Presented by: James W. Brody, Esq., Managing Member American Mortgage Law Group, P.C.

1. A Brief Overview of TRID Enforcement Updates, Regulatory Exam Preparation, Responding to Consent Orders, and Minimizing the Risk of Future Repurchase and Indemnification Exams Presented by: James W. Brody, Esq., Managing Member American Mortgage Law Group, P.C. 75 Rowland Way, Ste. 350, Novato, CA 94945 Telephone: (415) 878-0030 x151 Email: JBrody@americanmlg.com Info@americanmlg.com 1 Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

2. Brief Introduction to American Mortgage Law Group, P.C. • AMLG is a nationally recognized mortgage banking law firm with offices in the greater San Francisco and greater Boston areas. • We represent a diverse clientele from all around the country (e.g., mortgage lenders, warehouse banks, investors, servicers, Wall Street banking firms, insurers/insureds, etc.) • We focus on: • Repurchase and/or Make-Whole Litigation Defense (Defended Against Repurchase Lawsuits Filed by CitiMortgage, LBHI, GMAC, RFC, Franklin American, Wells Fargo, US Bank, Flagstar, FDIC, etc.); • Repurchase and/or Make-Whole Mitigation Management (Forensic Audits, Rebuttals, Settlements, etc.); • Defending and Prosecuting Contract/Commercial Litigation Disputes; • Investigative and Asset Search Services; • Third-Party Fraud Analysis and Resolution/Recovery (e.g., Prosecuted Cases Against Appraisers, Brokers, Real Estate Agents, Borrowers, E&O Carriers, Settlement Agents, Title Companies, MI Companies, Etc.); • Title Clearance and Title Claims; • State and Federal Regulatory Compliance Issues (e.g., CFPB Audit Readiness, LO Comp, Etc.); • Public Speaking at Conferences (National MBA, Misc. State MBAs, District Attorneys, Etc.) • Much, Much More! Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

3. TRID Updates • While the effective date of TRID has been delayed by the CFPB until October 3, 2015, the U.S. House Financial Services Committee did pass a bill at the end of July 2015, which would delay the enforcement of TRID.  The bill would prohibit any private lawsuits or action by the CFPB for TRID violations until at least February 1, 2016, so long as the lenders made a good faith effort to comply with the provisions of the regulations. • Various sources also say that the CFPB is having internal discussions regarding enforcement and deciding whether they will ultimately announce a self-imposed enforcement grace period as well, which would likely run through the end of 2015.   • With regard to penalties for non-compliance in general, keep in mind that under the new rule, some statutory and civil penalties include: (i) statutory penalties that could be as high as $4,000 for failure to provide certain disclosures; (ii) new private right of actions by borrowers for actual damages, statutory damages, court costs, and attorneys fees; and (iii) civil penalties that may be levied by the CFPB for reckless and/or knowing violations.  Furthermore, certain failures to comply under TRID could also trigger violations of other regulations, including UDAAP violations.  

4. Preparing for Regulatory Exams • Lenders should conduct a CFPB-readiness review or mock-examination to supplement their compliance program. • Mock-examinations allows a lender to identify and rectify deficiencies in their production process before an actual regulator discovers those same errors. • If the state or federal regulator comes in and conducts their exam shortly after you have completed your self-review, it is likely that they will ultimately discover that you did have errors in production in the past. • Nevertheless, the regulator should note that you self-identified the error and took appropriate steps to correct the issue, which should be viewed as favorable since it demonstrates a robust and functioning compliance management system.

5. Preparing for Regulatory Exams (cont.) • Identifying and fixing problems before they are detected by a regulator can result in significant cost savings as you are less likely to receive an administrative fine, or in the alternative, the fine is much more likely to be significantly reduced. • Even smaller companies will benefit from a CFPB mock-exam. • While smaller companies often think they are too small to ever be examined by the CFPB, it is important to keep in mind that many states take cues from the CFPB exams when structuring their own exam protocols. Conducting a CFPB mock-exam is still a great way to self-audit your baseline compliance with various regulations in preparation for state level exams as well. Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

6. Responding to State-Level Regulatory Exams Is a formal response to a Report of Examination required in every instance? AMLG’s guidance to clients is to always submit a response to a report of examination, even if the report received does not require you to issue refunds or submit evidence of remedial action to the regulator. As a pure baseline standard, even for examinations that reveal no errors, AMLG recommends that a lender respond to the examiner cordially, acknowledging the receipt of the report. We often see that lenders are examined by the same examiners year after year, so it never hurts to ensure you have a positive relationship with the examiner. 6 Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

7. Responding to State-Level Regulatory Exams (cont.) • If a lender receives a Report of Examination with negative findings or findings which require remedial action, it is critical to respond to the examiner and indicate receipt of the report and, in instances where the report does not provide a deadline for response, you should also respond indicating when you anticipate submitting your detailed response. • If the report states a deadline to respond, it is important to abide by those deadlines. • However, if you believe it is not possible to respond by the initial deadline, it is our recommendation that the issue be discussed with the examiner earlier rather than later. • Our experience indicates most examiners will provide an extension, but we believe it is much better to request the extension early on in the process. Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

8. Responding to Consent Orders • When a lender is facing a consent order from a regulator, whether it be the CFPB or a state banking regulator, it may be beneficial to try to negotiate the order, and retain assistance from counsel. • While everyone hopes they never have to enter into a consent order, the reality is that sometimes a state or federal regulator will require it. Sometimes this is due to the fact that certain state regulators are required to issue an administrative order or consent order in order to levy a civil money penalty. In those instances, it is much more difficult to negotiate out of a consent order altogether. Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

