Fannie Mae Prefunding Quality Control (“QC”) Requirements:
Fannie Mae has announced changes to prefunding QC requirements. In an announcement published March 1, 2023, Fannie Mae will now require lenders to select loans on a monthly basis for it prefunding quality control reviews. The selection process must be based on a lender’s assessment of the risks inherent in its origination process which include items such as business source, volume and product mix. The monthly sample must include selections from each of the lender’s origination channels.
Fannie Mae now requires lenders to complete a minimum number of prefunding QC reviews each month, and this review must be conducted by parties who have no involvement in the processing and underwriting decision of the loan being reviewed. A lender’s loan selections must equal, at a minimum, the lesser of:
- 10% of the prior month’s total number of loans originated or acquired, or
- 750 loans.
Note: If a lender does not originate or acquire at least 10 loans in the prior month, then the lender must select at least one loan for its current prefunding QC review.
Regulatory Solutions has a robust prefunding department that can provide these monthly reviews in accordance with Fannie Mae guidelines. Please contact Betsy Reynolds at Betsy.reynolds@regulatorysol.com to get started on your prefunding QC reviews today.
Announcement SEL-2023-02: Selling Guide Updates | Fannie Mae
The Latest Construction Loan TRID Compliance
On December 18, 2019 the CFPB released guidance for disclosing construction and construction-permanent loans under TRID. They published two guides on their website. The first is focused on disclosing construction and construction-permanent loans with separate Loan Estimates and Closing Disclosures for each phase of the loan and the second is on how to disclose a combined Loan Estimate and combined Closing Disclosure for both phases of a construction-permanent transaction. Both construction disclosures guides can be accessed by clicking this link: https://www.consumerfinance.gov/policy-compliance/guidance/tila-respa-disclosure-rule/.
CFPB Announces Increase In Special Appraisal Requirements
On October 31, 2019, the CFPB announced an increase for the special appraisal requirements for higher-priced loans from $26,700 to $27,000. This will take effect January 01, 2020 and it will be based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as of June 1, 2019.
The special appraisal requirements for higher-priced mortgage loans was added in 2010 to TILA. This requirement makes the creditor obtain a written appraisal based on a physical visit to the home’s interior before making a higher-priced loan.
The full announcement can be found at: https://www.federalregister.gov/documents/2019
GSE Patch Under Review By CFPB
On July 25, 2019, the CFPB issued an advance notice of proposed rule making looking for feedback on the expiration of the temporary GSE patch. This patch specifically grants Qualified Mortgage status to loans eligible to be purchased or guaranteed by Fannie Mae or Freddie Mac. As it stands, the GSE patch will end in January 2021 and the CFPB has stated their intention to let it expire. Along with announcing the expiration of the GSE patch, the CFPB is asking for feedback as to whether the definition of a Qualified Mortgage should be revised.
The full text of the advance notice with instructions on submitting feedback can be found here: https://files.consumerfinance.gov/f/documents/cfpb_anpr_qualified-mortgage-definition-truth-in-lending-act-reg-z.pdf
Construction Loans FAQ
Construction loans and their compliance with Regulation Z can be a struggle. The CFPB has recently published their first set of Frequently Asked Questions specifically addressing common compliance issues for construction loans that are subject to TRID. The Frequently Asked Questions can be found at https://www.consumerfinance.gov/policy-compliance/guidance/tila-respa-disclosure-rule/tila-respa-integrated-disclosure-faqs/#construction-loans.
Regulatory Solutions provides comprehensive TRID reviews to ensure compliance with TILA-RESPA requirements. Contact us today to find out how we can assist you with your TRID and other lending compliance reviews.
Regulatory Solutions Top 5 TRID Exceptions Noted During Our Loan Reviews
Last year, Regulatory Solutions completed TRID reviews on traditional mortgage loans, lot loans, constructions loans and construction/perm loans as well as home equity loans for lenders. While the number of exceptions varied per loan review, there were common TRID exceptions that occurred. Here are the top 5 TRID exceptions that Regulatory Solutions noted during our loan reviews:
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Disclosure issues in Block H of the Closing Costs Details table on page 2 of the Closing Disclosure. For example, the Real Estate Commissions fees are not always disclosed in Block H. These fees are required to be disclosed in Block H per 1026.38(g)(4) comment 4.
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Disclosure issues in Block B of the Closing Costs Details table showing the services that the borrower did not shop for on page 2 of the Closing Disclosure. For example, sometimes one or more of the Title fees are being placed in Block B when the borrower did not choose a service provider from the Settlement Service Provider List. Only fees that the borrower did not shop for should be placed in Block B per 1026.38(f)(2).
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The Amount Financed section of the Loan Calculations table on page 5 of the Closing Disclosure was not calculated correctly. Non-prepaid finance charges are being included in the calculation.
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The contact information for the participants in the transaction was not correct in the Contact Information table on page 5 of the Closing Disclosure. Lenders are still leaving out email addresses and contact information.
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The breakdown and other disclosure issues of the amount for taxes and other government fees listed in Block E of the Closing Costs Details table on page 2 of the Closing Disclosure. For example, the Transfer Taxes listed in Block E do not list the name of the government entity that is assessing the tax, which is required by 1026.38(g)(1)(ii).
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While the portfolio loans we reviewed have similar TRID exceptions, they will occasionally have different reporting problems than loans sold in the secondary market. One of the most common exceptions for portfolio loans is the incorrect loan purpose being listed on the Loan Estimate and the Closing Disclosure. Whether the loan should be listed as a refinance or as construction are the two most confused loan purposes for portfolio loans.
Regulatory Solutions provides comprehensive TRID reviews to ensure compliance with TILA-RESPA requirements. Contact us today to find out how we can assist you with your TRID and other lending compliance reviews.
Factsheet: Are Loan Estimates and Closing Disclosures Required for Assumptions?
On May 1, 2019 the Consumer Financial Protection Bureau posted a factsheet regarding whether Loan Estimates (LE) and Closing Disclosures (CD) were required for assumption transactions. The factsheet consists of a flowchart and a narrative discussion to assist lenders in making the determination of whether a loan would require the TILA-RESPA Integrated Disclosures. The factsheet can be found at https://files.consumerfinance.gov/f/documents/cfpb_tila-respa-factsheet.pdf.
Regulatory Solutions specializes in TRID loan reviews, please contact us to schedule your review today.
HMDA Compliance Alert: CFPB Proposes New Changes
On April 13, 2017, the Consumer Financial Protection Bureau issued a much-ask-for proposal to clarify and facilitate HMDA compliance with the 2015 updates to the Home Mortgage Disclosure Act rule set to take effect next year. According to the CFPB, “The proposed changes would help financial institutions comply with the 2015 HMDA Final Rule by clarifying the information they are required to collect and report about their mortgage lending.”
“These changes are monumental to HMDA collection and reporting requirements and will require a substantial amount of planning to implement the new data fields,” stated Rhonda Wannemuehler, Executive Vice President of Regulatory Solutions. “The CFPB gave the industry about three years to become compliant to the updates released in October 2015 with most of the requirements taking effect in January 2018.”
Read the full article on HousingWire.
Consumer Financial Protection Bureau website to review the proposal and other quick references.
Learn more about our Lending Compliance services.