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CFPB Delays Effective Date for Certain New Mortgage Disclosures By Laurie Spira

On Nov. 16, 2012, the Consumer Financial Protection Bureau (CFPB) announced that it will delay the effective date for certain new disclosures required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act requires that the CFPB integrate certain disclosures required by the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into a single disclosure. These “Integrated Disclosures,” which will replace the Good Faith Estimate (GFE), Truth-in-Lending (TIL) Disclosure Statement, and HUD-1 Settlement Statement, were proposed on July 9. In addition, the Dodd-Frank Act establishes new mortgage disclosure requirements, which would automatically take effect on Jan. 21, 2013 unless regulatory action was taken. Rather than approach each of these requirements separately, the CFPB integrated many of these new requirements into the Bureau’s proposed Integrated Disclosures. Through this new final rule, the CFPB has given a temporary exemption from many of the disclosure requirements of the Dodd-Frank Act that would otherwise be effective on Jan. 21, so that the entire Integrated Disclosure set can go into effect at once. Lenders and brokers need not comply with these disclosure requirements until such time as the Bureau removes the exemption, which it plans to do in the final rule for the Integrated Disclosures. The affected disclosures are:




I Warning regarding negative amortization features. (Dodd-Frank Act section 1414(a); TILA section 129C(f)(1)). I Disclosure of State law anti-deficiency protections. (Dodd-Frank Act section 1414(c); TILA section 129C(g)(2) and (3)). I Disclosure regarding creditor’s partial payment policy prior to consummation and, for new creditors, after consummation. (Dodd-Frank Act section 1414(d); TILA section 129C(h) I Disclosure regarding mandatory escrow or impound accounts. (DoddFrank Act section 1461(a); TILA section 129D(h)). I Disclosure prior to consummation regarding waiver of escrow in connection with the transaction. (Dodd-Frank Act section 1462; TILA section 129D(j)(1)(A)). I Disclosure of monthly payment, including escrow, at initial and fullyindexed rate for variable-rate residential mortgage loan transactions. (Dodd-Frank Act section 1419; TILA section 128(a)(16)). I Repayment analysis disclosure to include amount of escrow payments for taxes and insurance. (Dodd-Frank Act section 1465; TILA 128(b)(4)). I Disclosure of aggregate amount of settlement charges, amount of charges included in the loan and the amount of such charges the borrower must pay at closing, the approximate amount of the wholesale rate of funds, and the aggregate amount of other fees or required payments in connection with a residential mortgage loan. (Dodd-Frank Act section 1419; TILA section 128(a)(17)). I Disclosure of aggregate amount of mortgage originator fees and the amount of fees paid by the consumer and the creditor. (Dodd-Frank Act section 1419; TILA section 128(a)(18)). I Disclosure of total interest as a percentage of principal. (Dodd-Frank Act section 1419; TILA section 128(a)(19)). I Optional disclosure of appraisal management company fees. (Dodd-Frank Act section 1475; RESPA section 4(c)). I Post-Consummation Escrow Cancellation Disclosure. (Dodd-Frank Act section 1462; TILA section 129D(j)(1)(B)). While there will be so many requirements under the Dodd-Frank Act for the mortgage industry to comply with, the CFPB’s coordinated efforts in releasing inter-related disclosure requirements is welcome and encouraging news. Laurie Spira is chief compliance officer with Torrance, Calif.-based DocMagic Inc. She may be reached by phone at (800) 649-1362, ext. 6446 or e-mail

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In my very first week in the business back in 1995, my manager told me in no uncertain terms, “If you want to be in this business long-term, you have to have purchase business … regardless of what rates do, people always have a need to buy and sell homes.” I was taught to treat refinance transactions as “extra income” and to focus on the purchase market. I took that to heart and from day one I was always focused more on purchase business. During nearly every refinance boom, I always took the time to make appointments with real estate agents. My experience was that it was pretty easy to get appointments because my competition was not out in the field creating new relationships; they were cherry-picking the easy business generated by the refi boom. Not that I didn’t pick cherries too, mind you, but it so happens that during the one refinance boom during which I focused more on refinance business, while neglecting the purchase market, I paid for it dearly after the rates increased again and refinance business plummeted. I had to struggle mightily to get my purchase business back up. Learn from my mistake, and make sure you have your purchase lead generation systems in place now, so you can easily replace your refinance volume when it decreases!

Top FHA states For those of you who might be curious about what states produce the highest FHA volume, the report gives the following information: The top 10 FHA states in volume originated in 2012 are as follows, (1) California, (2) Texas, (3) New York, (4) Florida, (5) New Jersey, (6) Virginia, (7) Pennsylvania, (8) Maryland, (9) Illinois and (10) Colorado. This data is important for those of you that do business on a national level and are wondering where you can originate more FHA loans.

FHA market share Now to take a look at purchase market data: According to the audit, FHA accounted for approximately 13.5 percent of the purchase market in 2000, and dipped to a low of 3.77 percent in 2006 (remember the 100 percent LTV 580 stated-income?). It then climbed back up to 15.78 percent as of May 2012. Historically, FHA is usually about 10 percent of the total market volume (including both refinances and purchases). The report predicts that at some point (if the other agencies return to former market share), the FHA market share will likely again decrease to the 10 percent level. If, however, the recovery of the other agencies remains impaired, then FHA will remain

around 15 percent of the market share.

Credit scores Over the last three years, approximately 90 percent of all FHA loans had credit scores over 640, with about 60 percent between 680-850, and 30 percent between 640-679. Just under 10 percent of all FHA loans had scores between 600-639. Only about 0.5 percent had scores between 560599. For those of you doing consumer direct marketing for FHA loans, this data is tells you some important information. For starters, it tells you not to waste your money marketing to demographics that will have anything less than 640! And secondly, it tells you that not many loans below 640 are getting approved. There are lenders that accept scores of 580, and the direct marketing companies will likely be able to generate a lot of leads for you in the 580-620 range. Is it a good use of your time and money? Likely not. One thing is clear … in any rate environment and in any economy, there will always be potential homebuyers with good jobs that want to buy homes. If you market yourself as an FHA specialist and create your brand as an FHA expert among real estate agents, you will always have loans in your pipeline. According to the 2012 NAR Profile of Home Buyers and Sellers, first-time homebuyers (FTHB) accounted for about 40 percent of all purchases, and in 2011 accounted for 37 percent. Given this data, having a marketing channel for FTHBs is a way to recession-proof your mortgage practice. At the height of the crash, I trained a lot of mortgage loan originators (MLOs) who had niches in the jumbo market. They were trying to shift in to the FTHB market to survive. Learn from the past and consider creating a FTHB niche to enhance the foundation of your business. For FHA marketing help and to stay current on FHA changes, you can subscribe to “The FHA Originator,” a service I created to help MLOs brand themselves as FHA experts among FHA referral sources, go to to check it out. Wishing you a year of growth and prosperity in the coming year … Go FHA! Jeff Mifsud is founder of Michiganbased Mortgage Seminars LLC, a former FHA underwriter with 15-plus years of experience originating FHA loans, an FHA expert for and creator of The FHA Originator, a monthly FHA newsletter. Jeff may be reached by phone at (248) 403-8181 or visit