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MORTGAGE DISCLOSURE IMPROVEMENT ACT

MORTGAGE DISCLOSURE IMPROVEMENT ACT. MDIA. Today’s Objective . LEARN THE IMPORTANCE OF THIS REGULATION TO OUR INDUSTRY AND CONSUMERS LEARN THE NEW DISCLOSURE TIMING AND FEE COLLECTION REQUIREMENTS UNDERSTAND THE LOAN IMPACTS IF THE REQUIREMENTS ARE NOT MET. WHY DID CONGRESS PASS THE NEW LAW.

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MORTGAGE DISCLOSURE IMPROVEMENT ACT

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  1. MORTGAGE DISCLOSURE IMPROVEMENT ACT MDIA

  2. Today’s Objective • LEARN THE IMPORTANCE OF THIS REGULATION TO OUR INDUSTRY AND CONSUMERS • LEARN THE NEW DISCLOSURE TIMING AND FEE COLLECTION REQUIREMENTS • UNDERSTAND THE LOAN IMPACTS IF THE REQUIREMENTS ARE NOT MET

  3. WHY DID CONGRESS PASS THE NEW LAW • TO INSURE A LEVEL AND FAIR REGULATION FOR OUR INDUSTRY • ADDITIONAL CONTROLS TO PREVENT DECEPTIVE LENDING PRACTICES • CONSISTENT LENDING PRACTICES AMONG ALL LENDERS • PROTECT THE CONSUMERS • ENPOWER THE CONSUMER TO BE MORE INFORMED AND MORE CONFIDENT ABOUT THE MORTGAGE PROCESS

  4. WHAT LOANS ARE IMPACTED BY THE NEW LAW • PURCHASE TRANSACTIONS • REFINANCE TRANSACTIONS • INVESTOR; NO LONGER JUST PRIMARY RESIDENCE • HOME EQUITY LOANS (NOT INCLUDING HOME EQUITY LINES OF CREDIT)

  5. OVERVIEW OF THE ACT • INITIAL DISCLOSURES • RE-DISCLOSURE • COLLECTION OF FEES • 3-7-3 RULE

  6. WHAT IS THE 3-7-3 RULE? • INITIAL 3 DAYS: BORROWER MUST RECEIVE THE INITIAL DISCLOSURES INCLUDING THE TIL WITHIN 3 DAYS OF THE INITIAL LOAN APPLICATION AND NO UPFRONT FEES CAN BE COLLECTED FROM THE BORROWER WITH THE EXCEPTION OF THE ACTUAL COST TO RUN THE CREDIT REPORT UNTIL 3 BUSINESS DAYS AFTER WE HAVE PROOF OF RECEIPT OF THE INITIAL TIL FROM THE BORROWER • 7 DAY WAIT: EARLIEST A BORROWER CAN SIGN FINAL LOAN DOCUMENTS IS 7 DAYS AFTER THE DELIVERY OF THE INITIAL DISCLOSURES INCLUDING THE TIL • 3 DAY RE-DISCLOSE: IF THE APR CHANGES BY +/- .125% FROM THE TIME THE INITIAL TIL IS SENT TO THE TIME THE BORROWERS SIGN THE FINAL LOAN DOCUMENTS THE BORROWER MUST RECEIVE A NEW TIL 3 DAYS PRIOR TO SIGNING THE FINAL LOAN DOCUMENTS

  7. DEFINITION OF BUSINESS DAYS • ANY DAY OF THE WEEK EXCLUDING SUNDAYS AND HOLIDAYS

  8. DELIVERY OF DISCLOSURES • FACE-TO-FACE • E-MAIL • US MAIL

  9. HOW TO DOCUMENT RECEIPT FROM BORROWER AND WAIT TIME • FACE TO FACE: BORROWER SIGNS A WRITTEN STATEMENT THAT HE/SHE IS IN RECEIPT OF THE INITIAL TIL • YOU MUST WAIT 3 DAYS FROM THE DATE THE BORROWER ACKNOWLEDGED THAT THEY RECEIVED THE TIL BEFORE YOU CAN REQUEST ANY ADDITIONAL UPFRONT FEES FROM THE BORROWER • E-MAIL: SAVE COPY OF THE “READ” RECEIPT PROVING BORROWER OPENED UP THE E-MAIL OR BORROWER SENDS BACK A REPLY STATING THEY RECEIVED THE E-MAILED TIL • YOU MUST WAIT 3 DAYS FROM THE DATE YOU GOT THE “READ” RECEIPT OF THE REPLY E-MAIL BACK FROM THE BORROWER BEFORE YOU CAN REQUEST ANY ADDITIONAL UPFRONT FEES FROM THE BORROWER • US MAIL: YOU MUST COPY THE OUTSIDE OF THE ENVELOPE WITH THE METER POSTAGE DATE WHICH IS PROOF THAT YOU MAILED THE DOCUMENTS • YOU MUST WAIT A TOTAL OF 6 DAYS FROM THE DATE MAILED BEFORE YOU CAN REQUEST ADDITIONAL FEES FROM THE BORROWER

