The Consumer Financial Protection Bureau (CFPB) updated its exam procedures in June to address the agency’s new mortgage regulations on appraisals, escrow accounts, and compensation and qualifications for loan originators.Read
This is the first round of what likely will be multiple updates.
Although the procedures are intended for use by CFPB examiners, the agency is coordinating with the other federal financial institution regulators to ensure all the agencies have a shared understanding of the new mortgage rules.
This multiagency effort includes the interagency development of exam procedures through the Federal Financial Institutions Examination Council.
Reviewing the exam procedures helps institutions understand how examiners will review their compliance with CFPB rules that:
►Set qualification and screening standards for loan originators. A loan originator must be ethical and knowledgeable. Originators must meet character, fitness, and financial responsibility requirements; pass criminal background checks; and complete appropriate training.
►Prohibit steering incentives. Compensation for a loan originator generally can’t vary with the loan terms. A broker or loan officer can’t be paid more if the consumer takes a loan with a higher interest rate, a prepayment penalty, or higher fees.
►Prohibit dual compensation. A loan originator can’t be paid by both the consumer and another person such as the creditor;
►Protect borrowers of higher priced mortgage loans. The required duration of an escrow account on higher-priced mortgage loans extends from a minimum of one year to a minimum of five years;
►Prohibit the waiver of consumer rights. It’s prohibited to bar consumers in their mortgage or home equity loan or related agreements from bringing a claim in court in connection with any alleged violation of federal law.
►Prohibit mandatory arbitration. Mandatory arbitration of disputes related to mortgage loans is generally prohibited for mortgage and home equity loans.
►Require lenders to provide appraisal reports and valuations. Mortgage lenders will need to provide applicants with free copies of all appraisals and other written valuations developed in connection with certain mortgage loan applications.
►Prohibit single premium credit insurance. It prohibits creditors from financing certain credit insurance premiums in connection with certain mortgage loans.
Within the next several months, the CFPB will publish its first round of exam procedures for the ability-to-repay and mortgage servicing rules.
Once the agency updates these and other exam procedures with the new mortgage rule requirements, it will incorporate all amended sections into its general supervision and examination manual.