Compliance Newshub
State News

Bankers Advisory, Compliance Monitor--Zachary Pearlstein

The Iowa Finance Authority has recently clarified and simplified the rules governing the state’s Military Service Member Home Ownership Assistance Program, effective November 29, 2017.

The Iowa Military Service Member Home Ownership Assistance Program (MHOA) allows for one time assistance of up to $5,000 per eligible service member (including veterans), which may be used toward a down payment and/or closing costs for the purchase of a qualified home. If co-purchasers are both eligible service members, only one may use the MHOA per home purchase.  If another home is purchased at a later date, the other eligible service member may use the MHOA on the second home.

Eligible service members must have served a cumulative 90 days of active duty between August 2, 1990 and April 6, 1991, or between September 11, 2001 and the present. Federal status injured service persons are also eligible if he or she served in active duty between August 2, 1990 and April 6, 1991, or between September 11, 2001 and the present. The surviving spouse of an eligible service person is also eligible for the MHOA, as long as the eligible service person was not dishonorably discharged.

Eligible homes must be in the state of Iowa, and must be occupied as the service member’s primary residence. The home must be either a single-family residence (including “stick-built,” modular, or manufactured homes that are attached to a permanent foundation and taxed as real estate), or a condominium, townhome, or a two to four unit residential property where one unit is to be occupied by the eligible service member.

When the purchase of a home under the MHOA is to be financed, the service member must apply through a participating lender. If the service member qualifies for the program, the mortgage financing provided must be a qualified mortgage.  Once the lender has received all of the information required from the service member, the lender must then transmit copies of the necessary documentation to the Iowa finance authority. The authority must then submit the status documentation to the Iowa department of veterans affairs for verification that the applicant is an eligible service member.  The Iowa department of veterans affairs will be the final authority as to whether an applicant is an eligible service member.  Upon confirmation of the applicant’s eligibility by the Iowa department of veterans affairs and the authority, the authority must then notify the lender (or eligible service member in the case of a cash purchase) that the MHOA application has been approved.

Bankers Advisory, Compliance Monitor--Ryan Peters

The State of New York has amended NY Ins L § 6503(c), effective immediately.

Mortgage insurers providing coverage on loans secured by a first lien on real estate may now elect to pay the entire indebtedness to the insured and acquire title to the authorized real estate security. Previously, a mortgage insurer was required to limit its coverage, net of applicable reinsurance, to a maximum of twenty-five percent of the entire indebtedness to the insured, or in lieu thereof, a mortgage insurer.

Additionally, a mortgage insurer providing coverage on loans secured by a junior lien on real estate may now “elect to insure a portfolio of loans secured by instruments constituting a junior lien on real estate.” Prior to this amendment, a mortgage insurer was required to:

“…limit its coverage net of applicable reinsurance to a maximum of twenty-five percent of the combined indebtedness of all existing mortgage loan amounts at the time the loan is made secured by all liens or charges on the real estate, or in lieu thereof, a mortgage insurer may elect to insure a portfolio of loans secured by instruments constituting a junior lien on real estate, provided that the total amount at risk in any one pool shall not at any time exceed twenty  percent of the original principal mortgage loans insured.”

Senate Bill 1478

Bankers Advisory, Compliance Monitor--Margaret Wright

The state of Montana has updated the definition of “alter” as used in MCA 32-9-124(1)(l): mortgage licensees may not “knowingly withhold, abstract, remove, mutilate, destroy, alter, or keep secret any books, records, or other information from the department [of administration].”

Loan documents may not be altered by:

1. Using correction fluid, correction tape, or any other means of changing or covering over a date or signature not on the original;
2. Inserting a signature or date not on the original; or
3. Making any other change to a document.

Permissible error corrections include:

1. Reprint the document, have it re-signed, and retain the original document noting in the file why the document was reprinted and re-signed; or
2. Strike out the error, put the correct text beside it, and initial and date the change.

View Update

Bankers Advisory, Compliance Monitor--Robert Harrison

The Illinois Department of Financial and Professional Regulation adopted rules to repeal and amend certain portions of its Residential Mortgage License Act. The changes to Title 38 of the Illinois Administrative Code Section 1050 are effective immediately.

