Regulatory Compliance Update January 2017

Regulatory Compliance Update

By: Hickman Beckner, Vice President

With the change in administrations, there has been a flurry of regulatory activity.

IRS – 1042-S

The IRS has updated the codes for foreign countries that have agreed to furnish information to the IRS.  No changes  were required in the Shaw applications.

Consumer Financial Protection Bureau (CFPB) –

The CFPB has issued new rules for Mortgage Servicing.  The new rule affects all mortgage processing – both closed-end and open end lines of credit.  The rule will come into effect in two stages – October 19, 2017 and April 19, 2018.

Rules effective October 19, 2017:

The rules for prompt application of payments has been expanded to cover loans that are under a loss mitigation plan or other temporary payment adjustment.

The pyramiding of late fees rules have been revised to apply to only closed-end loans.

The statement disclosures for all mortgages have been revised reflect borrowers and “successor in interest.”  The changes are only to the language on the statement.  Shaw Systems will be issuing the required changes for the disclosures.

Current Language New Language
“your mortgage” “this mortgage” or “the mortgage”
“You are late on your mortgage payment” “The payments on this mortgage are late”
“You must pay this amount to bring your loan current” “This is the amount needed to bring the loan current”

The rules have been clarified for placing the disclosures in “close proximity”.  The new rules specify that unrelated text may not be placed in the disclosure.

The statement must now reflect the adjusted payment amount under the agreed upon loss mitigation plan, permanent loan modification or loan acceleration.

The Delinquency Date on the statement must reflect the date the loan went past due.

If a loan has been charged off and the lender will no longer assess interest or fees, a separate notice must be produced. This notice is produced outside of the Shaw applications.

Shaw has reviewed the above changes effective October 2017.  Any modifications required by the new regulations will be issued by Shaw.

Rules effective April 19, 2018:

The definitions have been modified to reflect “successor in interest” on a loan.  Closing escrow documents from the existing loan and new escrow documents are required. These changes will not require any System changes.

The rules for statements for borrowers in bankruptcy have been modified.  Statements must be provided to a borrower in bankruptcy unless the borrower requests in writing that the institution cease sending statements, the bankruptcy plan provides that the borrower will surrender the property or a court enters an order in the bankruptcy case providing for avoidance of the lien securing the mortgage, lifts the automatic stay of actions against the dwelling or the court orders the institution to cease providing statements.

Statements for borrowers in bankruptcy have been modified depending on the bankruptcy chapter of the filing.

Chapter 13 or 12 (repayment plan)

The previous six months of history can be omitted.

The loss mitigation program notice is not required.

The total amount past due can be omitted.

Reference to homeownership counseling can be omitted.

The Amount Due may be limited to the Post-Petition payments, fees and charges due.  The explanation of the amounts may also be limited to the Post-Petition amounts.

The transaction activity must reflect all payments received by the lender including the pre-petition and post-petition amounts.

The pre-petition payments received in the current payment cycle and pre-petition life-to-date amounts received since the petition was filed.

Additional disclosures for Chapter 13 and 12 filers:

A statement that the Amount Due only includes Post-Petition payments and does not include any other payments.

If payments are remitted to the bankruptcy trustee, a statement is required informing the customer that all payments must be remitted to the trustee.

A text block informing the customer that the periodic statement may not include payments made to the trustee and may not be consistent with the trustee’s records.

A text block encouraging the customer to contact the customer’s attorney or bankruptcy trustee with any questions regarding the statement.

Where there are multiple borrowers responsible for a mortgage debt, the institution is only required to send one statement.

The following must be made available to the borrower upon request:

The pre-petition past due amount.

Other fees and charges assessed to the loan.

Chapter 7 (liquidation)

The information for Chapter 7 filers is the same as for Chapter 13 filers.  The statement for Chapter 7 filers omits any information on the pre-petition past due amounts.

A text block informing the borrower that the statement is for information purposes only and is not an attempt to collect.  The text also informs the borrower to write to the institution if they do not wish to receive statements.

Shaw Systems is analyzing these changes and will be issuing updates for compliance with all changes.

The CFPB has also announced the threshold for asset-size exemption from the reporting requirements for Home Mortgage Disclosure Act remains the same.  This means that institutions with less than $44 million in assets are not required to collect and report HMDA data.

The CFPB has also announced the threshold for asset-size exemption from the escrow requirements for higher-priced mortgage loans (HPML) requirements for Home Mortgage Disclosure Act will increase to $2.069 billion.  This means that institutions with less than $2.069 billion in assets are not required to provide escrow services for HPML’s.  This threshold applies to creditors that operate in rural and underserved areas.

Significant Dates:

  • January 6, 2017 – Comments due on the proposed rule that would implement private flood insurance provisions of Biggert-Waters Flood Insurance Reform Act.  This Act allows private insurance in place of Federally-sponsored insurance.
  • January 17, 2017 – Comments due on proposed rulemaking for cyber risk management standards for large and interconnected financial institutions.
  • February 21, 2017 – Comments due for CFPB’s “Request for Information Regarding Consumer Access to Financial Records.
  • September 15, 2017 – Effective date for Phase 2 of NACHA’s same day ACH Processing.
  • September 29, 2017 – Effective date for NACHA Operating Rules that require registration of third-party senders.

Emerging Legislation:

Shaw Systems continues to monitor the legislation submitted.  Look for updates in the future.