November 17, 2020

Interagency Statement: LIBOR Transition for Loans, OCC Issues “True Lender” Rule and more!

Read more below!

November 17, 2020

Interagency Statement: LIBOR Transition for Loans

The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (collectively, the agencies) issued a statement to reiterate that they are not endorsing a specific replacement rate for the LIBOR index on ARM loans. In the statement, the Board indicates that a bank may use any reference rate for its loans that the bank determines to be appropriate for its funding model and customer needs. However, the Board recommends that a bank include fallback language in its lending contracts that provides for use of a robust fallback rate if the initial reference rate is discontinued.

OCC Issues “True Lender” Rule

The Office of the Comptroller of the Currency (OCC) issued a final rule to determine when a national bank or Federal savings association makes a loan and is the “true lender”. Under this rule, a bank makes a loan if, as of the date of origination, it is named as the lender in the loan agreement or funds the loan. The rule is effective December 29, 2020.

New IRS Form 4506-C

The IRS recently released a new Form 4506-C, IVES Request for Transcript of Tax Return (version September 2020).

Previously, Form 4506-T was used by both the Return and Income Verification system (RAIVS) respondents and Income Verification Express Service (IVES) respondents to order a tax transcript. To protect taxpayer information, IRS implemented a policy change for the Form 4506 series to no longer mail tax transcripts to third parties that have not been vetted through the agency, and as a result eliminated line 5a from Form 4506-T.

Form 4506-C was created for use by authorized IVES participants to order tax transcript records electronically for a third party. This impacts taxpayers by allowing the third parties to request a transcript of a return that will assist with securement of mortgages, loans, student aid, and other benefits.

The IRS will accept Form 4506-T (version March 2019) for all tax transcript order requests through February 28, 2021. On March 1, 2021, only Form 4506-C will be accepted for use by authorized IVES participants to order tax transcripts records electronically.

Click here to view the Supporting Statement from the Office of Management and Budget.

Note: PPDocs has Form 4506-C available upon request. Use of Form 4506-C will be based on your IVES vendor and, for secondary market loans, investor requirements.

November’s Frequently Asked Question

Question: I have two questions. First, are we required to order legal reviews for Trusts, Powers of Attorney or Leaseholds? Second, how do we order these legal reviews?

Answer: As to your first question, our Legal Reviews are specifically for secondary market loans, but ordering a Legal Review is a business decision for the lender and is never a PPDocs requirement. When performing the reviews, we check only for compliance with FNMA Selling Guide requirements for trusts and POAs. For leasehold reviews, we will review for FNMA, FHLMC, or FHA compliance, depending on which leasehold review type is indicated in the order form.

You’ll find the answer to your second question in the below PDF of our step-by-step instructions on ordering a Trust, Power of Attorney or Leasehold Legal Review. Please feel free to download the PDF, share it with those in your office who may order legal reviews, and keep it handy for future reference.