PPDocs Updates Available Qualified Mortgage Tests for Secondary Market Loans
For applications received on or after July 1st, 2021, loans will have to meet the revised General Qualified Mortgage requirements for most secondary market investors. Additionally, loans that met the previous GSE Patch or Temporary Qualified Mortgage requirements will no longer be eligible for sale. Please refer to this memorandum regarding the selection of the proper QM testing within PPDocs.com order forms.
CFPB Issues Statement on Mortgage Closings Affected by the Juneteenth National Holiday
On Friday June 18, 2021, Consumer Financial Protection Bureau (CFPB) Acting Director Dave Uejio issued the following statement:
President Biden’s signing of the Juneteenth National Independence Day Act into law yesterday afternoon is a cause for celebration. Juneteenth is a moment for us to commemorate the emancipation of those enslaved. I am proud that we as a country are taking concrete steps to recognize and heal from the legacy of slavery, even as I recognize that there is much more work to do.
The CFPB, along with the other Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) regulators, is aware of concerns regarding implementation of the new Juneteenth Federal holiday, particularly as it relates to mortgage lender compliance with the Truth in Lending Act and TILA-RESPA Integrated Disclosure (TRID) timing requirements. The CFPB recognizes that some lenders did not have sufficient time after the Federal holiday declaration to consider whether and how to adjust closing timelines. The CFPB understands that some lenders may delay closings to accommodate the reissuance of disclosures adjusted for the new Federal holiday. The CFPB notes that the TILA and TRID requirements generally protect creditors from liability for bona fide errors and permit redisclosure after closing to correct errors. Any guidance ultimately issued by the CFPB would consider the limited implementation period before the holiday and would be issued after consultation with the other FIRREA regulators and the Conference of State Bank Supervisors (CSBS) to ensure consistency of interpretation for all regulated entities.
PPDocs Note: In its statement, the CFPB did not commit to issuing any guidance regarding Juneteenth’s impact on TILA and RESPA compliance. Even if the CFPB does provides guidance in the future, however, it would only be for examination purposes and would not prevent a borrower from making a legal claim.
FHFA Eliminates Adverse Market Refinance Fee
July 16, 2021. The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will eliminate the Adverse Market Refinance Fee for loan deliveries effective August 1, 2021. Lenders will no longer be required to pay the Enterprises a 50-basis point fee when they deliver refinanced mortgages. The fee was designed to cover losses projected because of the COVID-19 pandemic. FHFA's expectation is that those lenders who were charging borrowers the fee will pass cost savings back to borrowers.
87th Texas Legislative Session
Now that the 87th Texas Legislative Session is complete, PPDocs, Inc. wants to make you aware of several bills pertinent to the mortgage industry. Please check with your legal counsel regarding any actions your institution should take in response to these or any other bills from the 87th Legislative Session.
The bill relates to the performance of a real property evaluation for use by certain financial institutions.
Previously, a Texas Attorney General opinion held that certified appraisers may not perform real property evaluations because they must always follow Uniform Standards of Professional Appraisal Practice (USPAP).
The bill harmonizes current state law with federal regulations allowing licensed, certified appraisers to perform evaluations without complying with USPAP when the lending guidelines do not require a full appraisal for a financial transaction. It requires the appraiser to disclose that the evaluation is not an appraisal that meets USPAP standards. The bill also makes it clear that an employee of a financial institution may provide an evaluation.
The bill modernizes mechanics lien laws.
These changes do not affect lenders for the most part. PPDocs will amend the disclosure required under Property Code §53.255 and the Affidavit of Completion before the January 1, 2022, effective date, but the amendments are not substantive.
The bill relates to the release of a judgment lien on homestead property.
A person’s homestead is protected from being foreclosed on by a judgment lien. However, there can be difficulty in identifying what land is a person’s homestead and whether a judgment lien attaches to said property. In 2007, the 80th Legislature created Section 52.0012 of the Texas Property Code to address this problem. The statute created a method of communication and provided a means for evidence for all parties with potential interest in the property.
The bill requires a judgment debtor filing such an affidavit to send a letter notifying the judgment creditor of the filing of the affidavit and a copy of the affidavit.
