February 11, 2020

Notice of Servicing Transfer, FNMA Updates Notes and Riders for ARM Index Language, Statutory Durable Power of Attorney Form, Updated version of HMDA Small Entity Compliance Guide available and much more!

Recent Updates from PPDocs.

Read more below!

February 11, 2020

Recent Updates from PPDocs:

Notice of Servicing Transfer

We added custom fields to the current servicing information to allow an entry of a phone number other than that of the loan officer. The custom field indicates the telephone number should be toll-free or can be called collect. A lender is also able to add their current servicing address. The updates are to assure the lender complies with RESPA at 12 CFR §1024.33(b)((4)(iii)

  • (b) Notices of transfer of loan servicing. (1) Requirement for notice. Except as provided in paragraph (b)(2) of this section, each transferor servicer and transferee servicer of any mortgage loan shall provide to the borrower a notice of transfer for any assignment, sale, or transfer of the servicing of the mortgage loan. The notice must contain the information described in paragraph (b)(4) of this section.
  • (4) Contents of notice. The notices of transfer shall include the following information:
  • (i) The effective date of the transfer of servicing;
  • (ii) The name, address, and a collect call or toll-free telephone number for an employee or department of the transferee servicer that can be contacted by the borrower to obtain answers to servicing transfer inquiries;
  • (iii) The name, address, and a collect call or toll-free telephone number for an employee or department of the transferor servicer that can be contacted by the borrower to obtain answers to servicing transfer inquiries;

FNMA Updates Notes and Riders for ARM Index Language

In a February 5, 2020 announcement, Fannie Mae (FNMA) announced the revision of numerous uniform notes and riders to incorporate the fallback language recommended by The Alternative Reference Rates Committee (ARRC) for ARM loans. The fallback language provides clear direction on the selection of a replacement index in the event an index is no longer available. This is occurring now due to the impending discontinuation of the LIBOR index.

Our documents team is working to have the FNMA Notes and Riders updated prior to June 1, 2020, which is the date the ARRC changes will be required by FNMA (the changes are effective immediately, but not formally required until June). So you’ll see the transition throughout the remainder of winter and spring.

FNMA also announced a phase-out of the delivery of LIBOR ARM products, stating that all LIBOR ARMs must have an application date of September 30, 2020 to be eligible for delivery. A LIBOR ARM must be purchased as a whole loan by December 31, 2020 or be in MBS pools with issue dates on or before December 1, 2020.

Statutory Durable Power of Attorney Form

We do not provide completed Powers of Attorney (POA) on behalf of your borrowers because we represent you, the lender. However, for your convenience, we have provided templates of the Texas Statutory Durable POA—in Word format—on our Resources page. Scroll down to the “Other” section of the Resources page to find the POA templates.

Texas law does not require the use of the form provided in Texas Estates Code §752.051, but a POA is legally sufficient when it is properly completed, signed, acknowledged, and substantially conforms with the wording in §752.051.

If you haven’t downloaded a new form recently, we recommend that you do so because we made a minor amendment to specifically state Texas law applies to the POA. The previous version conforms with the Texas Estates Code, but we recommend using the updated form.

Please be aware that we review POAs for compliance with FNMA requirements. To order a POA review, select Attorney Legal Review and select POA from the dropdown menu on the next screen. Please upload the POA and title commitment for with your submission.

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We pride ourselves in answering your questions quickly and efficiently. You can help us be even better by emailing to appropriate department directly. The result will be faster response times and more accurate information for everyone.

Type of Inquiries Email Address
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Legal specific questions (e.g. title, survey, state law) Legal@ppdocs.com
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Updated version of HMDA Small Entity Compliance Guide available

On January 24, 2020, the Consumer Financial Protection Bureau published an updated version of the HMDA Small Entity Compliance Guide (Guide). Changes to the Guide include updates to incorporate content from the HMDA Final Rule issued in October 2019. You can access the Guide here.

