Dodd-Frank and the New World of Residential …

1 September 12, 2013 Presented by: Dodd-Frank and the New World of Residential mortgage LendingToday s Agenda 8:30 am 9:45 am Overview of Qualified mortgage (QM) and Other 2013 Dodd-Frank mortgage Rulemakings Paul Schieber, Stevens & Lee 9:45 am 10:45 am Valuing and Assessing mortgage Company Acquisitions: Is This the Market to Enter/Expand Residential lending ? Mark McCollom, Griffin Financial Group BREAK 11:00 am 12:00 pm New and Creative Insurance Coverages for mortgage Operations Ken Maher, Pinnacle Risk Services 12:00 pm 1:00 pm Lunch Q&A 2 Paul H.

2 SchieberStevens & Overview of Qualified mortgage (QM) and Other 2013 Dodd-Frank mortgage Rulemakings The future ain t what it used to be Yogi Berra STEVENS & LEE 4 CFPB UDAP/UDAAP Authority, Enforcement New and Imminent Residential mortgage lending Rules Additional Consumer-Credit Rules Expected in 2013 CFPB Final Rulemakings HOEPA Rule Loan Officer Compensation Rule Servicing Rule Escrow Rule Appraisal Rule for Higher Risk Loans Disparate Impact Rule (HUD) Qualified mortgage Ability to Repay Vendor Oversight CFPB (and Other Regulator) Examinations Contents STEVENS & LEE 5 Section 1031 of Dodd-Frank Empowers the CFPB to Take Enforcement Action to Prevent.

3 A covered person or service provider From committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law In connection with any transaction with a consumer for a consumer financial product or service Or the offering of a consumer financial product or service UDAP is now UDAAP CFPB UDAP/UDAAP Authority, Enforcement STEVENS & LEE 6 Risk Areas The areas with the greatest potential for unfair or deceptive acts or practices include: Advertising and solicitations Account and loan disclosures Servicing and collections Managing and monitoring of third-party service providers Consumer complaints Consumer complaints can indicate to the CFPB weaknesses in an institution s compliance management system, such as.

4 Training Internal controls and/or Monitoring CFPB UDAP/UDAAP Authority, Enforcement (cont d) STEVENS & LEE 7 Enforcement Actions The CFPB s first public enforcement action required a major institution to Refund approximately $140 million to two million customers and Pay an additional $25 million penalty Action resulted from an examination that identified deceptive marketing tactics used by the institution s vendors Now focusing on debt collection practices, student lending CFPB UDAP/UDAAP Authority, Enforcement (cont d) STEVENS & LEE 8 ATR/QM Rule Ability to Repay/Qualified mortgage ; Proposal Issued May, 2011, originally to come out in final 4/12 Final Rule issued January 10, 2013, implementation date January 2014.

5 Detailed discussion below HOEPA Rule High Cost mortgage Loans (Reg Z) Proposal issued July 9, 2012, Comments deadline September 9 Final Rule issued January 10, 2013, implementation date January 2014 Loan Officer Compensation Rule mortgage Originator Standards (Reg Z) Proposal issued August 17, 2012, Comments were due October 16, 2012 Final Rule issued January 20, 2013, implementation date January 2014 New and Imminent Residential mortgage lending Rules STEVENS & LEE 9 Servicing Rule mortgage Servicing (Regulations X and Z) Proposal issued August 10, 2012, Comments were due October 9, 2012 Final Rule issued January 17, 2013, implementation date January 2014 Escrow Rule Requirements for Escrow Accounts (Reg Z)

6 Final Rule issued January 22, 2013, implementation date January 2014 ECOA/TILA Appraisal Disclosure Rule Final rule issued January 18, 2013, implementation date January 2014 Appraisals for High Risk Mortgages Rule Final rule issued January 18, 2013, implementation date January 2014 HUD Disparate Impact Rule Final rule issued February 9, 2013 New and Imminent Residential mortgage lending Rules (cont d) STEVENS & LEE 10 STEVENS & LEE 11 QRM Rule Six rule makers (not including CFPB) Final rule can now be published since ATR/QM has been issued in final.

7 Effective date unknown RESPA-TILA Integration Rule TILA/RESPA mortgage Disclosure Integration (Regulation X; Reg Z) Proposed rule issued July 9, 2012, First comments due and submitted September 7, 2012, Second (main set) comment deadline was due November 6, 2012. Final rule and effective date unknown HMDA Pre-Rule Home mortgage Disclosure Act (Reg C) Proposal and final rule dates unknown Loan Originator Anti-Steering Rule Proposal and final rule dates unknown Additional Consumer-Credit Rules Expected in 2013 STEVENS & LEE 12 HOEPA Rule Extends HOEPA restrictions to HELOC s and purchase money loans High Cost mortgage Thresholds.

8 The annual percentage rate exceeds the applicable average prime offer rate by more than percent for most first-lien mortgages, or by more than percent for a first mortgage if the dwelling is personal property and the transaction is for less than $50,000; The APR exceeds the applicable average prime offer rate by more than percentage points for subordinate or junior mortgages; or The points and fees exceed 5 percent of the total transaction amount or, for loans of less than $20,000, the lesser of 8 percent of the total transaction amount or $1,000 2013 CFPB Final Rulemakings STEVENS & LEE 13 New restrictions and duties on high-cost loans and lenders.

9 Balloon payments are generally, but not always, prohibited Lenders cannot finance points and fees The creditor cannot charge a prepayment penalty more than 36 months after the loan closing nor may such penalty total more than 2 percent of the amount prepaid Late fees are restricted to 4 percent of the overdue amount Fees for payoff statements are restricted Fees for loan modifications or payment deferrals are prohibited A home equity line of credit lender must assess the borrower s ability to repay the loan Lenders and mortgage brokers are prohibited from encouraging a consumer to default on a

10 Loan that will be refinanced by a high-cost mortgage The lender must give a loan applicant a list of counseling organizations within three business days of the loan application A creditor must obtain certification from an appropriate counselor that the borrower has obtained homeownership counseling before the loan can be made 2013 CFPB Final Rulemakings (cont d) STEVENS & LEE 14 Loan Officer Compensation Rule LO comp may not be based on or a proxy for rate/fee structure of loan No steering to less advantageous (to consumer) loan products Restrictions on dual compensation OK to pay based on loan amount, quality, volume No LO concessions unless unforeseen event OK to have different pricing for different LO s BUT raises fair lending issues Limits on profit sharing plans 2013 CFPB Final Rulemakings (cont d)