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Regulatory Update – Loans

Regulatory Update – Loans. Sam Teague Teague Consulting Group. Overview. Dodd-Frank Act – Provisions To Be Implemented Regulation Z – Mortgage Servicing Regulation X – Mortgage Servicing IRS Issues. Dodd-Frank Act Provisions To Be Implemented. Dodd-Frank Act – Future.

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Regulatory Update – Loans

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  1. Regulatory Update – Loans Sam Teague Teague Consulting Group

  2. Overview • Dodd-Frank Act – Provisions To Be Implemented • Regulation Z – Mortgage Servicing • Regulation X – Mortgage Servicing • IRS Issues

  3. Dodd-Frank Act Provisions To Be Implemented

  4. Dodd-Frank Act – Future Section 1032 – TILA/RESPA Disclosures • 7/9/12 – Proposed Rule On CFPB Website • 8/23/12 – Proposed Rule In Federal Register • 11/6/12 – Comments Due • 1/8/13 – CFPB Semi-Annual Agenda • Final rule expected in September 2013

  5. Dodd-Frank Act – Future Section 1094 – HMDA Data Collection • New Data Elements To Be Reported • Age of applicants • Total points and fees • Length of prepayment period • Value of property securing the loan • Length of introductory rate period • Others

  6. Dodd-Frank Act – Future Section 1094 – HMDA Data Collection • Effective Date • The first January 1 after the end of the 9-month period following the issuance of final regulations. • If final regs are published on 12/31/13, the effective date could be no earlier than 1/1/15 (12/31/13 + 9 months = 9/30/14; the first January 1 after that would be 1/1/15). • August 2013 – Further Action Expected

  7. Regulation Z Mortgage Servicing

  8. Reg. Z – Mortgage Servicing Significant Dates • 8/10/12 – Proposed Rule On CFPB Website • 9/17/12 – Proposed Rule In Federal Register • 10/9/12 – Comments Due • 1/17/13 – Final Rule Posted On CFPB Website • 2/14/13 – Final Rule Published In Federal Register • 1/10/14 – Effective Date

  9. Reg. Z – Mortgage Servicing Initial Rate Adjustments [§1026.20(d)] • Scope • Applies to all ARMs – not just hybrid ARMs • Closed-end loan secured by principal dwelling • Excludes ARMs with terms < 1 year • Notice Requirement • Special notice with first rate change • Must be in writing • Must be separate document (but may be included in same envelope with other material)

  10. Reg. Z – Mortgage Servicing Initial Rate Adjustments [§1026.20(d)] • Timing • 210-240 days before the first payment at the adjusted level is due • At consummation if the first payment at the adjusted level is due within first 210 days • Estimates • May disclose an estimate if new interest rate and payment are not known

  11. Reg. Z – Mortgage Servicing Initial Rate Adjustments [§1026.20(d)] • Notice Content • Date • Statement (explanation, effective date, other changes) • Rate & Payment Information (rates, payments, date) • Rate Determination (index, margin) • Rate & Payment Change Limits • Payment Determination • Interest-Only Loans • Negatively Amortizing Loans

  12. Reg. Z – Mortgage Servicing Initial Rate Adjustments [§1026.20(d)] • Notice Content (cont.) • Prepayment Penalty • Lender Contact Information • Alternatives • Other Contact Information • Homeownership Counselors • State Housing Finance Authority • Model Forms H-4(D)(3) & H-4(D)(4)

  13. Reg. Z – Mortgage Servicing Subsequent Rate Adjustments [§1026.20(c)] • Scope • Applies to all ARMs • Closed-end loan secured by principal dwelling • Excludes ARMs with terms < 1 year • Notice Requirement • Notice with a rate change that results in a payment change • No notice if rate changes but payment does not

  14. Reg. Z – Mortgage Servicing Subsequent Rate Adjustments [§1026.20(c)] • Timing • 60-120 days before the first new payment is due • Old rule (25-120 days) still applies to: • ARMs with adjustments every 60 days or more often • ARMs originated prior to 1/10/15 that require a look-back period of less than 45 days • Early 1st Adjustment • 1st adjustment occurs within 60 days of consummation • Initial notice was based on an estimate • Provide not less than 25 days before first new payment is due

