2014 A Year of Changes

1. 2014A Year of Changes Texas Department of Savings and Mortgage Lending

2. Concurrent Examinations • Multi-State Exams • Multi-State Exams set by the Multi-State Mortgage Committee (MMC). Focus is on nationwide lenders / servicers operating in ten or more states. • CFPB-StateConcurrent Exams • States, through their associations, are working with CFPB on the coordination of concurrent examinations. • CFPBexamination process will generally include 60-90 days of notice prior to the on-site examination. • Examine on a product line basis.

3. Changes in 2014 Examinations Areas in which our exams will be more detailed: • LO Compensation Agreements • Review for prohibited terms • Review for sufficient compensation records (W-2s, paystubs, “flow of funds” worksheet) • Compliance / Quality Control • Adequate for size and complexity of company • Regularly updated to include recent Federal and State regulations

4. Changes in 2014 Examinations • Red Flags Rule Program • Identify relevant patterns, practices, and forms of red flags and provide for periodic updating • Incorporate business practices to detect red flags • Detail responses to red flags to prevent identify theft • BSA Anti-Money Laundering Program • Detail policies, procedures, and internal controls • Provide for ongoing training, independent testing, and electronic SARS filing procedures • Personnel Administration

5. Changes in 2014 Examinations • Adverse Action Notices • Fully completed - Identify reason for denial and include Federal Agency name and address (FTC for non-depository). • If denial based on credit, credit information must be included. • Revised GFE and Changed Circumstance • Documentation of valid changed circumstance • All issued revised GFEs and documentation maintained • Tolerance: GFE fees vs. Hud-1 fees

6. Changes in 2014 Ability to Repay Rule Review underwriting policies, procedures, and internal controls to ensure that they cover each of the eight factors, including documentation. Eight ATR Underwriting Factors [1026.43(c)(2-4)]: • Income and asset verification • Employment status • Monthly mortgage payment • Monthly payment on any simultaneous loans on property • Monthly property tax, insurance and HOA payments • Debts, alimony, and child support obligations • Monthly DTI ratio or residual income • Credit history

7. Licensing Data

8. Licensees • Licensee Counts as of January 31, 2014

9. Negative Growth in Companies Versus Licenses

10. Consolidation ofMarket Share • 208 companies originated 45% of the loans in the last four quarters • But companies licensed in only 1 state originated 19% 208 companies 7,760 companies

11. MBA Loan Volume Projections for 2014

12. Growth in Individuals Versus Licenses

13. Texas Growth and Attrition National Rankings

14. Changes in 2014 Licensing Areas in which Licensing will be more detailed: • Failure to file Call reports • Will result in licensee renewal being blocked • Starting in April we will assess penalties for failing to file timely for any 2013 Mortgage Call and Annual Financial Reports • Applications • One Individual License • 3 Hours Texas Specific Pre-licensing Education • Renewal Fee Reduction

15. Mortgage Call ReportData

16. Aggregate MCR Filings1st – 3rd Quarter 2013 • Brokered • Retail • Wholesale

17. Common Filing Errors • 38% - Relate to Fees Information • AC600–AC610 • AC630-AC630 • 25% - Relate to Loan Originated Groups • AC070 • AC100-AC1000 • MLOs • 15% - Relate to Close Loan Groups • AC100-AC1000

18. Filing Noncompliance 2013 • 1st Quarter 313 • 2nd Quarter432 • 3rd Quarter 440 Total 1,185

19. Changes in 2014 Testing Stand Alone Uniform State Test as of March 31, 2014 • 47,607 taken or 43% of Licensees • 17,738 open enrollments for Stand Alone UST • 1,822 appointments made

20. Changes in 2014 Testing • INSERT MAP

21. Changes in 2014 Pre-License Education • States Adding THREE hours Pre-license Ed Texas • States Adding TWO hours Pre-license Ed Hawaii, Michigan, Tennessee Vermont, Washington • States Adding ONE hour Continuing Education Hawaii

22. Changes in 2014 Pre-License Education • 3 – hours of Texas Specific starting November 1, 2013 • 1,774 individuals have completed 5,322 hours of TX-SML courses between October 1, 2013 and January 15, 2014 • 11 separate providers, 1 brick and mortar in Texas • Feedback has been positive; but encompasses a lot of material

23. Complaints and Enforcement

24. Complaints Increasing

25. Complaints Increasing

26. Complaints Increasing

27. Complaints Increasing

28. CFPB Complaint Portal • TDSML signed the data sharing agreement on April 2, 2013. • The agreement allows authorized Department employees to view complaints filed with the CFPB by Texas consumers. • Shared workload is still under discussion.

29. Complaint Resources • TDSML has 5 full time equivalent Complaint Investigators to respond to 900 complaints with only 600 where we have jurisdiction. • CFPB will have a maximum 210 full time equivalent Complaint Specialists to respond to an expected 60,000 complaints where they have jurisdiction. • Complaints per Investigator TDSML 1: 180 CFPB 1: 285

30. Changes in 2014 New Commissioner • Retirement of Doug Foster August 31, 2014 • Search includes 60-90 days of transition for continuity • Sunset Review begins in 2018

31. QUESTIONS?

32. Contact Info SML Website: www.sml.Texas.gov Email: licensing@sml.Texas.gov Main Phone: 512-475-1350 Licensing Fax: 512-475-1360 Office: 2601 North Lamar Blvd., Suite 201 Austin, Texas 78705