• Section 1050.320 is repealed because the requirement to complete the renewal application and send it to the Director no later than 60 days prior to the licensee’s annual renewal date conflicts with Section 2-6 of the act which enforces a 30-day timely renewal application deadline.
• Section 1050.490 contains amendments to the bonding requirements that enable the use of the new electronic surety bond and remove the submission of paper surety bonds. The amount of the bond shall be not less than $25,000 and in an amount according to the scale in subsection (b) of the section. Each Mortgage Loan Originator must be covered by the electronic surety bond filed and maintained by his or her employing licensee.
• Sections 1050.710-1050.750 related to foreclosure rate are repealed because Public Act 99-0015 amended the regulations’ underlying Act Section 4-8 to now instead address Loan Delinquency data and its implementation.
• Sections 1050.810-1050.820 & 1050.860 are amended to repeal consumer notice provisions because these notice provisions are preempted by the federal Consumer Financial Protection Bureau (CFPB). Licensee must comply with the notice requirement set forth in 12 CFR 1024.33 when providing notice to mortgagor of transfer.
• Section 1050.1010 is amended to add reference to the CFPB’s TILA-RESPA Integrated Disclosure (TRID) Loan Estimate and the “Your Home Loan Toolkit” document; the Loan Estimate replaced the Good Faith Estimate for most residential mortgage transactions and the CFPB’s “Your Home Loan Toolkit” replaced the settlement cost booklet. The loan brokerage agreement must contain a description of the services to be provided by the licensee and an accounting of estimated fees paid to the licensee that may be provided through reference to, or be taken from, a good faith estimate or TILA-RESPA Integrated Loan Estimate. The “Your Home Loan Toolkit” may be obtained at the CFPB website: consumerfinance.gov, or from the United States Government Printing Office (GPO) at the GPO website: bookstore.gpo.gov.
• Section 1050.1176 is amended to allow servicers to preserve their records in electronic or digital format rather than adhere to a paper record-keeping requirement.
• Section 1050.1230 and 1050.1305 are repealed because there are CFPB-required notifications to consumers of loan term changes in the TRID process.
• Section 1050.1320 is amended add a reference to the CFPB’s adopted TRID Loan Estimate form in addition to the Good Faith Estimate.

ft Journal--Editorial Staff

The California legislature recently passed SB 173, which:

• renames the CalBRE the DRE; and
• removes the CalBRE from the Department of Consumer Affairs (DCA) to classify it as an independent department under the Business, Consumer Services and Housing Agency (BCSH).

The new rules become effective July 1, 2018.

Potential impacts to documents that must now reference Department of Real Estate:

• CA Fair Lending Notice
• CA Mortgage Loan Disclosure Statement 

InfoBytes--Buckley Sandler, LLP

California Governor Jerry Brown signed into law revisions to sections of the state’s Financial Code to incorporate references to federal Military Lending Act (MLA) amendments and applicable regulations. Impacted are the state’s Banking Law, Credit Union Law, Finance Lenders Law, and Deferred Deposit Transaction Law. Specifically, SB 266 is designed to ensure that the California Department of Business Oversight’s Commissioner has the authority to enforce violations of the federal MLA rules by state-regulated lenders. The provisions also incorporate additional changes to Section 394 of the state’s Military and Veterans Code to prohibit discrimination against servicemembers. The amendments take effect January 1, 2018. 

Bankers Advisory, Compliance Monitor--Rhona Kyeyune

The state of Delaware amended its provisions relating to the authorization to satisfy a mortgage. These provisions are effective immediately.

The provisions allow a retired Delaware attorney to satisfy a mortgage that the attorney paid off while in practice. Previously, only attorneys still in active practice were permitted to satisfy mortgages under Section 2120. This limitation left no practical way to satisfy a mortgage for which the lender failed to record a satisfaction as required by state law if the attorney who paid off the mortgage subsequently retired. For purposes of Section 2120, a “retired attorney” or a “retired Delaware attorney” means an inactive, judicial, retired or emeritus member of the Bar of the Delaware Supreme Court as provided in Delaware Supreme Court 143 Rule 69.

The amendment stipulates that a retired attorney who, while an active member of the Bar of the Delaware Supreme Court, paid in full or caused to be paid in full a debt owed by any debtor to any creditor holding a mortgage securing such debt and encumbering a property owned by the debtor, after review and approval of the retired attorney’s relevant records by an active member of the Bar of the Delaware Supreme Court, may record with the recorder of deeds in the county in which such property is located an affidavit and request which shall contain information made by the retired attorney.

The amendment expands the scope of Section 2120 to include partial releases of a mortgage where a Delaware attorney or retired attorney made a partial payment to release a portion of the mortgaged property. The amendment further provides that, upon receipt of an affidavit and request by the attorney or retired attorney fully or partially paying such debt, the recorder of deeds, or a duly appointed deputy, shall be authorized to cause said mortgage to be satisfied or the relevant portion of the pledged property to be released from said mortgage. The recorder of deed’s office may charge a fee for accepting and recording the affidavit and satisfying or partially releasing the mortgage.

