The FDIC has released revisions to several sections of its Compliance Examination Manual that have been updated for the mortgage rules issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Financial Institution Letter 9-2014 (February 25, 2014) indicates that, during initial examinations for compliance with the new mortgage rules, examiners will expect banks to be familiar with the requirements of the new rules and have an appropriate plan in place to implement the new requirements. Implementation plans should contain explicit timeframes and benchmarks for making necessary changes to compliance management systems and relevant programs, according to the agency. The FDIC also said that examiners will consider management’s overall compliance efforts and take into account progress that has been made on the implementation plan. Banks should expect examiners to ask about the implementation plan and actions taken to train bank staff and adjust systems, processes, policies and procedures to comply with the new mortgage rules. FIL-9-2014 includes a summary of the mortgage rules covered in the updated Compliance Examination Manual.
Nutter Notes: The CFPB issued several final rules in 2013 to implement various provisions of the Dodd-Frank Act related to residential mortgage lending. The FDIC, jointly with other federal agencies, also issued regulations on appraisals for higher-priced mortgage loans in 2013 to implement various provisions of the Dodd-Frank Act. Most of the final rules issued in 2013 became effective in January 2014. The new rules include the Ability-to-Repay/Qualified Mortgage Rule (“ATR Rule”), the loan originator compensation rule, mortgage servicing rules, the higher-priced mortgage loan (“HPML”) escrow and appraisal rules and the high-cost mortgage and homeownership counseling rule. The ATR Rule, under Regulation Z, requires that creditors make a reasonable and good faith determination that a consumer has a reasonable ability to repay a mortgage loan according to its terms. The rule also defines several categories of Qualified Mortgages, which entitle the creditor to a presumption of compliance with the ATR Rule. The loan originator compensation rule implements Dodd-Frank Act amendments to the Truth in Lending Act that restrict loan originator compensation based on loan terms, dual compensation and steering, among other requirements. The mortgage servicing rules implement Dodd-Frank Act amendments to the Truth in Lending Act and the Real Estate Settlement Procedures Act, including requirements to correct errors, promptly credit mortgage payments, provide protections to borrowers in connection with force-placed insurance, provide information about loss mitigation options and provide interest-rate adjustment notices for adjustable-rate mortgages. The escrow and appraisal rules and certain counseling requirements only apply to mortgage loans that cross certain HPML or high-cost mortgage price thresholds.