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North Dakota establishes requirements for residential mortgage servicers
On April 12, the North Dakota governor signed HB 1068, which outlines provisions relating to residential mortgage loan servicers. The Act provides that a person may not engage in residential mortgage loan servicing in the state without being licensed by the commissioner. This applies to servicers, subservicers, or a mortgage servicing rights investor. “A person engages in residential mortgage loan servicing in the state if the borrower resides in North Dakota,” the Act explains. Exempt from licensure are financial institutions, state or federal housing finance agencies, institutions chartered by the farm credit administration, and not-for-profit mortgage servicers. The Act outlines application and fee requirements and specifies financial conditions for applicants and licensees. Large mortgage servicers must also abide by certain corporate governance conditions, including the establishment of a board of directors responsible for oversight and compliance monitoring. These licensees must also obtain external audits and establish risk management programs.
The Act outlines prohibited acts and practices and grants authority to the Department of Financial Institutions to promulgate rules and regulations to enforce the law and power to carry out the provisions, including through orders and injunctions. The commissioner will also oversee the licensure process, including provisions concerning the expiration, renewal, revocation, suspension, and surrender of licenses, and may issue orders suspending and removing residential mortgage loan servicer officers and employees. The commissioner may also conduct investigations and examinations and impose civil money penalties of not more than $100,000 for each occurrence and $1,000 per day for each day that the violation continues after issuance of an order. Licensees may appeal by filing a written notice within 20 days after the assessment of a civil money penalty. The Act is effective August 1.
FFIEC releases 2023 HMDA reporting guide
On April 13, the OCC issued Bulletin 2023-10 announcing the Federal Financial Institutions Examinations Council’s issuance of the 2023 edition of the revised “A Guide to HMDA Reporting: Getting It Right!” The guide focuses on HMDA data submissions due March 1, 2024, and includes requirements and instructions for reporting and disclosing data for institutions and transactions covered by Regulation C. The guide also reflects a technical amendment to the 2020 HMDA Rule to adjust the loan volume thresholds (which took effect January 1) for reporting HMDA data on closed-end mortgage loans. As previously covered by InfoBytes, the CFPB issued the technical amendment last December to establish that the threshold for reporting data about closed-end mortgage loans is 25 mortgage loans in each of the two preceding calendar years, the threshold established by the 2015 HMDA Rule.
CFPB revises APOR methodology
On April 14, the CPFB announced a revised version of its Methodology for Determining Average Prime Offer Rates (APORs). APORs are a series of benchmark APRs derived from the average interest rates and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgage loans with low-risk pricing characteristics. APORs are used to determine whether a particular loan is a “Qualified Mortgage” or a “Higher-Priced Mortgage Loan,” which determines the treatment of that loan under various consumer protection laws.
The methodology statement has been revised to address the imminent unavailability of certain data the CFPB previously relied on to calculate APORs. Specifically, Freddie Mac recently made changes to its Primary Mortgage Market Survey (PMMS) used to calculate APORs for three types of loans. These changes make the PMMS unsuitable to be used in the APOR calculations. The CFPB is replacing data from the PMMS with data from ICE Mortgage Technology. This change also requires the CFPB to change certain of the product types for which APORs are produced. The CFPB will begin using ICE Mortgage Technology data and the revised methodology to calculate APORs on April 21, 2023.
We note that the CFPB is not changing the frequency of the APOR calculations, which will still be calculated on a weekly basis. These changes will therefore not address industry concerns that the APORs can be as much as seven days old, which can result in the APORs being significantly different than the actual market rates on a given day. This dissonance can lead to significant issues during periods where interest rates rise rapidly as we saw during much of 2022.
District Court dismisses RESPA claims that servicer failed on QWRs
The U.S. District Court for the Western District of Washington recently ruled on a loan servicer’s motion for summary judgment concerning claims that the servicer violated RESPA when it failed to respond to multiple qualified written requests (QWR) alleging account errors and improperly reported alleged delinquencies to credit reporting agencies (CRAs). Plaintiffs executed a promissory note and deed of trust, and later entered into a Chapter 11 bankruptcy plan to modify the terms of the loan. Plaintiffs sued, asserting violations of RESPA and various state laws, claiming, among other things, that the servicer failed to timely respond to their QWRs, provided false information to CRAs, and failed to adjust the loan to reflect the modified payment schedule from the bankruptcy plan.