The amendment also provides forms to use for a mortgage satisfaction affidavit and a mortgage partial release affidavit that an attorney or retired attorney should use when certifying a mortgage payoff or partial payoff.

docutech

Effective immediately, the “California Finance Lenders Law” (Cal. Fin. Code §§ 22000 through 22780) is now changed to the “California Financing Law.”

InfoBytes--Buckley Sandler, LLP

Governor Jerry Brown signed into law amendments to the state’s code of civil procedure that essentially eliminates the use of forced arbitration in cases of fraudulently created accounts. SB 33 prevents state or federally chartered depository institutions from enforcing arbitration agreements in existing consumer contracts to compel California customers to arbitrate disputes regarding other contracts created “fraudulently without the consumer’s consent or by unlawfully using the consumer’s personal identifying information.”

The law comes at a time when, as previously discussed in InfoBytes, several financial industry groups issued a joint lawsuit challenging the Bureau’s arbitration rule, which prohibits the use of mandatory pre-dispute arbitration clauses in certain contracts for consumer financial products and services. The amendments take effect January 1, 2018.

Docutech

The New Jersey Department of Banking & Insurance has published a new “NJ Application Disclosure Form” on their website (available at: http://www.state.nj.us/dobi/division_banking/ocf/), along with the following post:

“DOBI Rules at N.J.A.C. 3:1-16.3 provide for the disclosure of fees charged in connection with a mortgage loan application. Beginning on January 1, 2018, the ‘NJ Application Disclosure Form’ must be used for such disclosures, preferably in a two-sided single sheet format. A copy of the completed form must be provided to the applicant(s) and maintained in the loan file.”

Effective November 6, 2017:

.01 Definitions.

• B. Terms Defined. (30) “Vacant and abandoned” means a finding by the appropriate circuit court that a residential property is vacant and abandoned pursuant to Real Property Article, §7-105.14(c), Annotated Code of Maryland.

.08 Notice of Filing.

• E. Notice of Filing with Respect to Properties Found to Be Vacant and Abandoned. A form substantially similar to that in Appendix H-6 of this chapter shall be used to comply with the notice of filing requirement when accompanying an order to docket or complaint to foreclose with respect to a property that is vacant and abandoned.

Bankers Advisory, Compliance Monitor--Ryan Peters

Illinois has modified the Predatory Lending Database Program of the Residential Real Property Disclosure Act, effective immediately.

The definition of “Counseling” as applied to the Predatory Lending Database Program has been modified to remove the requirement that a borrower supply all necessary documents to the counselor at least 72 hours prior to scheduled telephone counseling. However, section 70(d) of the Act now requires the borrower to supply all necessary documents to the counselor at least 72 hours prior to a scheduled interview.

The definition of “Originator” within this section of the Act has been modified to mean only “mortgage loan originator” as defined in subsection (jj) of Section 1-4 of the Residential Mortgage License Act of 1987, except an exempt person.

Section 70(g) of the Act has been modified to require that at least one of the borrower’s names and the property index number be included when a title insurance company or closing agent attaches a certificate of compliance or exemption to the mortgage.

Under section 72(2), loan originators are no longer required to include the permanent index number when submitting information for inclusion to the predatory lending database. Section 72(5) of the Act has been removed. Section 72(5) had required the loan originator to provide information about affiliated or third party service providers.

When submitting information for inclusion to the predatory lending database, loan originators must also now include all information indicated in connection with the TILA-RESPA Integrated Loan Estimate Disclosure or on the Good Faith Estimate and Truth in Lending statement disclosures given to the borrower by the broker or originator.

Section 76 now requires that a title insurance company or closing agent must submit, in addition to previous requirements:

• All itemizations and descriptions set forth in or in connection with the TILA-RESPA Integrated Closing Disclosure or RESPA settlement statement, including items to be disbursed, payable outside closing “POC” items noted on the statement, and a list of payees and the amounts of their checks.
• The date of closing, a detailed list of all notices provided to the borrower at closing and the date of those notices, and all information indicated on or in connection with the TILA-RESPA Integrated Loan Estimate Disclosure or on the Truth in Lending statement and Good Faith Estimate disclosures.

For the full text of Public Act 100-0509, please refer to:

Public Act 100-0509