  15. Reg. Z – Mortgage Servicing Subsequent Rate Adjustments [§1026.20(c)] • Notice Content • Statement (explanation, effective date, other changes) • Rate & Payment Information (rates, payments, date) • Rate Determination (index, margin) • Rate & Payment Change Limits • Payment Determination

  16. Reg. Z – Mortgage Servicing Subsequent Rate Adjustments [§1026.20(c)] • Notice Content (cont.) • Interest Only Loans • Negatively Amortizing Loans • Alternatives • Prepayment Penalty • Model Forms H-4(D)(1) & H-4(D)(2)

  17. Reg. Z – Mortgage Servicing Payment Processing [§1026.36(c)(1)] • Periodic Payments [§1026.36(c)(1)(i)] • Old Rule: must credit a payment as of the date of receipt • New Rule: must credit a periodic payment (PP) as of the date of receipt • PP: an amount sufficient to cover principal, interest, and escrow for a given billing cycle (does not include late fees, other fees, or non-escrow payments a servicer advanced on the borrower’s behalf)

  18. Reg. Z – Mortgage Servicing Payment Processing [§1026.36(c)(1)] • Partial Payments [§1026.36(c)(1)(ii)] • Unapplied Funds: must disclose on periodic statement • Subsequent Application: must apply when sufficient funds accumulate to cover a “periodic payment”

  19. Reg. Z – Mortgage Servicing Payoff Statements [§1026.36(c)(3)] • Old Rule: provide within a reasonable time after receiving a borrower’s request (Commentary said 5 business days) • New Rule: provide within 7 business days after receiving a borrower’s written request • May provide within a reasonable time in situations where 7 days is not feasible (bankruptcy, foreclosure, reverse mtg., natural disasters, etc.)

  20. Reg. Z – Mortgage Servicing Periodic Statements [§1026.41] • Scope • Closed-end loan secured by a dwelling • Provide a statement for each billing cycle • May use “monthly” if billing cycle is shorter than 31 days (e.g., bi-weekly loans). • Timing • Provide within a reasonably prompt time after payment due date or end of courtesy period for previous cycle (the Commentary says 4 days)

  21. Reg. Z – Mortgage Servicing Periodic Statements [§1026.41] • Form • Clear • Conspicuous • In writing • Form to keep • Sample forms – Appendix H-30

  22. Reg. Z – Mortgage Servicing Periodic Statements [§1026.41] • Content & Layout • Amount Due (due date, late fee, amount due) • Explanation Of Amount Due (pmt amt, fees, past due) • Past Payment Breakdown (current cycle, YTD) • Transaction Activity (date, description, amount) • Partial Payment Message (if applicable) • Contact Information (toll-free #, e-mail) • Account Information (balance, rate, next rate chg date) • Delinquency Information

  23. Reg. Z – Mortgage Servicing Periodic Statements [§1026.41] • Exemptions • Reverse Mortgages • Timeshare Plans • Fixed-Rate Loans With A Coupon Book • If certain requirements are met • Small Servicers • 5,000 or fewer mortgages • Only service loans they own or originated

  24. Regulation X Mortgage Servicing

  25. Reg. X – Mortgage Servicing Significant Dates • 8/10/12 – Proposed Rule On CFPB Website • 9/17/12 – Proposed Rule In Federal Register • 10/9/12 – Comments Due • 1/17/13 – Final Rule Posted On CFPB Website • 2/14/13 – Final Rule Published In Federal Register • 1/10/14 – Effective Date

  26. Reg. X – Mortgage Servicing • Regulation X – Mortgage Servicing • Error Resolution Procedures • Information Requests • Force-Placed Insurance • General Servicing Policies, Procedures, & Requirements • Early Intervention Requirements • Continuity Of Contact • Loss Mitigation Procedures

  27. IRS Issues

  28. IRS Issues – Overview • Information Reporting • Tax Year 2013 Form Changes • TIN Truncation • Fiscal Cliff Legislation • IRPAC Recommendations To IRS