If a judgment debtor has filed a certificate of mailing and a contradicting affidavit is not filed, the bill further authorizes a bona fide purchaser or a mortgagee for value or a successor or assign of a bona fide purchaser or mortgagee for value to rely conclusively on an affidavit filed for the 90-day period that begins on the 31st day after the date the certificate of mailing was filed.
The bill relates to the removal of certain discriminatory provisions from a recorded conveyance instrument.
In some old real property instruments, there were provisions that restricted land use based on race, gender, or other discriminatory factors. A process will now exist to file a motion to remove these restrictions from recorded instruments.
The bill relates to the authority of a county to require photo identification to file certain documents with the county clerk.
In counties with populations of 80,000 or more, photo identification must be presented to file in the real property records.
The bill relates to the legal carry of a firearm.
Effective September 1, 2021, it will be legal for a person 21 years old or older to carry a handgun without a license.
Businesses may post statutory language prohibiting entrance with a firearm.
Employers may prohibit staff from entering with a firearm but may not prohibit an employee from storing a firearm in a vehicle on the business premises.
The bill relates to certain notifications required following a breach of security of computerized data.
Notifications must include number of affected residents that were notified when send notice of breach to the Texas Attorney General.
The Attorney General is required to list the notices on a website.
The bill relates to the rule against perpetuities.
Texas trusts now can last for 300 years after the effective date of the trust.
July Frequently Asked Question
Question: When is a loan modification subject to TRID?
Answer: When a transaction does not constitute a refinancing under 1026.20(a), then the transaction is exempt from Regulation Z, including TRID disclosures and all other Regulation Z requirements (e.g. ATR, Section 32 and 35). Conversely, when a transaction constitutes a refinancing under 1026.20(a), it is subject Regulation Z requirements.
The typical modification, involving extending the term of loan or changing the interest rate, is not considered a refinancing under 1026.20(a). However, when the lender adds a variable rate or changes a variable rate feature of the loan, then it is considered a refinancing, and is subject to TILA, including TRID.
1026.20(a) Refinancings. A refinancing occurs when an existing obligation that was subject to this subpart is satisfied and replaced by a new obligation undertaken by the same consumer. A refinancing is a new transaction requiring new disclosures to the consumer. The new finance charge shall include any unearned portion of the old finance charge that is not credited to the existing obligation. The following shall not be treated as a refinancing:
1. Definition. A refinancing is a new transaction requiring a complete new set of disclosures. Whether a refinancing has occurred is determined by reference to whether the original obligation has been satisfied or extinguished and replaced by a new obligation, based on the parties' contract and applicable law. The refinancing may involve the consolidation of several existing obligations, disbursement of new money to the consumer or on the consumer's behalf, or the rescheduling of payments under an existing obligation. In any form, the new obligation must completely replace the prior one.
i. Changes in the terms of an existing obligation, such as the deferral of individual installments, will not constitute a refinancing unless accomplished by the cancellation of that obligation and the substitution of a new obligation.
ii. A substitution of agreements that meets the refinancing definition will require new disclosures, even if the substitution does not substantially alter the prior credit terms.
2. Exceptions. A transaction is subject to §1026.20(a) only if it meets the general definition of a refinancing. Section 1026.20(a)(1) through (5) lists 5 events that are not treated as refinancings, even if they are accomplished by cancellation of the old obligation and substitution of a new one.
i. If a variable-rate feature was properly disclosed under the regulation, a rate change in accord with those disclosures is not a refinancing. For example, no new disclosures are required when the variable-rate feature is invoked on a renewable balloon-payment mortgage that was previously disclosed as a variable-rate transaction.
ii. Even if it is not accomplished by the cancellation of the old obligation and substitution of a new one, a new transaction subject to new disclosures results if the creditor either:
A. Increases the rate based on a variable-rate feature that was not previously disclosed; or
B. Adds a variable-rate feature to the obligation. A creditor does not add a variable-rate feature by changing the index of a variable-rate transaction to a comparable index, whether the change replaces the existing index or substitutes an index for one that no longer exists.
iii. If either of the events in paragraph 20(a)–3.ii.A or ii.B occurs in a transaction secured by a principal dwelling with a term longer than one year, the disclosures required under §1026.19(b) also must be given at that time.