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From Banking and Finance Law Daily, July 8, 2013

CFPB guidance provides tools for implementing mortgage rules

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau has released new guidance intended to assist financial institutions in implementing the bureau’s 2013 mortgage rules.

The guidance, titled the 2013 CFPB Dodd-Frank Mortgage Rules Readiness Guide, consists of four parts and includes summaries of the rules, a questionnaire, a set of Frequently Asked Questions, and a list of tools to help financial institutions wade through the myriad of rules to come into, and maintain, compliance.

The CFPB cautions that the guide is not a substitute for the rules because only the rules and their official interpretations can provide complete and definitive information regarding the requirements of the rules.

Part l. The first portion of the guide provides summaries for each mortgage rule as well as a link to the rule and relative guidance such as the Small Entity Compliance Guides. In January 2013, the CFPB issued eight final rules concerning U.S. mortgage markets pursuant to the Dodd-Frank Act. The rules are effective in January 2014, with the exception of the rule on escrow requirements under the Truth in Lending Act, which was effective June 1, 2013, and the amendments to Section 1026.36(h) in the rule on loan originator compensation requirements.

The rules included in the guide are:

  • Ability-to-Repay and Qualified Mortgage Standards (Regulation Z);
  • Escrow Requirements under the Truth in Lending Act (Regulation Z);
  • High-Cost Mortgage and Homeownership Counseling (Regulation Z) (Regulation X);
  • Mortgage Servicing Rules (RESPA) (Regulation X) (TILA) (Regulation Z);
  • Equal Credit Opportunity Act Appraisals for Higher-Priced Mortgage Loans (Regulation B);
  • TILA Appraisals for Higher-Priced Mortgage Loans (Regulation Z); and
  • Loan Originator Compensation Requirements (Regulation Z).

Given the number of rules that the bureau adopted in the month of January 2013, the summaries are helpful in tracking each rule, what the compliance requirements are for a rule, and whether there are any proposed or final amendments to a particular rule.

Part II. The second part of the guide consists of a “Readiness Questionnaire.” The questionnaire is intended by the bureau to be used as a self-assessment guide when putting requirements for the rules in place. The CFPB notes in the guide that the questionnaire will not be added to the Examination Manual but rather should just serve as a “voluntary guide for preparation.”

The questionnaire focuses on varying areas and questions that need to be addressed when implementing the rules and acts as a form of checklist for preparedness. Some of the areas covered include:

  • Developing an Implementation Plan;
  • Policies and Procedures;
  • Training;
  • Audit, Compliance Review, Internal Control;
  • Complaints; and
  • Third Party and Vendor Management.

Part lll. Part three of the guide is a set of Frequently Asked Questions. The FAQs provide answers to such questions as what the CFPB expects of financial institutions on the effective dates of the rules and when the bureau plans to start examining institutions for compliance with the rules. A link to the CFPB’s examination procedures is included.

Part lV. The last part of the guide is a list of tools that institutions may use to get into and maintain compliance. The tools include links to plain language summaries and guidance on the rules as well as a link to the CFPB’s website on regulatory implementation. One of the tools included is a comparison chart of the ability-to-repay and qualified mortgage requirements.

MainStory: TopStory CFPB DoddFrankAct

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