United States: CFPB Issues Compliance Guides For New TILA, RESPA, And ECOA Requirements

In January 2013, the Consumer Financial Protection Bureau ("CFPB") issued a number of new final rules to implement amendments to the Truth in Lending Act ("TILA"), Real Estate Settlement Procedures Act ("RESPA"), and Equal Credit Opportunity Act ("ECOA") made by the Dodd-Frank Wall Street Reform and Consumer Credit Protection Act (collectively, the "January Rules"). The January Rules included, among other things, new mortgage servicing requirements codified in both Regulation X, which implements RESPA, and Regulation Z, which implements TILA, and amendments to Regulation Z addressing loan originator compensation issues. The new mortgage servicing and loan originator compensation rules are generally effective in January 2014.

Although the CFPB has identified one its "core functions" as "working to make regulations and guidance as clear and streamlined as possible," the mortgage servicing and loan originator rules exceeded 1,700 pages, as published on the CFPB's website. Mortgage lenders and servicers have faced a daunting task in reviewing all the new requirements under the January Rules and moving forward with implementation plans to ensure compliance with the new requirements prior to the effective dates.

On April 10, 2013, the CFPB released its first in a series of Small Entity Compliance Guides ("Guides") addressing the requirements under the January Rules. As of the date of this alert, the CFPB has released the following Guides addressing various requirements under the January Rules:

Ability-to-Repay and Qualified Mortgage Rule April 10, 2013
TILA Escrow Rule April 18, 2013
Equal Credit Opportunity Act (ECOA) Valuations Rule May 2, 2013
TILA Higher-Priced Mortgage Loans Appraisal Rule May 2, 2013
2013 Home Ownership and Equity Protection Act (HOEPA) Rule May 2, 2013
2013 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (TILA) Mortgage Servicing Final Rules June 7, 2013
2013 Loan Originator Rule June 7, 2013

As with the January Rules, the CFPB continued its practice of streamlining via volume. The Guide addressing the new mortgage servicing final rules is 98 pages and the Guide addressing the loan originator compensation final rules is 80 pages. The Guides are not compiled at a single page on the CFPB's site, but may be accessed at our firm links above.

"Small entities" generally include commercial banks, savings institutions, and credit unions with $175 million or less in assets and other mortgage lenders and servicers with average annual receipts of $7 million or less. Although the Guides were designed for smaller financial services companies that may not have full time legal and compliance staff, the Guides are a helpful resource for mortgage lenders and servicers of all sizes. The Guides provide easy-to-use summaries of the new rules in a question and answer format and tips for implementation that may assist all lenders and servicers as they continue to prepare to comply with the new requirements.

Although the Guides should also serve as a valuable source of information in interpreting the new regulatory requirements, they do not replace the official CFPB commentary to any of the January Rules so lenders and servicers should continue to follow the guidance in the commentaries. The CFPB plans to periodically update the Guides as it finalizes rule clarifications.

On May 15, 2013, the CFPB released plain-language videos on You Tube for each of the new mortgage-related rules, including the mortgage servicing and loan originator compensation final rules. The publication of the Guides is another step in the CFPB's ongoing efforts to assist mortgage lenders and servicers in interpreting and implementing the January Rules. Since the effective date for many of the new requirements under the January Rules is only six months away, the CFPB's recent efforts to provide guidance to the industry should provide help to those companies already diligently working to implement the new requirements and should also serve as a call to action for other companies who may not be as far down the road as they need to be in order to meet the compliance deadlines.

The CFPB confirmed in the Guide regarding the new mortgage servicing rules that they expect to issue proposed amendments to the mortgage servicing rules in June and August 2013. One such amendment will likely focus on the loss mitigation rules under Regulation X. A few days prior to the release of the Guide regarding the new loan originator compensation rules, the CFPB extended the effective date of the prohibition on creditors financing credit insurance premiums in connection with certain mortgage loan transactions that was included in the final loan originator compensation rule released in January 2013. The effective date was extended from June 1, 2013 to January 10, 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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