The court granted summary judgment in favor of the servicer. On the QWR-related allegations, the court found that, “while the [plaintiffs] say that [the servicer] did not address the issues raised in the QWRs, their brief does not identify a single issue that went unaddressed. . . Their brief does not, for example, point to a request in any QWR that went unanswered in [the servicer’s] corresponding response. Merely providing a laundry list of documents—without specifically identifying how [the servicer’s] responses were incomplete—is insufficient.” The court also found that the plaintiffs failed to show that the servicer’s responses were misleading, confusing, or incorrect. Though the plaintiffs provided a list of statements made by the servicer when responding to the QWRs, plaintiffs failed to explain what exactly was inaccurate or confusing about the servicer’s responses, the court said.
While the court flagged one possible inconsistency in at least one of the servicer’s responses (where the servicer incorrectly stated the monthly principal amount due but corrected the mistake less than a month later), the court determined that “this alone does not suffice under RESPA.”
With respect to plaintiffs’ allegations of false credit reporting, the court concluded that there was no evidence that the servicer submitted negative information about plaintiffs to a CRA, nor did the plaintiffs demonstrate how any such reports hurt their credit or identify whether the reports were filed within RESPA’s 60-day non-reporting period. Under RESPA, a servicer is prohibited from providing certain information regarding “any overdue payment, owed by such borrower and relating to such period or qualified written request, to any consumer reporting agency” during the 60-day period beginning on the date the servicer receives a QWR. The court further noted that the plaintiffs failed to show that they suffered actual damages “flowing from” the alleged RESPA violations, which is a requirement of the statute.
The court granted summary judgment on the RESPA claims in favor of the servicer and remanded the remaining state-law claims to state court.
HUD extends Covid-19 forbearance through May
On April 7, HUD issued Mortgagee Letter 2023-08, which extends through May 31 the final date for borrowers to request Covid-19 forbearance and home equity conversion mortgage (HECM) extensions. The extension is intended to allow ample time for affected borrowers to submit requests and for mortgagees to offer and process the requests in the event that the presidentially-declared national emergency ends earlier than originally expected. As stated in the letter, HUD determined that providing a short period beyond the expiration of the national emergency will be beneficial to both FHA borrowers and mortgagees. The extension will also align Covid-19 forbearance and HECM extension requests with the monthly billing cycle. The letter stated that no Covid-19 forbearance period may extend beyond November 30.
HUD announces Arkansas disaster relief
On April 5, HUD announced disaster assistance for areas in Arkansas impacted by severe storms and tornadoes on March 31. The disaster assistance follows President Biden’s major disaster declaration on April 2. According to the announcement, HUD is providing immediate foreclosure relief, making FHA mortgage insurance available to disaster victims, and providing information on housing providers, as well as HUD-approved housing counseling agencies, among other measures. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties, as well as an automatic 90-day extension for home equity conversion mortgages, effective April 2. It is also making various FHA insurance options available to victims whose homes require repairs or were destroyed. HUD’s Section 203(h) program allows borrowers from participating FHA-approved lenders to obtain 100 percent financing, including closing costs, for homes that require “reconstruction or complete replacement.” HUD’s Section 203(k) loan program enables individuals to finance the repair of their existing homes or to include repair costs in the financing of a home purchase or a refinancing of a home through a single mortgage. HUD is also allowing administrative flexibilities for community planning and development grantees, as well as to public housing agencies and Tribes. Additionally, HUD is advising consumers who believe they have experienced housing discrimination as a result of the disaster to reach out to the agency’s Office of Fair Housing and Equal Opportunity.
