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Does Your New Year’s Resolution Include CFPB Compliance? By Andrew Liput

JANUARY 2016 n National Mortgage Professional Magazine n

NationalMortgageProfessional.com

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What better way to celebrate the dawn of 2016 than to recap some of the key regulatory changes and compliance stories from last year and to address those that are rumored to be in the works for this year? Fears of Consumer Financial Protection Bureau (CFPB) audits (and let’s face it, publicity regarding large fines and penalties) created a cottage industry of compliance consultants. Mock CFPB audits at a cost of $10,000$50,000 became commonplace as lenders sought a heads-up on internal policy and procedure adjustments to ensure a potential audit might be less painful. Vendor management came of age as lenders and vendors both realized that the CFPB was serious when it enacted Bulletin 20I2-3, requiring risk evaluation, monitoring and reporting of third party service providers as a measure of consumer protection. Whether lenders are (gasp!) trying to manage this risk themselves or outsourcing the evaluation and monitoring to others, it is safe to say that doing business with a bank is now considered a privilege and not a right. RESPA kick-back penalty threats caused many folks to divest themselves of affiliated title, appraisal and settlement service business, and others swiftly exited real estate joint marketing arrangements. Managing consumer non-public private information under data privacy rules added additional burdens, and fears, for lenders nationwide. Controlling who has access to such information both internally and externally has proven to be a major task. Many lenders have adopted confidential email delivery rules and have stepped up evaluation of their technology platforms and data process flow procedures. In addition, several hacking scams rocked the industry when lenders and settlement agents were unwittingly duped into wiring funds to criminals after e-mail addresses were hacked, duplicated and misused. Perhaps no new regulatory scheme in recent memory created as much anxiety, anger, confusion, comedy memes and general anticipation as TRID: the TILA, RESPA Integrated Disclosure Rule. Designed to reduce paperwork, increase transparency, and slow down the closing process a bit to provide consumers with more time to study and understand loan costs, the implementation was delayed from August to October and has so far failed to trigger the Apocalypse. As the year unfolds the CFPB has given a hint at where it is focused, beyond supervision and audits. Discriminatory lending practices appear to be of paramount concern. Combined with changes to HMDA reporting requirements, lenders can expect the nature and practice of whom they lend to and whom they decline will be under heightened scrutiny. The CFPB seems laser focused on rooting-out any practices that by design or consequence limit lending efforts and homebuying opportunities in under-served communities. Expect new rules, aggressive audit questions, and fines and penalties where disparate treatment and disparate impact in discriminatory lending practices are uncovered. Happy New Year! Andrew Liput is CEO of Secure Insight, a risk analytics firm offering vendor management services addressing settlement agent risk. He can be reached by e-mail at ALiput@SecureSettlements.com.

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deadline to be moved to Jan. 1, 2018, with reporting to begin one year after. It also sought an exemption for institutions issuing 500 covered closed-end loans and 1,000 covered open-end loans, as well as a clearly defined safe harbor period for institutions making a good-faith effort to meet compliance guidelines.

Feds to Target All-Cash Luxury Real Estate Purchases

sions—is three percent below the 2014 level and 62 percent below the 2.8 million peak reached in 2010. Last year, one in every 122 property in the U.S., or 0.82 percent of all housing units, had at least one foreclosure filing. This is the second consecutive year that the annual national foreclosure rate was below one percent. “In 2015 we saw a return to normal, healthy foreclosure activity in many markets even as banks continued to clean up some of the last vestiges of distress left over from the last housing crisis,” said Daren Blomquist, vice president at RealtyTrac. “The increase in bank repossessions that we saw for the year was evidence of this cleanup phase, which largely involves completing foreclosure on highly distressed, low value properties.” Twenty-four states and the District of Columbia posted a year-over-year increase in foreclosure activity, most notably Massachusetts (up 55 percent), Missouri (up 50 percent), Oklahoma (up 36 percent), New York (up 24 percent) and Texas (up 16 percent). Foreclosure starts increased in 16 states, most alarmingly in Oklahoma (up 92 percent) and Massachusetts (up 67 percent), while bank repossessions increased year-overyear in 41 states and the District of Columbia, most notably in New Jersey (up 226 percent), New York (up 194 percent) and Texas (up 115 percent). New Jersey’s ailing seaside resort Atlantic City was the top metro area for foreclosure rates, where 3.43 percent of housing units had a foreclosure filing. New Jersey’s capital Trenton had the second highest metro level for foreclosure rates, at 2.14 percent, followed by the Florida markets of Tampa Bay-St. Petersburg-Clearwater, Florida (2.03 percent), Jacksonville (2.02 percent) and Miami (1.98 percent).

The federal government has announced a new initiative to identify certain individuals that may be using dubious limited liability company structures to cover their allcash purchases of luxury residential real estate in New York City and Florida’s Miami-Dade County. The Financial Crimes Enforcement Network (FinCEN) issued Geographic Targeting Orders (GTO) that will temporarily require certain U.S. title insurance companies to identify and report the true “beneficial owner” behind any legal entities making luxury real estate purchases in these two high-priced markets. The GTO initiative is based on concerns that some of these transactions involve shell companies that only exist as a cover for money laundering schemes. FinCEN did not publicly state how many transactions could be potentially targeted in this operation. The GTOs will go into effect on March 1 and expire on Aug. 27. “We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” said FinCEN Director Jennifer Shasky Calvery. “Over the years, our rules have evolved Energy Patch States to make the standard mortgage market Risk Housing Woes more transparent and less hospitable to Falling energy fraud and money laundering. But cash prices may purchases present a more complex gap have a negative that we seek to address. These GTOs will impact on the produce valuable data that will assist housing marlaw enforcement and inform our broadkets in so-called er efforts to combat money laundering “energy patch” states, according to the in the real estate sector.” Arch Mortgage Insurance Company (Arch MI) Winter 2016 Housing and Foreclosure Filings Hit Mortgage Market Review. States with economies that are heavNine-Year Low Nearly 1.1 mil- ily dependent on domestic oil, coal and lion foreclosure natural gas production–North Dakota, filings were re- Wyoming, Alaska, West Virginia and ported in 2015, New Mexico–were seen as especially the lowest an- problematic due to a seesaw effect of nual total since weakening employment levels and 2006, according to RealtyTrac’s Year- increasing home prices. On a metro End 2015 U.S. Foreclosure Market level, Texas is home to the five markets Report. with the greatest risk of home price The 1,083,572 total on foreclosure declines over the next two years, with filings—which include default notices, scheduled auctions and bank repossescontinued on page 26

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National Mortgage Professional Magazine January 2016  

National Mortgage Professional Magazine January 2016  

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