Amla - Lesson 3 ' Module 3

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Module 3 Loan Disclosures & Terms

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Module 3 – Loan Disclosures and TermsExaminers should identify acts, practices, and materials that indicate potential violations of federal consumer financial laws. Disclosures1. Examiners should review financial institution policies, procedures, and systems to determine whether the applicable disclosures listed below are scheduled and furnished when required. 2. Examiners should obtain a list of consumer accounts and select a sample for further review.a. Consider weighting the sample so that more loans from branches with a larger volume of complaints are reviewed.b. Obtain complete loan files, which contain the disclosures required by federal consumer financial laws and other legal documents, as well as underwriting documents, rate sheets, and all documents provided to and by the consumer.c. Review the sample of loan origination files to assess the adequacy and completeness of required disclosures, as described below.d. Determine whether the required disclosures were made as required and ensure the presence and accuracy of the items below, as applicable.e. If consumer complaints or document review indicate potential violations in the areas discussed below, examiners also may conduct review of recorded telephone calls and/or complaints, if available, and interviews of consumers from the sample and ask questions relevant to each topic area below.

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MODULE 3 QUESTION

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Examiners should ask to complete loan files including which of the following( )Rate sheets( )Underwriting disclosures( )Disclosures( )All of theseExplanation:Module 3 Loan Disclosures & Terms2. Examiners should obtain a list of consumer accounts and select a sample for further review.a. Consider weighting the sample so that more loans from branches with a larger volume of complaints are reviewed.b. Obtain complete loan files, which contain the disclosuresrequired by federal consumer financial laws and other legal documents, as well as underwriting documents, rate sheets, and all documents provided to and by the consumer.

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1 RESPA Disclosures

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RESPA (Regulation X) - DisclosuresThe lender/creditor is responsible for providing the Good Faith Estimate (GFE) and the Shopping for your Home Loan, Settlement Cost Booklet (Settlement Cost Booklet) (RESPA 12 CFR Part 1024.6). The regulations permit the mortgage broker to provide the disclosures, but the lender must ascertain whether the GFE has been provided. (This will change to Loan Estimate and Home Loan Toolkit on 10/3/2015)During an examination of a mortgage broker, examiners should determine whether it has agreed to provide the GFE and Booklet and if so, whether it is doing so.For mortgage lenders, determine whether the lender complies with RESPA Settlement Cost Booklet provisions. RESPA 12 CFR Part 1024.6For mortgage lenders, determine whether the lender complies with RESPA GFE requirements. RESPA 12 CFR Part 1024.7For mortgage lenders, determine whether the lender complies with RESPA List of Homeownership Counseling Organizations requirements. RESPA 12 CFR Part 1024.20For any person making a referral to an entity that is part of an affiliated business arrangement, determine whether the entity complies with RESPA requirements for affiliated business arrangements. RESPA 12 CFR Part 1024.15For mortgage lenders, brokers, or dealers, determine whether the entity complies with RESPA requirements for providing the notice stating whether the servicing of the loan may be transferred. RESPA 12 CFR Part 1024.33Review the final settlement statement (HUD-1 or HUD-1A), and assess compliance with RESPA disclosure requirements and tolerance limits on settlement charges. RESPA 12 CFR Part 1024.7 (this will change to the Closing Disclosure on October 3, 2015)EFFECTIVE OCTOBER 3, 2015 all references to the following will change with the enforcement of TRIDGOOD FAITH ESTIMATE (GFE) WILL BE LOAN ESTIMATESHOPPING FOR YOUR HOME LOAN, SETTLEMENT COST BOOKLET WILL BE "YOU HOME LOAN TOOLKIT"SETTLEMENT STATEMENT (HUD 1 OR 1A) WILL BE CLOSING ESTIMATE

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2 TILA Disclosures

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TILA (Regulation Z) – Disclosures -Assess compliance with TILA’s disclosure provisions, including TILA, 12 CFR 1026.4, 1026.6, 1026.14, 1026.15 and 1026.40 (open-end accounts) and 1026.4, 1026.17, 1026.20, 1026.22 and 1026.23 (closed-end accounts)1. Appropriate disclosure of amount financed,2. Finance charge,3. Annual percentage rate (APR), and4. Payment schedule or rate and payment summary table (as applicable),5. The right to rescind for non-purchase money loans secured by a principal dwelling Effective October 3, 2015 the TIL will not exist as it will merge with the Loan Estimate and Closing Disclosure

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3 ECOA, FCRA, HPA Disclosures

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ECOA (Regulation B) - DisclosuresAdverse Action Notices - Review loan files to determine whether ECOA adverse action notices were provided when required.(Regulation B, ECOA 12 CFR Part 1002.9)Right to Copies of Appraisals and Other Written Valuations - Review loan files to determine whether ECOA notices of the applicant’s right to receive a copy of all written appraisals (Regulation B, ECOA 12 CFR Part 1002.14(a)) FCRA (Regulation V) - DisclosuresReview the loan file to determine whether FCRA adverse action and risk-based pricing notices were provided when required.(FCRA, 15 U.S.C. 1681m(a) and FCRA 12 CFR Part 1022.72)Assess the entity complies with the requirements for disclosure of credit scores. (FCRA–Sections 609(g); 15 U.S.C. 1681g(g)) Homeowners Protection Act (HPA) - Disclosures -Determine whether the entity provided a notice to the borrower of the borrower’s ability to terminate private mortgage insurance.

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4 Terms

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TermsIf the creditor originates qualified mortgages as a way to meet TILA’s ability-to-repay requirements, review the qualified mortgage terms to determine whether they contain any prohibited terms. (TILA 12 CFR Part 1026.43(e), and TILA, 12 CFR 1026.43(e)-(f))If the creditor originates qualified mortgages, determine whether the points and fees are within the required limits. (TILA 12 CFR Part 1026.43(e), and TILA, 12 CFR 1026.43(e)-(f))If the creditor originates high-cost mortgage loans, reverse mortgage loans, or higher-priced mortgage loans, assess compliance with TILA provisions concerning those mortgage loans. (TILA 12 CFR Part 1026.32, 1026.33, and 1026.36, TILA 12 CFR Part 1026.32 and 1026.34)Determine whether the creditor structures a high-cost or higher-priced mortgage loan as an open-end plan to evade the requirements of Regulation Z. (TILA 12 CFR Part 1026.43(h))Determine whether agreements for consumer transactions secured by a dwelling contain terms that require arbitration or whether terms have been applied or interpreted to bar a consumer from bringing a claim in court. (TILA 12 CFR Part 1026.36(h))Determine whether a creditor finances, directly or indirectly, premiums or fees for credit insurance. TILA 12 CFR Part 1026.36(i)Review policies and procedures regarding rate locks, and review the loan file to determine whether there are instances where consumers lose their rate locks prior to their expiration, resulting in the consumer being placed in more expensive mortgage products, despite obtaining a rate lock and submitting all required documentation within required time frames.

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4 Terms QUESTION

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ECOA requires that borrowers be provided only with copies of appraisals but the other written valuations do not have to be provided.( )True( )False ← Wrong answer Explanation:Module 3: 3 ECOA, FCRA, HPA DisclosuresECOA (Regulation B) - DisclosuresAdverse Action Notices - Review loan files to determine whether ECOA adverse action notices were provided when required. (Regulation B, ECOA 12 CFR Part 1002.9)Right to Copies of Appraisals and Other Written Valuations- Review loan files to determine whether ECOA notices of the applicant’s right to receive a copy of all written appraisals (Regulation B, ECOA 12 CFR Part 1002.14(a))