9. Responding to Consent Orders (cont.) • Most consent orders will become public and will be placed on the company’s NMLS profile simply by virtue of it being a consent order. • As such, especially for more minor violations, AMLG recommends lenders try to negotiate with the regulators to issue a non-public administrative agreement in lieu of a true consent order, with express language in the agreement noting that it shall not be made public and not be placed on the NMLS. • Take caution that this approach is not always successful, even for relatively minor violations. • If a lender is facing any civil money penalties or administrative fines, AMLG recommends that it attempt to negotiate those numbers as well. • While many regulations expressly provide for fines up to a certain dollar amount for violations, those amounts are typically seen as a ceiling, and there is some discretion afforded to the regulators to impose a lesser dollar amount. Again, as noted before, this is one reason why it is important to ensure you have a positive rapport with the regulators. Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

10. Consent Orders Regarding Impermissible Marketing Services Agreements • AMLG has seen a fair amount of action over the past year on consent orders regarding impermissible marketing services agreements, or MSAs. • The CFPB has not shied away from taking action against lenders and others based upon alleged violations of RESPA’s anti-kickback provisions as a result of their MSAs. • It is important to note that the CFPB has not stated that MSAs are by virtue impermissible. • The orders and actions that have come out of the CFPB over the past year were fairly egregious and most regulatory counsel would have cautioned those companies that the structure of their MSA would expose them to significant risk and likely violate RESPA. Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

11. Consent Orders Regarding Impermissible Marketing Services Agreements (cont.) • One of the most discussed CFPB enforcement actions for MSA violations was issued against Lighthouse Title, a Michigan Title Insurance company, in which the CFPB levied a $200,000 fine.  • Lighthouse Title in effect set the amount of fees it would pay under the MSAs based upon the amount of referrals they would actually receive from their counterparties.  • This case is a good example of how the CFPB and regulators will look below the surface of an agreement to how the relationship is actually managed, as the CFPB itself noted that on the surface of the agreements it appeared as though the fees would be based upon the marketing services actually performed by the counterparties.  However, when they reviewed the details, they uncovered the fees were intricately tied to the amount of referrals received.  

12. Consent Orders Regarding Impermissible Marketing Services Agreements (cont.) • In establishing MSAs, it is important to have experienced counsel review the agreements to ensure the hallmark red flags are not present, such as ensuring the agreements are non-exclusive and that compensation is not impermissibly tied to the amount of referrals that come through, varying from month to month based upon volume and profitability of loans. • It is critical to ensure not only that the MSA contract complies with all requirements, but that the ways the actual relationship and services are performed also complies with all of the requirements and restrictions. • Keep in mind the CFPB and regulators will always look past how the relationship or transaction is labeled and instead will focus on the way the transactions are actually carried out. For example, if your MSA passes muster, but the actual transaction level details do not match the provisions of the MSA and do not comply with RESPA requirements, the regulators will quickly look past the MSA agreement and still find you in violation of regulatory requirements. • It is always important that you are fully transparent with your counsel and compliance advisors to ensure that they are assisting you in the most efficient way possible. Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

13. Minimizing Future Repurchase and Indemnification Demands We are all aware of the fact that many large aggregators and large investors, such as Bank of America and LBHI, have been trying to push back repurchases and litigating indemnification claims against originating lenders for losses incurred on Alt-A, no-doc, and no-ratio loans that were done pre-recession.  Many of those claims are based upon violations of either Guide or LPA representations and warranties.  While most of these non-traditional products went away after the recession, we are now seeing the emergence of new non-traditional product sets, mainly non-QM loans.  To minimize the future risk, correspondent lenders should scrutinize their Loan Purchase Agreements and negotiate contract provisions to help safeguard against potential future buyback and indemnification demands. 13 Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

14. Minimizing Future Repurchase and Indemnification Demands (cont.) As we are seeing a steady rise in non-QM loans and the number of investors offering these products as an option to their originators and brokers, AMLG strongly recommends that you ensure your LPA has language to alleviate you of as many reps and warrants possible. For example: Since the investor will ultimately have the same access to information you do, you should not be held to a higher standard than they are.  Knowledge qualifiers in the reps and warrants provisions: For example, excluding misstatements or inaccuracies supplied by the applicant or any other associated vendor, like an appraiser or closing agent, unless the lender had knowledge of the mistake.  AMLG encourages lenders to take a careful look at the procedures for cure, repurchase, and indemnification to ensure that they are reasonable, providing the lender timely notice of any alleged defects, as well as allowing the lender a reasonable amount of time to cure any alleged defects prior to any repurchase or indemnification obligation going into effect.  Finally, lenders can try to add in provisions which would effectuate a release of the lender from any repurchase and indemnification obligation; for example, if a borrower makes 36 months of consecutive, on-time payments on the Loan, or if the loan was later modified without the correspondent lender’s knowledge and consent. 14 Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.

15. Concluding Thoughts Regulatory compliance should always be a lender’s top priority. A lender should always stay on top of and remain updated as to new regulations. Lenders should conduct a CFPB-readiness review or mock-examination to supplement their compliance program. Consider outsourcing your repurchase issues to a law firm. If you are signing a new LPA, have your attorney review it and try to include a knowledge requirement (i.e., make sure that you are required to repurchase a loan only if you were aware of the defect at the time of origination). 15 Important Notice(s): The American Mortgage Law Group, P.C. ("AMLG") makes available the information (the "Information") in this presentation for general informational purposes only. The Information is not intended to constitute, and does not constitute, legal advice. The Information is not intended to constitute, and does not constitute, a solicitation for the formation of an attorney-client relationship. No attorney-client relationship is created through your use of the or your receipt of the Information contained within the Presentation. AMLG accepts clients only in accordance with certain formal procedures, and renders legal advice only after the completion of those procedures, and/or completion and execution of an appropriate retainer agreement.