Aug. 4: A couple random notes (pretty quiet out there); state lending law changes continue – the MBA weighs in
“Rob, this week you had a lead paragraph about builder costs, and a chart of where their money goes. Have you heard that under the Trump Administration, asbestos is going to make a comeback?” Politics aside, apparently the EPA has loosened the guidelines, despite the link to cancer, for using asbestos. Whether or not builders are going to use it remains to be seen.
On the dire side of things… “Rob, when will you figure out that any item sold in a Costco store is a commodity? Avocados, nuts, computers, chicken, mortgages, whatever. I think that the commoditization of a mortgage will continue until any inefficiencies are phased out of the marketplace. And one can expect the same thing to happen with real estate agents – do they really need to have all those offices, and lease all that space?”
“Rob, are you seeing companies eliminate escrow waiver fees?” Yes, although nothing is free in this business, right? Most lenders prefer that the borrower pays property tax and homeowner’s insurance into an impound or escrow account. The traditional alternative is to pay an extra fee and have them waive that requirement – often .25% of the loan amount. So, on a $200,000 loan, a borrower would pay an additional $500 on top of all the standard loan closing costs. An alternative option is the lender will increase the borrower’s interest rate to cover the cost. Don’t forget that in California the escrow interest law (California Civil Code Section 2954.8(a)), requires that financial institutions pay borrowers at least 2 percent annual interest on funds held in the borrowers’ escrow accounts. I’ve heard it argued that companies eliminating escrow waiver fees are (as noted above) increasing other rates/costs to compensate, or have little experience with servicing loans. Cynics say they’ll be adversely selected by the market and start to understand the concept of paying interest on escrow funds to borrowers (OR), plus processing escrow payments to some counties 4X a year.
Even if federal regulators, such as the CFPB, scale back, lenders still must work with the states. For the last few weeks I’ve been playing catch-up on some state-level law changes related to lending. Although there was plenty of griping about national-level rules and regulations, when you have 50 states with varying takes on things like notaries, signatures, documents, real property law, and licensing, it just makes things more difficult for any multi-state originator.
From the MBA William “Koop” Kooper scribed, “Just a short update on a few developments in recent months with respect to MBA’s efforts to enact consistent state laws and rules to permit remote online notarization (RON) for real estate finance transactions. Last year, MBA and the American Land Title Association (ALTA) partnered to draft model state legislation based largely on the statute enacted in Texas during 2017. Thus far, Tennessee, Minnesota, Indiana and Michigan have enacted laws this year which follow the contours of the MBA-ALTA model. They joined Montana, Virginia, Texas and Nevada, which already permitted RON.
“Several other states proposed bills this year, but their legislatures adjourned before they could be approved. While we are pleased with results of our campaign thus far, we’re very optimistic that even more can be achieved when legislatures convene in 2019. First, last week the non-partisan Uniform Law Commission (ULC) approved revisions to their Revised Uniform Law on Notarial Acts (RULONA) to authorize RON in a manner that is substantially aligned with the MBA-ALTA approach. Because many states have already adopted RULONA, this development could accelerate action on RON legislation in those states next year.
“In addition, earlier this year the National Association of Secretaries of State approved their suggested RON implementation standards for their members to rely on when implementing RON regulations. These standards track very closely to the draft product of MISMO’s RON Development Working Group. The MISMO draft standards are also reflected in the recently proposed rules in Texas to implement their law, which we expect to see finalized in the coming days. Lastly, just this week the U.S. Treasury Department released its long anticipated white paper on non-bank fintech which not only encourages states to adopt RON laws, but also to do so in a manner that results in greater standardization and alignment among states. MBA staff and several member company executives met with the Treasury Department earlier this year to provide input to this report and made this specific recommendation.
“All of these results were driven by MBA and ALTA members and staff as well as by both organizations’ state and local association partners. If you’re readers want to get involved, they should contact their state associations and check out the MBA’s RON resource center at www.mba.org/remoteonlinenotarization for the latest updates.” Thanks Koop!
Pennsylvania Department of Banking and Securities has published its quarterly newsletter. Included in this newsletter is “The Impact of Gender Diversity on Business.”
The Pennsylvania Department of Banking and Securities has amended Title 10 of the Pennsylvania Code by adding Chapter 59. This chapter is effective immediately. Chapter 59 concerns mortgage servicing issues. The topics covered are set out into fifteen parts: 1) Purpose; 2) Scope; 3) Definitions; 4) General disclosure requirements; 5) Mortgage servicing transfers; 6) Timely escrow payments and treatment of escrow account balances; 7) Error resolution procedures; 8) Requests for information; 9) Force-placed insurance; 10) General servicing policies, procedures, and requirements;11) Early intervention requirements for certain borrowers; 12) Continuity of contact; 13) Loss mitigation procedures; 14) Coordination with existing law; and 15) Additional notices.
The purpose of this new chapter is to set forth mortgage servicing standards that conform to the Consumer Financial Protection Bureau’s mortgage servicer regulations. Chapter 59 applies to any mortgage loan which is serviced by a mortgage servicer licensed by the Department of Banking and Securities.
Paul H. Wentzel, Jr., Sr. Legislative Director, Pennsylvania Department of Banking and Securities, recently provides his observations regarding interest that can be charged on loans in Pennsylvania. How much interest can I be charged for a loan? Seems a simple enough question, but the answer is surprisingly complicated. What the money is being borrowed for and the type of business lending you the money will determine the answer and many consumers can find themselves confused trying to figure it out. Take automobile financing as an example of just how confusing it can be for a consumer to understand what interest rates can be charged on a financial transaction. If you purchase a vehicle through an auto dealer and finance your purchase through them, your interest limits are based on the age of the car. If the car is two years old or newer, you can be charged up to 18 percent interest annually. If the car is older than two years, you can be charged up to 21 percent interest.
