TMHA Submits Comments to CFPB on Mortgage Appraisals, ECOA Changes and Loan Originator Compensation

This past Monday and Tuesday marked the deadlines for three more submissions of public comments relating to proposed federal regulations to the national mortgage industry.  All three of the proposed rules could have a significant impact on the manufactured housing industry, in particular the financing aspect of our industry.

As we did with the High-Cost Mortgage and Loan Servicing proposed rules, TMHA once again weighed in earlier this week on all three proposed rules. 

Two of the rules focused primarily on new appraisal processes and disclosures. 

The High-Risk Mortgage Appraisal proposed rule (not to be, but easily confused with the High-Cost Mortgage proposed rules) was an interagency rulemaking process with the Federal Reserve Board (Board), the OCC, the FDIC, the NCUA, and the FHFA to develop proposed regulations to implement the amendments made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to the Truth in Lending Act (TILA) and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) concerning appraisals. The amendments made by the Dodd-Frank Act to TILA require creditors to obtain an appraisal, including a physical property visit by a certified appraiser, before extending higher-risk mortgage credit. The TILA amendments also impose various new requirements for appraisal independence, the portability of appraisal reports, and charging of customary and reasonable fees. The amendments made by the Dodd-Frank Act to FIRREA require new minimum requirements to be applied by states in the registration, reporting, and supervision of appraisal management companies. The FIRREA amendments further require implementing regulations for new quality control standards for automated valuation models to ensure a high level of confidence in the estimates produced by the valuation models, protect against the manipulation of data, seek to avoid conflicts of interest, require random sample testing and reviews, and address any other factor that the agencies determine to be appropriate.

>> Read TMHA’s comments on the High-Risk Mortgage Appraisal Proposed Rule

The Equal Credit Opportunity Act proposed rule is similar, but different from the above High-Risk Appraisal Rule.  The proposed rule would implement an amendment to the Equal Credit Opportunity Act (ECOA). ECOA prohibits lenders from discriminating on the basis of race, national origin, sex, or other bases protected under the statute.  The proposed rule is in response to the statutory changes of ECOA in the Dodd-Frank Act that require creditors to automatically provide mortgage applicants with a copy of appraisal reports and valuations prepared in connection with certain mortgage loans.

>> Read TMHA's comments on the Proposed ECOA Amendment

The third proposed rule was unrelated to appraisals or “valuation” disclosures and addressed compensation paid to “mortgage originators.”  The proposed regulations implement amendments to the Truth in Lending Act (TILA), and to Regulation Z's loan originator compensation standards. Prior to the Dodd-Frank Act, the Federal Reserve Board (Board), as part of its August 26, 2009, proposal pertaining to closed-end credit, proposed prohibiting certain compensation payments to loan originators and prohibiting steering consumers to loans not in their interest because the loans would result in greater compensation for the loan originator. The Board published a final rule on loan originator compensation on September 24, 2010, to protect consumers from unfair or abusive lending practices that can arise from certain loan originator compensation practices. As added by the Dodd-Frank Act, many of the provisions in new TILA section 129B(c) have largely codified the approach taken in the Board's rules concerning loan originator compensation. However section 129B(c) also has some provisions not addressed by the Board's rules. The CFPB expects to issue proposed regulations clarifying the use of the unique identifier, payment of discount points and origination points, and anti-steering rules.

>> Read TMHA’s comments on the Proposed Amendment to TILA on MLO Compensation