Marianne Collins, Executive Director & Chief Operating Officer Ohio Mortgage Bankers Association

1. Dodd-Frank and Your BusinessA snapshot of the Consumer Financial Protection Bureau’s proposed rules Marianne Collins, Executive Director & Chief Operating Officer Ohio Mortgage Bankers Association

2. Consumer Financial Protection Bureau (CFPB) Proposed Rules • Qualified Mortgage • Qualified Residential Mortgage • Integrated Good Faith Estimate/Truth-in-Lending/Closing Statement • Home Owner’s Equity Protection Act Changes • Servicing Rules • Loan Originator Compensation

3. Qualified Mortgage (QM)Ability to Repay • Proposal by the Federal Reserve Board, Final rule by the CFPB • Two proposed alternatives • Coverage: Dwelling secured 1-4 family (including 2nd homes) 1st & 2nd mortgages, sold and portfolio • Exempt: HELOC, timeshare, reverse, temporary • Includes sold and portfolio loans. No exemptions for GSE’s or government loans

4. QMAlternative 1 • Safe Harbor • No Negative-amortization, interest only, balloon payments (w/narrow exception) • Maximum term of 30 years • Maximum of 3% in points & fees • Must be underwritten at maximum rate permitted in the first 5 years • Income & assets must be verified

5. QMAlternative 2 • Rebuttable Presumption • Loan must meet all of the requirement of Alternative 1 • Verify employment status • Consideration of DTI and credit history

6. QM3% Points and Fee Limit • Direct and indirect payments by a consumer to a creditor and mortgage broker as well as their originator employees (double count) • Affiliate fees • Mortgage insurance premiums in excess of the FHA premium • The prepayment penalty on the covered transaction or on an existing loan if it is refinanced by the same creditor.

7. QMFees Not Included in 3% • 3rd party fees • Bone fide discount points

8. QMFailure to Comply • Actual damages • All fees paid by the consumer and up to three years of finance charges paid by the consumer • Court costs and reasonable attorney’s fees associated with the enforcement action • Defense against foreclosure

9. Qualified Residential Mortgage (QRM) • Sold loans only • Coverage: Principal Dwelling 1st lien, closed end loan that does not finance initial construction, not a bridge or timeshare, not a reverse mortgage • Exemptions: 2nd liens, Fannie/Freddie (as long as they are in conservatorship), Government Loans • Non QRM/Non Exempt=Risk Retention

10. QRM Credit Requirements • Cannot be currently past due on any debt • No 60 day late payments in the past 24 months • No bankruptcy, foreclosure deed-in-lieu, short sale or repossession of personal property in last 36 months

11. QRM Loan Requirements • No Balloons, Negative Amortization, or interest only • ARM increases may not exceed 2/6 Caps, underwritten at max rate in 1st 5 years • 3% Maximum points and fees • Maximum ratios 28/36% • Max LTV: 80% purchase, 75% rate/term refi, 70% cash-out refinance • Closing costs and down payment paid cash from borrower’s funds • Written appraisal • No loan assumptions

12. Penalty for Making a Non-QRM Loan Risk retention in the amount of 5% of the loan

13. Integrated Good Faith Estimate (GFE) Truth-in-Lending (TIL) Closing Statement (HUD1) • All-in APR (not a Dodd-Frank requirement) • 0% tolerance for affiliate fees and 3rd party services that borrower cannot shop • A 5-page closing disclosure would replace the HUD1. Borrower must receive completed form 3 days prior to closing. Changes of more that $100 require another 3 day period

14. Integrated GFE/TIL/HUD1Concerns • All-in APR would cause more loans to become a HPML or HOEPA • 0% tolerance on 3rd party fees will mean more lender cures • 3-day wanting period will cause purchase contract and rate loan expirations

15. Home Owner’s Equity Protection Act (HOEPA) (High Cost Loans) • Adds purchases and Home Equity Lines of Credit (HELOC), previously refinance only • Excludes reverse mortgages • Triggers when Annual Percentage Rate (APR) exceeds prime offer rate by 6.5% (8.5% for 2nd lien), points and fees exceed 5%, or a pre-payment penalty applies for more than 36 months or exceeds 2% of the amount pre-paid. • Requirement to provide list of federally approved homeownership counselors to ALL mortgage applicants

16. Servicing Proposal • Monthly statements required, to include: Explanation of amount due, Past payment breakdown, Transaction activity, Message section, Contact information, Account information section, Delinquency information, Housing counselor information • Coupon books acceptable for fixed rate loans, if all information is somewhere in the book • Exception for small servicers for loans they originated or own, and reverse mortgages

17. Servicing Proposal (cont.) • 60-120 day notice of rate/payment changes to Adjustable Rate Mortgages (ARM) • Payments credited on the day of receipt • Payoffs must be sent within 7 days of receipt of written request • Complaints: Acknowledged within 5 days, respond/correct within 30 days (5 days for pay-off resolutions) • Force-placed insurance: refund to borrower within 15 days of confirmation that he had insurance • Servicers must establish information management policies and procedures

18. Servicing Proposal Delinquent Borrowers • At least 3 separate calls on 3 separate days must be made before the 30th day of delinquency • Assign contact personnel within 5 days of oral notice. Response within 3 days of customer contact • Early loss mitigation intervention required with 1st 30 day late payment • Written notice by the 40th day of delinquency • Establish formal policies and procedures • Small servicers are not exempt

19. Loan Originator Compensation • Loans with points and fees can only be made if an option at no points and fees is offered • No affiliate fees can be charged in a no points and fees option • Reduction in loan officer’s commission allowed if a fee exceeds tolerances and the loan officer could not have known this ahead of time • Record retention goes from 2 years to 3

20. THE ROAD AHEAD