If you go to your bank or credit union, however, there is no limit on the amount of interest or fees that can be charged. The financing you choose will be governed by different Pennsylvania laws with different requirements and limitations. Many any interest rates now are tied to the high interest economies of the late 1970s and early 1980s. Back then, lenders found themselves having to pay so much for the money they would lend that they needed to be able to charge higher interest rates to recoup their costs and be a profitable business. During that period, there was a push by lenders to increase interest rates to be able to make more money from the loans. Back then, the idea of a home loan with less than a 10 percent interest rate was unthinkable. Also, at one time, credit card interest rates were capped at 15 percent, and then were eventually raised to 18 percent. Flash forward to today when the average current mortgage interest rates are right around 4.73 percent for a 30-year fixed rate mortgage. In an effort to help Pennsylvanians better understand allowable interest rates so they do not find themselves paying more than they should, the department recently introduced a new video series. These videos are a useful resource to consumers and offer a straightforward answer to the question, “what interest rate can I be charged for this loan?”
Pennsylvania’s Secretary of Banking and Securities Robin L. Wiessmann announced the release of a new series of videos that explains the amount of interest Pennsylvania consumers can be charged when borrowing money. “Finding out how much interest you can be charged can be a complicated task, depending on who is lending you the money, what you are purchasing, or whether you are a member of the military,” said Wiessmann. “These new videos take a plain-English approach to answering the basic question ‘what interest rates and fees am I going to be charged?'” The six-minute “Consumer Interest Rates in Pennsylvania” video can be found online. In addition, a series of 13 shorter videos on specific lending types can be found on the department’s YouTube channel.
Pennsylvania’s Secretary of Banking and Securities Robin L. Wiessmann reminded non-bank mortgage servicers that the department will begin accepting license applications beginning April 1, 2018. She also announced that frequently asked questions and answers on the licensing process have been posted online. Mortgage servicers can apply for a license through the NMLS. The deadline for licensing applications is June 30, 2018. Anyone with questions about license and the application process can email the department at firstname.lastname@example.org.
Mortgage Solutions Financial posted information regarding Texas severe storms and flooding.
Due to the active volcano, Flagstar Bank is suspending funding in various zip codes. It will continue to monitor and update the zip codes as necessary. Once funding has resumed a re-inspection may be required in the counties identified.
Last month, MBA-NJ Executive Director E. Robert Levy testified before the Senate Commerce Committee in Trenton, New Jersey on the bill to amend the Residential Mortgage Lending Act (RMLA) that includes a provision for the allowance of transitional mortgage licensing in the State. There is one floor amendment needed to conform fully with the transitional provisions added to the SAFE Act by the recently enacted Federal Law. Once enacted into law, the bill will be one of the earliest to track the new SAFE Act transitional licensing requirements providing a 120-day period for a state MLO moving to a company in another state or a registered MLO leaving a depository institution to work for a state -licensed mortgage company to continue to work while meeting all the state’s licensing requirements. The state-licensed company hiring the transitioning MLO is responsible to see that the individual is in compliance with all legal/regulatory requirements in the performance of his/her duties with the company during the transitional period.
New Jersey Commissioner of Banking and Insurance posted a bulletin warning the Industry About Theft of Mortgage Funds. Banks, credit unions, mortgage lenders, loan originators, title insurers, title, real estate agents, and consumers in the state of New Jersey need to be on the lookout for hackers that are trying to steal mortgage funds during the transactions. Acting Commissioner Marlene Caride stated “They all share one unfortunate result: the funds diverted through these criminal acts are nearly impossible to recover. The purpose of today’s bulletin is to remind those New Jersey firms involved in wire transfers to take every step necessary to protect small business owners, consumers and themselves against this constantly evolving fraudulent threat.” Caride added, “These industries handle millions of dollars in wire transfers every day in connection with mortgage loans and taking precautions to safeguard these transactions should be a high priority.”
The Massachusetts Supreme Judicial Court recently held in Dorrian v. LVNV Funding, LLC, that “passive debt buyers” are not “debt collectors” required to be licensed under the Massachusetts Fair Debt Collection Practices Act (“MDCPA”). Specifically, the Dorrian court held that a defendant passive debt buyer did not meet either definition of “debt collector” under the MDCPA because, among other things, it did not have any direct contact with consumers, and it only collected debts it owned as opposed to those owned by others. The full article is available here.
Virginia modified its provisions relating to notaries and fee agreements with an employer. The amendment provides that “any employer may require a notary in his employment to surrender to such employer a fee, if charged, or any part thereof, provided that the notarial act for which the fee is charged is performed during the course of such employee’s employment.” The amendment takes effect on July 1, 2018.
Vermont modified its provisions relating to data security and consumer privacy through House Bill 764, effective January 1, 2019. This bill contains provisions dealing with the protection of personal information and the regulation of data brokers and data collectors. Through House Bill 764 Vermont will require data brokers to register with the Secretary of State, pay a $100 annual fee, and disclose information related to their debt collection practices. Data brokers have a duty to protect personally identifiable information and must maintain appropriate information security programs and adopt safeguards for the protection of such information.
The bill also eliminates fees for obtaining a security freeze.
Seen on a T-shirt in Reno, Nevada recently:
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “With Regulations, Be Careful What You Wish For.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are over 300 mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2018 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)