Fed Defers Another Mortgage Reform. Originator Comp. on Schedule
Citing thernlimited benefits of proceeding with it and the potential compliance difficulties that would arise from it,rnthe Federal Reserve Board had decided not to finalize three pending rulemakings scheduledrnto go into effect in July. The rulesrnwere to be promulgated under Regulation Z which implements the Truth in LendingrnAct (TILA) currently administered by the Board scheduled to be transferred tornthe new Consumer Financial Protection Bureau (CFPB.) </p
Two ofrnthe rules were first proposed in August 2009 and would have reformed consumerrndisclosures under TILA for closed-end mortgage loans and home equity lines ofrncredit. The third rule, issued inrnSeptember 2010 included changes to consumer disclosures for rescinding severalrnloan types, clarified lenders’ responsibilities when borrowers exercised thosernrights, changed disclosures for reverse mortgages, proposed new disclosures forrnloan modifications and proposed restrictions on some advertising and salesrnpractices. The Board received more than 5,000 comments onrnthese proposed rules.</p
CFPB wasrncreated under the Dodd-Frank Wall Street Reform and Consumer Protection Act andrnwill take over general rulemaking authority for TILA. It is required to issue a proposal to combinernthe mortgage disclosures currently required by TILA with those required by thernReal Estate Settlement Procedures Act (RESPA) into a single form within 18rnmonths of assuming that authority.</p
ThernBoard said it had reviewed the efficacy of proceeding with its substantialrnrevisions to the disclosures but, as they would be subject to further revisionrnby CFPB in order to combine them into a single form, has determined that itrnwould not be in the public interest. Therernis also the possibility, the board said, that a new combined disclosure rulerncould be proposed by CFPB before some requirements issued by the Board wererneven fully implemented. Some provisionsrnof the three proposals will not be affected by future CFPB rulemaking but the Boardrnsaid issuing rules piecemeal would be of limited benefit.</p
“This announcement and the delay of risk retention regs indicates the Fed is capable of understanding the implications of implementing ‘onesy-twosy’ type reforms in the mortgage industry” said MND’s Managing Editor Adam Quinones. “If the main intention of these updates is to protect consumers, the Fed should further consider the ramifications if they don’t delay originator compensation reform too. No definitive compliance guide has been offered by the Fed. The Consumer Financial Protection Bureau isn’t set up and won’t be until July. The GFE and the TIL still need to be simplified. Uncertainty is clearly abundant. As a result lenders are taking several different approaches on loan officer pay practices that will only reduce financing options and increase costs for consumers. This is not how we rebuild the industry. We need less confusion and more direct guidance. One issue at a time. Otherwise the consumer will end up suffering”. </p
MortgagernBankers Association (MBA) President John A. Courson issued a statement applaudingrnthe Board’s action, saying in part, “We agreernwith the Board’s analysis that completing these rulemakings, then having thernCFPB do its own rulemaking shortly thereafter, would not be in the public’s bestrninterest. A series of unnecessarily duplicative rulemakings would havernincreased confusion, regulatory burden and costs to the very consumers thesernrules should protect. We look forward to working with the CFPB on itsrnrule to address many of the same issues and to harmonize the TILA and RESPArnconsumer disclosures.” </p
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