FHA proposes earlier HECM claim submissions
On April 4, FHA issued FHA Info 2023-25, announcing proposed changes to the Home Equity Conversion Mortgage (HECM) program and documentation requirements for certain submission criteria. FHA explained that the documentation changes would apply to HECM Assignment Claim Type 22, which “is an option that allows a HECM servicer to assign a mortgage that is in good standing to FHA in exchange for payment of the loan balance, up to the maximum claim amount.” Specifically, the proposal would allow servicers to start submitting claim documentation for preliminary FHA review when a mortgage reaches 97 percent of the maximum claim amount (MCA), versus the 97.5 percent currently allowed. The change is intended “to expedite the payment of claim funds when the mortgage reaches 98 percent of the MCA, to mortgage servicers in light of current market liquidity considerations.” The proposal would also establish that the deadline for mortgagees to deliver original notes and mortgages to FHA is 90 days after the assignment claim payment date, and would align the deadline for delivering recorded assignments of mortgage for all HECMS by increasing the timeline to 12 months for HECMs with FHA case numbers assigned before September 19, 2017. Comments on the proposal are due April 11.
FHFA expands deferral policies for hardships
On March 29, FHFA announced enhanced payment deferral policies for borrowers facing financial hardships. Under the newly enhanced policies, Fannie Mae and Freddie Mac will allow borrowers to defer up to six months of mortgage payments, enabling borrowers “to keep the same monthly mortgage payment by moving past-due amounts to the end of the loan as a non-interest bearing balance, due and payable at maturity, sale, refinance, or payoff.” Fannie and Freddie will work with servicers to implement the enhanced payment deferral policies, which carry a voluntary adoption date of July 1, and a mandatory adoption date of October 1.
Recognizing that the more than one million Covid-19 payment deferrals completed by Fannie and Freddie during the pandemic helped borrowers stay in their homes, FHFA Director Sandra L. Thompson said the agency is making the payment deferral policies a key part of its standard loss mitigation toolkit that is available to all borrowers with eligible hardships.
HUD announces Mississippi disaster relief
On March 28, HUD announced disaster assistance for areas in Mississippi impacted by severe storms, straight-line winds, and tornadoes beginning March 24 to March 25. The disaster assistance follows President Biden’s major disaster declaration on March 26. According to the announcement, HUD is providing immediate foreclosure relief, making various FHA mortgage insurance available to disaster victims, and providing information on housing providers, as well as HUD-approved housing counseling agencies, among other measures. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties, as well as a 90-day extension granted automatically for home equity conversion mortgages, effective March 26. It is also making various FHA insurance options available to victims whose homes require repairs or were destroyed or severely damaged. HUD’s Section 203(h) program allows borrowers from participating FHA-approved lenders to obtain 100 percent financing, including closing costs, for homes that require “reconstruction or complete replacement.” HUD’s Section 203(k) loan program enables individuals to finance the repair of their existing homes or to include repair costs in the finance of a home purchase or a refinance of a home through a single mortgage. HUD is also allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
Arkansas amends LO sponsorship licensing requirements
On March 21, Arkansas enacted HB 1439 to clarify the sponsorship process and amend licensing requirements under the state’s Fair Mortgage Lending Act. The amendments modify the definition of a “transitional loan officer license” to mean a license that is issued to an individual who is employed “and sponsored by” a licensed mortgage banker or mortgage broker. The term “sponsor” was also added and defined as a licensed mortgage broker or mortgage banker “that has assumed the responsibility for and agrees to supervise the actions of a loan officer or transitional loan officer.” HB 1439 also amends provisions relating to the termination of a loan officer’s license to provide that should the employment of a loan officer or a transitional loan officer be surrendered or canceled, a “sponsor shall terminate the sponsorship of the loan officer or transitional loan officer with the commissioner within thirty (30) days from the date that the loan officer or transitional loan officer ceased to be employed or ceased activities for the sponsor.” Sponsorship termination extinguishes any rights of a loan officer or a transitional loan officer to engage in mortgage loan activity. The license will be marked as “approved-inactive” until a licensed mortgage broker or mortgage banker files an application with the commissioner to sponsor the loan officer. The “approved-inactive” status may be changed to “approved” if a licensed mortgage broker or mortgage banker files an application for sponsorship, pays a $50 fee, and provides sponsorship notice to the commissioner. The amendments will take effect 90 days following the adjournment of the legislature.