  10. EXAMPLES OF TIMELINE EXAMPLE #1 (7 DAY WAIT) • AUGUST 3RD THE LOAN APPLICATION IS TAKEN AND THE INITIAL DISCLOSURES INCLUDING THE TIL IS SENT VIA FACE-TO-FACE OR E-MAIL AND THE BORROWER HAS ACKNOWLEDGED THAT THEY RECEIVED THE TIL ON AUGUST 3RD • AUGUST 10TH IS THE SOONEST THE BORROWER CAN SIGN FINAL LOAN DOCUMENTS AS LONG AS THE APR HAS NOT CHANGED +/- .125%

  11. EXAMPLES OF TIMELINE(CON’T) EXAMPLE #2 (COLLECTION OF FEES IF DISCLOSURES SENT VIA U.S.MAIL) • AUGUST 3RD THE LOAN APPLICATION IS TAKEN AND THE INITIAL DISCLOSURES INCLUDING THE TIL IS SENT VIA US MAIL • AUGUST 10TH(WOULD BE THE 8TH BUT WE ARE NOT OPEN THAT DAY) IS THE SOONEST DAY YOU CAN REQUEST ADDITIONAL UPFRONT FEES FROM THE BORROWER • AUGUST 10TH IS THE FIRST DAY THE BORROWER CAN SIGN LOAN DOCUMENTS AS LONG AS THE APR IS NOT CHANGED +/- .125%

  12. EXAMPLES OF TIMELINE(CON’T) EXAMPLE #3 (RE-DISCLOSURE) • AUGUST 3RD THE LOAN APPLICATON IS TAKEN AND THE INITIAL DISCLOSURES INCLUDING THE TIL IS SENT VIA FACE-TO-FACE OR E-MAIL AND THE BORROWER HAS ACKNOWLEDGED THAT THEY RECEIVED THE TIL ON THE 3RD • AUGUST 6TH YOU CAN REQUEST ANY OTHER UPFRONT FEES (I.E. APPRAISAL FEE) • AUGUST 14TH THE LOAN IS LOCKED AND THE APR CHANGES BY MORE THAN .125% • AUGUST 17TH NEW TIL IS SENT TO THE BORROWER VIA E-MAIL OR FACE-TO-FACE AND THE BORROWER HAS ACKNOWLEDGED RECEIPT OF THE TIL BY ACCEPTABLE MEANS • AUGUST 19TH IS THE SOONEST THE BORROWER CAN SIGN THEIR FINAL LOAN DOCS

  13. EXAMPLE OF FILE FLOW FROM INITIAL APPLICATION TO CONSUMMATION OF THE LOAN • AUGUST 3RD MR. LOAN OFFICER TAKES A LOAN APPLICATION VIA TELEPHONE AND TURNS THE LOAN INTO THE PROCESSOR • AUGUST 3RD THE PROCESSOR PREPARES THE DISCLOSURES INCLUDING THE TIL AND SENDS THEM TO THE BORROWER VIA E-MAIL. • THE PROCESSOR PRINTS THE DISCLOSURES ALONG WITH THE E-MAIL COVER LETTER AND PUTS THEM IN THE FILE • AUGUST 4TH THE PROCESSOR RECEIVES AN E-MAIL FROM THE BORROWER STATING HE/SHE HAS RECEIVED THE E-MAIL WITH THE TIL ENCLOSED • AUGUST 4TH THE PROCESSOR PRINTS THE E-MAIL RECEIVED FROM THE BORROWER PUTS IT IN THE FILE ON TOP OF THE COPIES OF THE DISCLOSURES (THIS RECEIPT MUST STAY IN THE FILE AND WILL BE SCANNED WITH THE CLOSED LOAN)

