originator without a license from the Superintendent of Financial Institutions. A mortgage loan originator must be at least associated with a mortgage lender, mortgage broker, or entity holding a valid letter of exemption. However, the originator can only be associated with one mortgage lender, mortgage broker, or exempt entity at a time.

Ohio Consumer Installment Loan Act

The Ohio Consumer Installment Loan Act (CILA) generally does not apply to any credit transaction that does not require equal monthly payments. Under the Act, CILA applies when, with respect to a precomputed loan, the first installment period is extended and the first installment payment is larger than the remaining payments by the amount of interest charged for the extra days. Revised Code 1321.631(B)

The full text of the amendments can be found here: https://www.legislature.ohio.gov/legislation/legislation-summary?id=GA132-HB-199

Adopted Emergency Rule 1/12/2018

§418.1 Requires that persons or entities which service mortgage loans on residential real property on or after a specified date be registered with the Superintendent of Financial Services.

Article 12-D of the Banking Law requires certain Persons (certain terms in this Part are defined in Section 418.3 below) engaged in the business of Servicing Mortgage Loans to register with the Superintendent . Sections 418.2 to 418.11 of this Part 418 implement such registration requirements. Article 12-D of the Banking Law also provides exemptions from such registration requirements for certain Exempted Persons, provided that such Persons notify the Superintendent that they are Servicing Mortgage Loans in this state and comply with any regulations applicable to Persons so engaged. Sections 418.12 and 418.13 of this Part 418 set forth financial responsibility requirements that are applicable to applicants for Mortgage Loan Servicer registration as well as to both registered and Exempt Persons engaged in Servicing Mortgage Loans in this state.

Bankers Advisory, Compliance Monitor--Elizabeth Dailey

Texas has adopted provisions related to mortgage lending. These provisions are effective as of January 7, 2018.

Licensing

The first adopted provision concerns a licensing exemption for individuals or corporations conducting depository agent services. A person or corporation under written contact with the comptroller to operate the depository, who acts only within the scope of authority conferred therein, is not required to be licensed.

Definitions

The definition of “physical office” as applied under these provisions has been simplified to mean “an actual office where the business of mortgage lending and/or the business of taking or soliciting residential mortgage loan applications are conducted.”

The more detailed definition of “physical office” is now included for these provisions. The characteristics of a physical office under this section include a physical or street address, accessibility by the general public, the posting of business hours, and the presence of at least one staff member to a

Full Text

Bankers Advisory, Compliance Monitor--Elizabeth Dailey

The Finance Commission of Texas has implemented provisions regarding pre-licensing education. These provisions are effective as of January 4, 2018.

One provision requires that an individual who has completed the twenty hours of pre-licensing education required by the S.A.F.E Mortgage Licensing Act but fails to obtain a valid license within five years from the date of completion must retake the twenty hours of pre-licensing education to be eligible for licensure.

Similarly, an individual who obtains a valid residential mortgage loan originator license but fails to maintain it for five consecutive years must also retake the twenty hours of pre-licensing education to be eligible for licensure.

Full Text

Bankers Advisory, Compliance Monitor--Elizabeth Dailey

Pennsylvania Amends Mortgage Loan Licensing Provisions

Pennsylvania has modified provisions regarding mortgage loan licensing. Some of these provisions are effective immediately, while others are effective upon the promulgation of regulations by the Department of Banking and Securities of the Commonwealth.

Definitions

“Clerical or support duties” has been updated to exclude “offering or negotiating mortgage servicing terms” to a consumer from its definition.

The term “delinquent” has been added to this section, and is defined as the date when a periodic payment is due and goes unpaid by the borrower.

Other definitions added to this section include “loss mitigation option,” “mortgage servicer,” and “single point of contact.”

License Requirements

Generally, a person must be licensed in order to lawfully engage in the mortgage loan business in Pennsylvania, though there are exceptions. A new exception has been added, which allows a mortgage lender to act as a mortgage servicer, even without a separate mortgage servicer license for loans he or she has originated, negotiated, and owns.

However, a person licensed only as a mortgage servicer may only perform the services of a mortgage servicer.

Additionally, Section 6131 sets out application requirements to be used by the department when issuing mortgage servicer licenses to potential applicants.

