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From Banking and Finance Law Daily, June 10, 2013

CFPB Issues “Small Entity Compliance Guides” for Loan Origination, Mortgage Servicing Rules

By Thomas G. Wolfe, J.D.

The Consumer Financial Protection Bureau has issued a “Small Entity Compliance Guide” for its 2013 rules governing loan originators and for its 2013 rules governing mortgage servicing. Each of the two Guides is set forth in a straightforward question-and-answer format to provide an “easy-to-use summary” of the respective CFPB rules on loan origination and mortgage servicing that take effect in January 2014.

Besides facilitating a small entity’s understanding of, and compliance with, the pertinent CFPB rules, the Guides are also designed to satisfy the requirements of the Small Business Regulatory Enforcement Fairness Act of 1996; that Act requires the CFPB to issue a small entity compliance guide to help small businesses comply with the pertinent federal regulations.

Guide on loan originator rules. The Guide, entitled “2013 Loan Originator Rule Small Entity Compliance Guide,”covers the regulation issued by the CFPB in January 2013 to implement Dodd-Frank Act requirements to restrict certain compensation practices concerning loan originators and to clarify the necessary qualifications of loan originators. The CFPB’s loan origination rule addressed the “concern about the incentives that loan originators have to steer consumers into more expensive loans in order to increase their own compensation.”

While the CFPB’s Guide summarizes the loan origination rule that takes effect on January 10, 2014, it emphasizes that it “is not a substitute for the rule.” Among other things, the question-and-answer format of the Guide covers:

  1. the definition of a loan originator;
  2. the requirements for loan originator compensation;
  3. the “qualification” rules for loan originators;
  4. required information on loan documents;
  5. policies and procedures to monitor compliance;
  6. recordkeeping requirements;
  7. restrictions concerning arbitration clauses and waivers of federal claims;
  8. restrictions on the financing of credit insurance; and
  9. practical considerations for implementation and compliance.

Guide on mortgage servicing rules. The Guide, entitled “2013 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules Small Entity Compliance Guide,” covers the regulation issued by the CFPB in January 2013 to implement Dodd-Frank Act requirements concerning the servicing of certain residential mortgage loans. For instance, the CFPB’s rule required mortgage servicers to establish certain policies, procedures, and requirements regarding the designation of personnel to assist consumers who fall behind in their mortgage payments; to contact consumers soon after delinquency; and to work with consumers for consideration of applicable “loss mitigation” options.

In noting that the CFPB has already proposed amendments to certain provisions of these mortgage servicing rules, the CFPB stresses in the Guide that the mortgage servicing rules “set forth minimum requirements for compliance.” Moreover, while the CFPB summarizes the mortgage servicing rules that take effect on January 10, 2014, it emphasizes that the Guide “is not a substitute for the rules.” Among other things, the question-and-answer format of the Guide covers:

  1. the nature and scope of the mortgage servicing rules;
  2. exemptions for “small servicers”;
  3. rules on periodic statements;
  4. rules on interest-rate adjustment notices;
  5. requirements concerning prompt crediting and payoff statements;
  6. requirements concerning force-placed insurance;
  7. resolution of errors for consumers;
  8. requests for information by consumers;
  9. general policies and procedures of mortgage servicing;
  10. communications and interactions with “delinquent” consumers;
  11. procedures concerning loss-mitigation; and
  12. practical considerations for implementation and compliance.

MainStory: TopStory CFPB ConsumerCredit DoddFrankAct Loans Mortgages

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