  14. EXAMPLE OF FILE FLOW FROM INITIAL APPLICATION TO CONSUMMATION OF THE LOAN (CON’T) • AUGUST 6TH MR. LOAN OFFICER REQUESTS FROM THE BORROWER THE FEE FOR THE APPRAISAL AND/OR CAN CHARGE THE BORROWERS CREDIT CARD. • AUGUST 24TH MR. LOAN OFFICER LOCKS THE LOAN AND THE APR HAS CHANGED MORE THAN .125% • AUGUST 25TH THE PROCESSOR PREPARES AND SEND TO THE BORROWER VIA E-MAIL OR FACE-TO-FACE THE NEW TIL. THE PROCESSOR PRINTS AND KEEPS THE NEW TIL IN THE LOAN FILE ALONG WITH THE ORIGINAL TIL • AUGUST 26TH BORROWER ACKNOWLEDGES RECEIPT OF THE NEW TIL • AUGUST 26TH THE PROCESSOR PRINTS THE ACKNOWLEDGE RECEIPT AND IT MUST STAY IN THE FILE AND WILL BE SCANNED WITH THE CLOSED LOAN

  15. EXAMPLE OF FILE FLOW FROM INITIAL APPLICATION TO CONSUMMATION OF THE LOAN (CON’T) • AUGUST 28TH IS THE SOONEST THE BORROWER CAN SIGN THE FINAL LOANDOCUMENTS • SEPTEMBER 1ST FUNDING DEPARTMENT RECEIVES THE FINAL LOAN DOCS AND THE ESTIMATED HUD-1. IT IS DISCOVERED THAT THE APR HAS CHANGED MORE THAN .125% AND A NEW TIL MUST BE SIGNED BYTHE BORROWER • SEPTEMBER 1ST A NEW TIL IS PREPARED AND BORROWER RECEIVES THE NEW TIL. WRITTEN ACKNOWLEDGEMENT OF RECEIPT OF THE TIL IS RECEIVED AND PUT IN THE FILE AND WILL BE SCANNED WITH THE CLOSED LOAN • SEPTEMBER 3RD IS THE SOONEST THE LOAN CAN CLOSED **IN THIS EXAMPLE WHEN THE FINAL LOAN DOCS WERE RETURNED AND THE APR HAS CHANGED, TO EXPEDITE THE CLOSING THE FEES COULD HAVE BEEN REDUCED TO BRING THE APR INTO THE ACCEPTABLE RANGE AND THE LOAN COULD CLOSE ON OR AFTER AUGUST 28TH (WET FUNDING STATES)**

  16. EXAMPLE OF FILE FLOW FROM INITIAL APPLICATION TO CONSUMMATION OF THE LOAN (CON’T) EXAMPLE #2 • MR. LOAN OFFICER TAKES A LOAN APPLICATION FACE-TO-FACE ON AUGUST 3RD • MR. LOAN OFFICER TURNS THE LOAN INTO THE PROCESSOR ON AUGUST 3RD AND HAS PAID UPFRONT FOR ALL THE BORROWERS REQUIRED FEES • THE PROCESSOR PREPARES THE INITIAL DISCLOSURING INCLUDING THE TIL AND THE BORROWER COMES IN TO PICK UP THE INITIAL DISCLOSURES. THE BORROWER SIGNS AND DATES A STATEMENT THAT SAYS THEY RECEIVED THE TIL ON AUGUST 3RD. • IN THIS CASE THE LOAN CONSUMMATION CAN TAKE PLACE AS EARLY AS AUGUST 10TH AS LONG AS THE APR HAS NOT CHANGED BY +/- .125%

  17. IMPORTANT THINGS TO REMEMBER • INITIAL DISCLOSURES INCLUDING THE TIL MUST BE PRINTED AND KEPT IN THE FILE (UNSIGNED, UNTIL THE ORIGINAL IS RECEIVED BACK) • PROOF OF RECEIPT OF INITIAL TIL MUST BE KEPT IN THE FILE FOREVER. • PROOF OF RECEIPT CAN BE EITHER ANY OF THE FOLLOWING • COPY OF THE ENVELOPE WITH THE POSTAGE DATE SHOWING DISCLOSURES WERE MAILED • “READ” RECEIPT PRINTED SHOWING BORROWERS OPENED THE E-MAIL WITH THE TIL ATTACHED • RETURN E-MAIL FROM THE BORROWER STATING THEY RECEIVED THE ATTACHED TIL • WRITTEN STATEMENT FROM THE BORROWER SIGNED AND DATED STATING THEY RECEIVED THE TIL

