March 25, 2021

Agencies Release Proposed Q&A Regarding Private Flood Insurance, CFPB Proposes Delay of Mandatory Compliance Date for General QM Final Rule and more!

Read more below!

March 25, 2021

Are Texas Residential and Commercial Real Property Foreclosures Possible Again?

As we reported in our January newsletter, the Governor’s Executive Order GA-28, limiting the number of persons who may attend outdoor gatherings, subjected residential and commercial foreclosure sales held after June 2020 to attack. On August 10, 2020, the Texas Attorney General’s office sent a letter to Texas State Senator, Bryan Hughes, stating that “to the extent a sale is so limited, and willing bidders who wish to attend are not allowed to do so as a result, the sale should not proceed as it may not constitute a “public sale” as required by the Texas Property Code.”

With the Governor’s latest Executive Order (GA-34), rescinding past executive orders (GA-17, GA-25, GA-29, and GA-31, GA-32), public sales should once again be possible without the threat of attack for limiting the number of persons in attendance. We recommend that your institution consult with your legal counsel prior to proceeding with a public foreclosure sale.

A couple of wrinkles remain:

  • According to the Governor’s latest order, a county judge in an area with high hospitalizations (as defined in the order) may impose restrictions on businesses and other establishments, but those restrictions may not require businesses and other establishments to operate at less than 50% total capacity. If a county judge imposes occupancy restrictions, foreclosures in that county may have to cease.
  • A secondary market federal moratorium on evictions and foreclosures on homeowners remains in effect at least through June 30, 2021.

Additionally, a question remains as to whether there is a way to validate affected foreclosures that were held while the restriction on outdoor gatherings was in effect. If you had a foreclosure during this period, check with your title company to determine if they will insure the sale of OREO properties from foreclosures held after the first half of 2020.

Important Note: We are not foreclosure experts. As with anything in our monthly newsletter, this information is not offered as legal advice. If you have an OREO property that may be affected or wish to proceed with a Texas public foreclosure sale, please consult with your institution’s legal counsel.

Agencies Release Proposed Q&A Regarding Private Flood Insurance

On March 11, 2021, five federal regulatory agencies (Federal Reserve, Farm Credit Administration, FDIC, NCUA, and OCC) requested public comment on 24 proposed Interagency Questions and Answers Regarding Private Flood Insurance.

The proposal is intended to help lenders comply with the agencies' joint rule promulgated in 2019 to implement the private flood insurance provisions of the Biggert-Waters Flood Insurance Reform Act of 2012.

The proposal incorporates new questions and answers in several areas including:

  1. Mandatory Acceptance;

  2. Discretionary Acceptance; and

  3. Private Flood Insurance General Compliance.

These Questions and Answers would supplement the 118 Interagency Questions and Answers Regarding Flood Insurance that the agencies proposed on July 6, 2020.

Comments will be accepted for 60 days after publication in the Federal Register.

Federal Register notice: Loans in Areas Having Special Flood Hazards; Interagency Questions and Answers Regarding Private Flood Insurance (PDF)

CFPB Proposes Delay of Mandatory Compliance Date for General QM Final Rule

On March 3, 2021, the CFPB released a notice of proposed rulemaking (NPRM) to delay the mandatory compliance date of the General Qualified Mortgage (QM) final rule from July 1, 2021 to October 1, 2022. The CFPB’s stated purpose for proposing to extend the mandatory compliance date is to ensure homeowners struggling with the financial impacts of the COVID-19 pandemic have the options they need.

Under the statute, QM loans are presumed to be made based on the lender’s reasonable determination of the homeowner’s ability to repay the loan. The CFPB’s press release stated that:

  • Extending the mandatory compliance date of the General QM final rule would allow lenders more time to offer QM loans based on the homeowners’ debt-to-income (DTI) ratio, and not solely based on a pricing cut-off.

