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to the agreement announced today, but that are also subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing. OCC and Federal Reserve examiners are continuing to closely monitor the servicers’ implementation of plans required by the enforcement actions issued in April 2011 to correct the unsafe and unsound mortgage servicing and foreclosure practices.
Final Rule on Appraisals Issued by Agencies for Higher-Priced Mortgages
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MISSISSIPPI MORTGAGE PROFESSIONAL MAGAZINE
Six federal financial regulatory agencies have issued the final rule that establishes new appraisal requirements for “higher-priced mortgage loans.” The rule implements amendments to the Truth in Lending Act made by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). Under the DoddFrank Act, mortgage loans are higherpriced if they are secured by a consumer’s home and have interest rates above certain thresholds. For higher-priced mortgage loans, the rule requires creditors to use a licensed or certified appraiser who prepares a written appraisal report based on a physical visit of the interior of the property. The rule also requires creditors to disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report. If the seller acquired the property for a lower price during the prior six months and the price difference exceeds certain thresholds, creditors will have to obtain a second appraisal at no cost to the consumer. This requirement for higher-priced homepurchase mortgage loans is intended to address fraudulent property flipping by seeking to ensure that the value of the property legitimately increased. “A fair and accurate appraisal is a critical tool for lenders and borrowers alike. The appraisal rules announced today, under both ECOA and TILA, appear to be reasonable, commonsense solutions,” said Debra W. Still, CMB, Chairman of the Mortgage Bankers Association (MBA). “These standards will increase transparency for borrowers and give lenders a uniform set of guidelines under which to operate, hopefully without unnecessarily increasing costs or reducing access for borrowers.” The rule exempts several types of loans, such as qualified mortgages, temporary bridge loans and construction loans, loans for new manufactured homes, and loans for mobile homes, trailers and boats that are dwellings.
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foreclosure processing have reached an agreement in principle with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board to pay more than $8.5 billion in cash payments and other assistance to help borrowers. The sum includes $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments. The payments involve mortgage servicers operating under enforcement actions issued in April 2011 by the OCC, the Federal Reserve, and the Office of Thrift Supervision. The agreement ensures that more than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010 with the participating servicers will receive cash compensation in a timely manner. Eligible borrowers are expected to receive compensation ranging from hundreds of dollars up to $125,000, depending on the type of possible servicer error. This agreement includes Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo. For these participating servicers, fulfillment of the agreement would meet the requirements of the enforcement actions that mandated that the servicers retain independent consultants to conduct an Independent Foreclosure Review. As a result of this agreement, the participating servicers would cease the Independent Foreclosure Review, which involved case-by-case reviews, and replace it with a broader framework allowing eligible borrowers to receive compensation significantly more quickly. The OCC and the Federal Reserve accepted this agreement because it provides the greatest benefit to consumers subject to unsafe and unsound mortgage servicing and foreclosure practices during the relevant period in a more timely manner than would have occurred under the review process. Eligible borrowers will receive compensation whether or not they filed a request for review form, and borrowers do not need to take further action to be eligible for compensation. “The lesson is clear: Moving forward we must do all we can to prevent such foreclosures from happening in the first place,” said Julia Gordon, Director of Housing Finance and Policy at the Center for American Progress. “That means enacting strong standards for mortgage servicers, especially on foreclosure prevention activities, and making sure that consumers, as well as public enforcement bodies, have the power to hold banks accountable for violations of predatory lending laws.” The agencies continue to work to reach similar agreements in principle with other servicers that are not parties