compliant business systems time of application, harmonize with the Settlement Statement the borrower sees at closing. In the past, the forms routinely differed, causing consumer complaints that led to the new regulations. If the amounts are expected to differ during the loan process due to verifiable “changes in circumstances,� the lender is required to re-disclose and issue a revised GFE. At the same time, all the calculations must be consistent on the system to make certain the HUD-1 accurately reflects the changes. Failure for compliance will require mortgage brokers and lenders to detect such violations and reimburse customers within 30 days of closing or face penalties and increased rescission periods. Failure to comply will increase costs to brokers.
Truth-in-Lending Act (TILA) The final rule regarding TILA changes should be published at some point in 2010. The final rule will redefine fees and charges considered finance charges for annual percentage rate (APR) purposes, change the TIL Statement content and format, including amortization types, prohibit payments to mortgage brokers or creditor loan officers based on the interest rate or other loan terms, prohibit steering consumers to less favorable loans in order to increase compensation, require 60-day notification of ARM loan changes, require monthly statements on loans where negative amortization is possible, replace home equity line of credit (HELOC) disclosure, enhance periodic statements for open-end credit, require 45-day notice for changes to HELOC terms and change protections regarding credit line suspensions or reductions.
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including many lawyers, doctors and other professionals.
Gramm-Leach-Bliley Act The Gramm-Leach-Bliley Act imposed strict guidelines for the security and disclosure of Non-Public Private Information (NPPI). Privacy laws changed dramatically under this new law passed in 1999. The Gramm-LeachBliley Act imposed strict guidelines for the security and disclosure of NPPI. The complete law can be found at www.ftc.gov/privacy/glbact/glbsub1.htm.
Responsible Information Management
8. Respond to violations and breaches
Every person in your organization must be held accountable and every organization must create a system of “Responsible Information Management�. This system must be in use every day and by every employee. In order to meet the requirements, every company must:
In developing a compliant system, just as in any other process, it starts at the top. In this case, the top begins with the “Responsible Individual.�
1. 2. 3. 4.
Raise awareness Create policies and protections Train its staff Hold all employees and vendors accountable 5. Monitor and re-train employees on policy breaches 6. Actively protect customers 7. Detect risks
Responsible Individuals The federal SAFE Act, as implemented by many states, created a new classification of individuals for employment purposes in mortgage lending operations. The Responsible Individual (RI) or a branch manager is required to have two to three years of experience in the mortgage business, within the five years immediately preceding the application. continued on page 12
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FACTA directed financial regulatory agencies, including the Federal Trade Commission (FTC), to promulgate rules requiring “creditors� and “financial institutions� with covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. FACTA’s definition of “creditor� applies to any entity that regularly extends or renews credit—or arranges for others to do so— and includes all entities that regularly permit deferred payments for goods or services. Accepting credit cards as a form of payment does not, by itself, make an entity a creditor. Some examples of creditors are finance companies, automobile dealers that provide or arrange financing, mortgage brokers, utility companies, telecommunications companies, non-profit and government entities that defer payment for goods or services, and businesses that provide services and bill later,
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Fair and Accurate Credit Transactions Act of 2003 (FACTA)/Red Flags