  18. IMPORTANT THINGS TO REMEMBER (CON’T) • NO UPFRONT FEES OTHER THAN THE COST OF THE ACTUAL CREDIT REPORT CAN BE COLLECTED UNTIL AFTER 3 DAYS OF RECEIPT OF THE INITIAL TIL • LOAN CONSUMMATION CAN NOT TAKE PLACE UNTIL ON OR AFTER THE 7TH DAY FROM THE DATE THE INITIAL TIL IS DELIVERED TO THE BORROWER • THE BORROWER MUST BE IN RECEIPT OF THE UPDATED TIL IF THE APR CHANGES BY MORE THAN .125% AND LOAN CONSUMMATION CAN NOT TAKE PLACE UNTIL 3 DAYS AFTER RECEIPT OF THE NEW TIL

  19. PROCESSOR RESPONSIBILITIES • VERIFY ALL INITIAL DISCLOSURES ARE PRINTED WITHIN 3 DAYS OF THE LOAN APPLICATION BEING RECEIVED BY THE LOAN OFFICER • RETAIN ALL COPIES OF THE INITIAL DISCLOSURES IN THE FILE UNTIL THE ORIGINAL SIGNED DISCLOSURES ARE RECEIVED BACK • RETAIN IN THE FILE PROOF OF HOW THE INITIAL DISCLOSURES WERE SENT TO THE BORROWER • FACE-TO-FACE • BY E-MAIL • BY US MAIL

  20. PROCESSOR RESPONSIBILITIES (CON’T) • RETAIN IN THE FILE PROOF BORROWER RECEIVED THE INITIAL DISCLOSURES • READ RECEIPT FROM E-MAIL • WRITTEN SIGNED ACKNOWLEDGEMENT FROM THE BORROWER • E-MAIL RESPONSE FROM THE BORROWER STATING THEY RECEIVED THE DISCLOSURES • AT THE TIME THE LOAN DOCUMENTS ARE DRAWN CONFIRM IF THE APR HAS CHANGED BY THE .125% TOLERANCE • IF THE APR HAS CHANGED OUTSIDE THE TOLERANCE PREPARE AND RESEND UPDATED TIL • KEEP IN THE FILE ALL RE-DISCLOSURES OF THE TIL THAT ARE SENT TO THE BORROWER • KEEP IN THE FILE ALL DOCUMENTATION OF HOW THE REDISCLOSED TIL WAS SENT AND RECEIVED BY THE BORROWER

  21. UNDERWRITERS RESPONSIBILITY • VERIFY THE INITIAL TIL WAS SENT TO THE BORROWER WITHIN 3 DAYS OF THE INITIAL 1003 (this is verified based off the L/O signature and date on the 1003 and this should also match the Loan Originated Date in PC Lender) • VERIFY THE FILE HAS THE ORIGINAL SIGNED DISCLOSURES IN THE FILE • VERIFY THE PROCESSOR RETAINED THE PROOF THE BORROWERS RECEIVED THE DISCLOSURES. (I.E., READ RECEIPT, WRITTEN ACKNOWLEDGEMENT, RETURN E-MAIL)

  22. DOC DRAWER RESPONSIBILITY • VERIFY THAT THE APR HAS NOT CHANGED BY MORE THAN .125% FROM THE INITIAL TIL • IF THE APR HAS CHANGED BY MORE THAN .125% FROM THE INITIAL TIL VERIFY THE FILE HAS THE REDISCLOSED TIL AND PROOF THE BORROWER RECEIVED THE TIL IN THE FILE • CONFIRM FINAL LOAN DOCUMENTS ARE NOT DATED PRIOR TO 3 DAYS AFTER THE RECEIPT OF THE AMENDED TIL RECEIVED BY THE BORROWER

  23. FUNDER RESPONSIBIITY • ONCE FINAL LOAN DOCUMENTS ARE BACK CONFIRM THAT THE FINAL FIGURES HAVE NOT ADJUSTED THE APR OUTSIDE OF THE .125% TOLERANCE • IF THE APR HAS CHANGED OUTSIDE THE TOLERANCE THEN REDISCLOSURE OF THE TIL MUST BE PREPARED AND THE BORROWER MUST RECEIVE THE TIL AND ANOTHER 3 DAY WAITING PERIOD STARTS • CONFIRM NO LOAN CLOSES THAT IS OUSIDE THE APR TOLERANCE UNLESS THE ADDITIONAL 3 DAY WAITING PERIOD HAS LAPSED

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