Not only do financial institutions have to be in compliance with the new mortgage rules implemented as a result of the Dodd Frank Act, but they have to have a PLAN in place FIRST, to implement the changes.
During initial examinations for compliance with the new regulations, FDIC examiners will expect institutions to be familiar with the mortgage rules' requirements and have a plan for implementing the requirements. The FDIC notes that implementation plans should contain clear timeframes and benchmarks for making necessary changes to compliance management systems and relevant programs. FDIC examiners will consider the overall compliance efforts of an institution and take into account progress the institution has made in implementing its plan.
I would suppose that this plan could look something like your internal audit tracking report, or your compliance tracking report for tracking all items that require action by your institution, the responsible party for taking that action, and the dates that such items have been completed.
On February 25, the FDIC released FIL 09-2014 titled, “Interagency Consumer Compliance Examination Procedures for Mortgage Rules Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)”.
FDIC examiners will use the revised interagency procedures to evaluate institutions’ compliance with the following residential mortgage loan rules issued pursuant to the Dodd-Frank Act:
Ability-to-Repay/Qualified Mortgage Rule – requires creditors to make a reasonable and good faith determination that the consumer has a reasonable ability to repay a mortgage loan.
Loan Originator Compensation Rule – regulates loan originator compensation and establishes qualification and training requirements.
Mortgage Servicing Rules – implements amendments to the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (“TILA”) regarding mortgage loan servicing.
High-Cost Mortgage and Homeownership Counseling Amendments Rule – implements the Dodd-Frank Act provisions amending TILA and RESPA concerning consumer protections associated with high-cost mortgages and homeownership counseling.
Higher-Priced Mortgage Loan (HPML) Escrow Rule – requires creditors to establish and maintain, for a minimum of five years, escrow accounts for certain HPMLs.
HPML Appraisal Rule – requires appraisals for certain HPMLs.
Equal Credit Opportunity Act (ECOA) Appraisal Rule – requires creditors to provide a copy of an appraisal or other property valuation as a matter of course, rather than providing copies only upon an applicant’s request.
For access to the full FIL 09-2014 you can find it here: FIL-9-2014
Additional resources on the new rules can be found on the Consumer Financial Protection Bureau’s (CFPB) Web site at http://www.consumerfinance.gov/regulatory-implementation/
This FIL applies to all financial institutions regardless of size, so even all of our surrounding community banks are going to be affected by this. So, my question to you is, do you have a plan in place for implementation of these new mortgage rules, and if so, is that plan documented accordingly? Does your staff have a good understanding of the changes and are they ready to discuss such with regulators? If answers to either of these questions is no, then I suggest you have some work to do. Be proactive, not reactive in this. Get a start on this now and find favor in the eyes of the regulators. Believe me, it pays to be able to discuss these regulatory issues with the regulators and it’s possible they will then be pleased with the efforts your institution has taken.
Senior Quality Control and Review Specialist
Sharon Geiger has 27 years banking experience, 21 of which have been involved in internal audit. She has extensive knowledge of all aspects of the banking industry, with a particular emphasis on regulatory compliance and identifying risks and controls. As QCR Specialist, she performs Quality Control Reviews to ensure all workpapers and reports are completed in compliance with the firm's standards.