  • Extending the mandatory compliance date of the General QM final rule would also give lenders more time to use the GSE Patch, which provides QM status to loans that are eligible for sale to Fannie Mae or Freddie Mac.
  • Forbearance plans and foreclosure moratoriums have helped many homeowners stay in their homes, but those interventions may end before either the broader economy has recovered from the impact of the pandemic or the housing market has reached a new equilibrium. The CFPB believes that an extension of the mandatory compliance date may help ensure stability and access to affordable, responsible credit in the mortgage market.

If this NPRM is finalized as proposed, the previous DTI-based General QM definition; the new, price-based General QM definition; and the GSE Patch (unless the GSEs exit conservatorship prior to October 1, 2022) would all remain available, provided the lender received the consumer’s application prior to October 1, 2022.

Comments on the NPRM must be received on or before April 5, 2021.

March's Frequently Asked Question

Question: Do you have any information concerning when to use Notice of Right to Cancel Model Form H-8 and when to use Model Form H-9?

Answer: For the right to rescind under Regulation Z, model form H-8 is the form used most often. Model form H-9 is specifically intended for a same creditor refinance where additional credit is being extended to the borrower. (See Section 1026.23(f) and its Official Interpretation below.) The Official Interpretation states that H-9 is used for same creditor refinances with a new extension of credit, whereas H-8 is used for other refinances where the refinancing lender is not the same lender who extended the original credit.

New credit does not include the financing of reasonable and necessary closing costs attributed solely to that loan. A same creditor refinance where new credit is not being extended is exempt from the rescission requirements of Reg. Z.

Reg. Z, Section 1026.23(f)

(f) Exempt transactions. The right to rescind does not apply to the following:

(2) A refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer's principal dwelling. The right of rescission shall apply, however, to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation.

(3) A transaction in which a state agency is a creditor.

(4) An advance, other than an initial advance, in a series of advances or in a series of single-payment obligations that is treated as a single transaction under §1026.17(c)(6), if the notice required by paragraph (b) of this section and all material disclosures have been given to the consumer.

(5) A renewal of optional insurance premiums that is not considered a refinancing under §1026.20(a)(5).

Official Interpretation 23(f) Exempt Transactions

4. New advances. The exemption in §1026.23(f)(2) applies only to refinancings (including consolidations) by the original creditor. The original creditor is the creditor to whom the written agreement was initially made payable. In a merger, consolidation or acquisition, the successor institution is considered the original creditor for purposes of the exemption in §1026.23(f)(2). If the refinancing involves a new advance of money, the amount of the new advance is rescindable. In determining whether there is a new advance, a creditor may rely on the amount financed, refinancing costs, and other figures stated in the latest Truth in Lending disclosures provided to the consumer and is not required to use, for example, more precise information that may only become available when the loan is closed. For purposes of the right of rescission, a new advance does not include amounts attributed solely to the costs of the refinancing. These amounts would include §1026.4(c)(7) charges (such as attorneys fees and title examination and insurance fees, if bona fide and reasonable in amount), as well as insurance premiums and other charges that are not finance charges. (Finance charges on the new transaction—points, for example—would not be considered in determining whether there is a new advance of money in a refinancing since finance charges are not part of the amount financed.) To illustrate, if the sum of the outstanding principal balance plus the earned unpaid finance charge is $50,000 and the new amount financed is $51,000, then the refinancing would be exempt if the extra $1,000 is attributed solely to costs financed in connection with the refinancing that are not finance charges. Of course, if new advances of money are made (for example, to pay for home improvements) and the consumer exercises the right of rescission, the consumer must be placed in the same position as he or she was in prior to entering into the new credit transaction. Thus, all amounts of money (which would include all the costs of the refinancing) already paid by the consumer to the creditor or to a third party as part of the refinancing would have to be refunded to the consumer. (See the commentary to §1026.23(d)(2) for a discussion of refunds to consumers.)A model rescission notice applicable to transactions involving new advances appears in Appendix H. The general rescission notice (model form H–8) is the appropriate form for use by creditors not considered original creditors in refinancing transactions.