  29. Tax Year 2013 Form Changes (as of 4/21/13)

  30. Changes Impacting All Forms • Payer’s Name Box – Caption Expanded • 1099-INT caption now reads: PAYER’S name, street address, city or town, province or state, country, ZIP or foreign postal code, and telephone no. • Recipient’s Name Box – Last Address Line Caption Expanded • 1099-INT last address line caption now reads: City or town, province or state, country, and ZIP or foreign postal code. • Web Links • 1099-INT web link reads: www.irs.gov/form1099int

  31. 1099-C – Cancellation Of Debt • No Changes To The Form • Box 6 – Identifiable Event Code • 2012 • If Code “A” (Bankruptcy) applied, it was required to be reported. • If other codes applied, reporting was optional. • 2013 • The code that applies must be reported. • There is no more “optional” reporting.

  32. 1099-C – Cancellation Of Debt • Box 6 – Identifiable Event Code • A—Bankruptcy • B—Other judicial debt relief • C—Statute of limitations or expiration of deficiency period • D—Foreclosure election • E—Debt relief from probate or similar proceeding • F—By agreement • G—Decision or policy to discontinue collection • H—Expiration of nonpayment testing period • I—Other actual discharge before identifiable event.

  33. Forms With No Changes • 1098……………. Mortgage Interest Statement • 1098-E........... Student Loan Interest Statement • 1098-T………... Tuition Statement • 1099-A…........ Acquisition or Abandonment of Secured Property • 1099-S…........ Proceeds From Real Estate Transactions

  34. TIN Truncation (a/k/a TIN Masking)

  35. TIN Truncation • 10/16/08 – IRPAC Report To IRS • Recommends that filers be allowed to truncate (mask) taxpayer TINs on information returns. • Objective: To help prevent identity theft. • 11/19/09 – IRS Notice 2009-93 • TIN truncation permitted on taxpayer copies (generally Copy “B”)

  36. TIN Truncation • Pilot Program • Tax years 2009 & 2010. • Forms Covered • 1098 series (except 1098-C – Contributions of Motor Vehicles, Boats, & Airplanes) • 1099 series • 5498 series NOTE: Forms1042-S & Form W-2 are not included

  37. TIN Truncation • Media Covered • “Paper” payee statements (not “electronic” statements) • TINs Covered • SSNs, ITINs, & ATINs (not EINs) • Format • ***-**-6789 OR • xxx-xx-6789

  38. TIN Truncation • 1/5/10 – IRS Clarifications • Scope – may truncate the TIN on all copies of the form that are furnished to the payee. • Disclosure – may include a note on the 2009 forms stating that the TIN has been truncated. 2010 forms included this information already. • 4/14/11 – IRS Notice 2011-38 • Pilot program extended for 2 more years (2011 & 2012)

  39. TIN Truncation • 1/7/13 – Proposed Rule Published In Federal Register • 2/21/13 – Comments Due • Pilot Program: would be made permanent. • Participation: would continue to be voluntary. • Scope: would be expanded to include forms that are delivered “electronically” • New Terminology: the truncated TIN would be referred to as a “TTIN” • TTIN = Truncated Taxpayer Identification Number

  40. Fiscal Cliff Legislation

  41. Fiscal Cliff Legislation • American Taxpayer Relief Act of 2012 (H.R. 8) • 1/1/13 – Passed the House & Senate • 1/2/13 – Signed Into Law (P.L. 112-240) • Signed by autopen while President on vacation in Hawaii • 1/3/13 – 1st Day Of 113th Congress • Tax Brackets • Added the 39.6% bracket for high-income individuals • Made permanent the other existing tax brackets (Bush-era tax cuts)

  42. Tax Brackets

  43. Backup Withholding Tax Rate • Economic Growth & Tax Relief Reconciliation Act of 2001 • 6/7/01 – Signed Into Law (P.L. 107-16) • Changed The BWH Tax Rate • Old BWH Tax Rate: flat 31% • New BWH Tax Rate: tied to the 4th lowest tax rate for single individuals • Impact Of New Tax Bracket Added By “Fiscal Cliff” Legislation • BWH Tax Rate Remains At 28%

  44. Backup Withholding Tax Rate

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