Here is a link to the CFPB’s resources to help industry understand, implement, and comply with the Home Mortgage Disclosure Act and Regulation C: https://www.consumerfinance.gov/policy-compliance/guidance/hmda-implementation/.

Frequently Asked Questions

Question: The borrower does not want his or her spouse to sign the Deed of Trust because the borrower doesn’t want the spouse to vest in title. I know the difference, but can you give me an explanation of the difference between a vesting Deed and a Deed of Trust so I can educate myself before I address this with the borrower?

Answer: Yes, people often get “Deeds” and “Deeds of Trust” confused, especially because many in the mortgage industry refer to Deeds of Trust as “deeds.” However, these two legal documents are used for very different purposes. Let’s start with a couple of definitions that may contain a bit too much legalese for the average borrower:
DEED OF TRUST: The Texas Real Estate Forms Manual defines a Deed of Trust as:

  • A deed of trust is a mortgage with a power of sale. Although a deed of trust by its literal terms conveys the described property in trust to the trustee, its actual effect under Texas law is to create a lien against the property to secure a debt of the grantor of the lien to the beneficiary of the lien. The deed of trust is often used to establish a lien on property for which the lender has advanced purchase money, but it may also secure a loan or other obligation unrelated to the property. The primary advantage of the deed of trust over the type of mortgage used in many other states is that it provides the default remedy of nonjudicial foreclosure by a trustee’s sale without the necessity of a lawsuit.

DEED: A Deed is defined in the forms manual as:

  • A legal document that is signed and delivered, especially one regarding the ownership of property or legal rights.

That’s a lot of words. For the average borrower’s purpose, this is likely all you need:

  • Deed of Trust: Creates a lien against the property to secure a debt owed to the lender. It does not convey legal title to real property.
  • Deed: Conveys legal title to real property from a grantor to a grantee. In the most common transaction, a purchase, a deed transfers the real property from the seller to the buyer.

There are several different forms of deeds, which leads us to this next Q&A…

Question: I see a lot of different kinds of deeds. What is the difference between them?

Answer: Before we answer your question, I want to define a couple of terms I’ll use. A “grantor” is the person conveying an interest in the real property, and the “grantee” is the person receiving the interest in the real property. Here is a general definition of the most common deeds:

  • General Warranty Deed: In a general warranty deed a grantor conveys to a grantee a fee simple estate in real property with a covenant of general warranty in the real property, subject to reservations and exceptions in the deed. In other words, a warranty deed guarantees clear title to the buyer of real property.
  • Warranty Deed with Vendor’s Lien: This type of warranty deed includes a vendor’s lien to secure payment of the unpaid purchase price when a portion of the purchase price is financed.
  • Special Warranty Deed: With this type of warranty deed, the grantor warrants to defend title to the property conveyed only to the extent that claims are made by, through, or under the grantor. It only covers title defects caused by the grantor, not those caused by the grantor’s predecessors in title.
  • Partition Deed: Divides property held by joint owners so that each may have a distinct tract of land.
  • Owelty of Partition Deed: Allows one co-owner to buy the interest of the other co-owner(s) while using the entire property as collateral for the loan to acquire the property.
  • Assumption Deeds: An assumption deed can be general or special warranty deed to convey real property, but it additionally provides that the grantee will assume liability for a debt.
  • Quitclaim Deed: Conveys only the right, title, and interest that the grantor has in the property at the time the instrument is executed and delivered.
  • Lady Bird Deed: Also known as an Enhanced Life Estate Deed, a Lady Bird Deed is a special type of life estate deed where the life estate holder retains exclusive control over the property (including the right to sell or encumber the property) until the life estate holder’s death, at which time the property is transferred to the grantee.
  • Gift Deed: Used for the purpose of the grantor making a gift of real property to the grantee. Typically, the deed will provide that the grantee has paid consideration to the grantor in the form of “love and affection” for the gift.

These are general definitions and, as they say, the devil can be in the details. At least with these definitions, you will know what these deeds are doing when you are dealing with them.