Mortgage Servicers

Upon an open-end mortgage being paid off in full, the mortgage servicer is required to do the following:

1. Request the mortgage holder release the lien on the property and deliver to the consumer an assignment, release, or other certificate evidencing the release; and
2. Request the mortgage holder cancel any insurance associated with the loan and refund the borrower any unearned portion of the insurance premium.

Mortgage servicers are also required to establish a single point of contact for borrowers to discuss foreclosure or loss mitigation matters, no later than the 36th day of a borrower’s delinquency.

Full text of Senate Bill 751

Pennsylvania Modifies “Base Figure” Definition

The Pennsylvania Department of Banking and Securities has updated its definition of “base figure” from $244,856 to $250,324 for the 2018 calendar year. This new figure is effective as of January 1, 2018.

Full text of Pennsylvania Bulletin 7054

docutech

On December 22, 2017 Gov. John Kasich (R-OH) signed into law OH HB 199 (2017), which creates “the Ohio Residential Mortgage Lending Act for the purpose of regulating all non-depository lending secured by residential real estate, to limit the application of the current Mortgage Loan Law to unsecured loans and loans secured by other than residential real estate, and to modify an exemption to the Ohio Consumer Installment Loan Act.” (https://www.legislature.ohio.gov/legislation/legislation-summary?id=GA132-HB-199)

This bill takes effect 90 days after it has been filed with the Ohio Secretary of State, per Ohio Const. art. II, § 1C (no date has been set yet, but it should be a short time after March 22, 2018).

Black, Mann & Graham L.L.P.

Effective January 7, 2018, the Finance Commission of Texas on behalf of the Department of Savings and Mortgage Lending revised the definition of “physical office” for residential mortgage loan companies and mortgage bankers, as follows:

• §80.2.Definitions. (10) "Physical Office" means an actual office where the business of mortgage lending and/or the business of taking or soliciting residential mortgage loan applications are conducted.
• §80.206.Physical Office  and §81.206.Physical Office. Defines additional requirements, such as a physical street address (no PO Boxes), be a publicly accessible place of business with published hours of business, have a minimum of one (1) staff member on premises during hours of business, have direct access to business records accessible to the Commissioner or designee for inspection during normal business hours.

These amendments to 7 TAC Chapters 80 and 81 defining the physical office of residential mortgage loan companies and mortgage bankers, respectively, are not substantial in content. They merely divide the existing definition of a physical office into separate sections: §§80.2 and 81.2, respectively, retaining a statement of the purpose of the office, while the specific requirements for the office are moved to new §§80.206 and 81.206, respectively.

Print memorandum.

Bankers Advisory, Compliance Monitor--Zachary Pearlstein

The state of New Jersey has recently lessened the state’s restrictions on appraisal fees, effective immediately.

The New Jersey Department of Banking and Insurance has recently eliminated certain borrower protections regarding appraisal fees. Since 2002, lenders in New Jersey have been subject to N.J.A.C. 3:1-16.2(a)3, which sought to protect borrowers from being over-charged for appraisal fees.  The concern was that, at this time, appraisals were commonly performed by in-house affiliates or appraisal management companies that were affiliated with lenders, rather than by independent third-party appraisers.  The Department enacted certain restrictions in response to a concern that borrowers were being charged for the cost of appraisals, plus the added cost of in-house or AMC services.

The Department’s 2002 regulations sought to protect consumers by establishing a “usual, customary and reasonable fee” standard for the cost of an appraisal. In order to establish this value, the Department was permitted to conduct an annual survey of third party appraisal fees charged by lenders to determine the current “usual, customary and reasonable” fees.  These fees would then become the benchmark for permissible fee amounts published in the New Jersey Register.  The Department specified that even if the appraisal was performed and delivered in-house, the fee must still approximate the usual, customary, and reasonable fee for comparable appraisals by third party appraisers, established pursuant to the survey.

The Department has now determined that the 2002 concerns about in-house and appraisal management company charges are outdated. The Department has further determined that the survey benchmark could be an unnecessary restraint on the free market for appraisal fees, may have a negative impact on the business community, and may constitute an unneeded and burdensome regulatory requirement imposed upon lenders.  Because the survey imposed a cap on appraisal fees without significantly protecting borrowers, the Department has decided to eliminate the survey and the “usual, customary and reasonable” fee pricing concept.  The Department has adopted a simple requirement that an appraisal fee charged to a consumer must total no more than the amount charged by a third-party appraiser.