August 24, 2022
Minimum Monthly Full-Service Fee / PPDocs Fee Adjustments, New Fannie Mae/Freddie Mac Uniform Instruments Update, Commercial Flood Insurance Compliance and more!
Read more below!
Minimum Monthly Full-Service Fee / PPDocs Fee Adjustments
In July 2022, PPDocs announced that when using full-service documentation services, effective September 1, 2022, our minimum monthly fee for full-service document preparation services will be $1,000.00 (the "Minimum Monthly Fee"). Please note that our full-service documentation services give our clients full access to our legal and compliance staff.
The Minimum Monthly Fee will consider and include all borrower, seller, and lender fees (except fees for fulfillment services) paid related to lender transactions. Fees charged for fulfillment services shall not count toward the Minimum Monthly Fee.
This Minimum Monthly Fee is not applicable to lenders only using our Review and/or Express loan services. There is no minimum usage requirement for our Review and/or Express loan services. These services will no longer include access to our Legal and Compliance staff.
To the extent fees for full-service document preparation charged in a calendar month total less than $1,000.00, PPDocs will invoice the lender for the difference between the actual fees for that month and $1,000.00.
Fee Adjustments: Additionally, in July 2022, we released our updated fee matrix effective September 1, 2022: 2022 Fee Matrix. The Fee Matrix reflects current fees and fees effective September 1.
New Fannie Mae/Freddie Mac Uniform Instruments Update
In July 2021, Fannie Mae and Freddie Mac published an entirely new set of uniform instruments, including promissory notes, security instruments, riders & addenda, and special purpose documents. Lenders were permitted to use the new uniform instruments immediately, but in any case, are required to use them for GSE conforming loans with a note date of January 1, 2023, or after. Thus far, PPDocs has not seen any evidence that the new uniform instruments are in widespread use. Our review of investor announcements over the past few months indicates that at least some secondary market investors are not ready to accept the new uniform instruments. However, we anticipate that many investors will begin to accept (or require) use of the new uniform instruments beginning in the 4th quarter of 2022.
PPDocs has created all the new FNMA/FHLMC Uniform Instruments on our system and we have almost finished testing the new forms. Accordingly, while we do not yet have an exact date of when they will go live on our system, we will be ready to make the switch to the new uniform instruments very soon, and well before the January 1, 2023, mandatory implementation date. We will continue to provide further updates as they become available.
Commercial Flood Insurance Compliance
The latest issue of Consumer Compliance Outlook is now available for download. This issue includes a variety of topics, including Commercial Flood Insurance Compliance.
Frequently Asked Question
Question: Can an interim construction loan be closed on an 18-month term, or will we get a stop audit in your system?
Answer: An interim construction loan may have an 18-month term. The biggest issue is that once the term goes past 12 months, it is not exempt from certain sections of Reg. Z, including Section 43 (ATR/QM).
Under Reg Z, a construction term of 12 months or less allows the construction portion of the loan to be considered “temporary” financing, exempted from ability-to-repay analysis. A construction term longer than 12 months, on the other hand, must be considered in the ability-to-repay analysis. For borrower interim construction loans (with no permanent phase), the full balance of the loan would have to be factored into the ATR analysis due to the balloon payment at maturity of the construction loan. This would disqualify most borrowers. If the construction loan initially closes with a term of 12 months or less, the term can then be extended for 12 months or less and remain exempt from ATR. Extensions greater than 12 months will put your loan back into ATR underwriting requirements.
Here is the official staff commentary from Regulation Z, Section 1026.43(a):
1. Renewable temporary or "bridge" loan. Under § 1026.43(a)(3)(ii), a temporary or "bridge" loan with a term of 12 months or less is exempt from § 1026.43(c) through (f). Examples of such a loan are a loan to finance the purchase of a new dwelling where the consumer plans to sell a current dwelling within 12 months and a loan to finance the initial construction of a dwelling. Where a temporary or "bridge loan" is renewable, the loan term does not include any additional period of time that could result from a renewal provision provided that any renewal possible under the loan contract is for one year or less. For example, if a construction loan has an initial loan term of 12 months but is renewable for another 12-month loan term, the loan is exempt from § 1026.43(c) through (f) because the initial loan term is 12 months. [Emphasis added.]