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Regulatory Panel 1: TILA, RESPA and HMDA Update TILA and HMDA

Topics. Mortgage Disclosure Improvement Act.Became law July 30, 2008.Regulation Z amendments regarding unfair or deceptive mortgage practices.Published July 30, 2008.Omnibus Appropriations Act, 2009.Became law March 11, 2009.FTC advertising enforcement.HMDA rate spread reporting changes.Pub

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Regulatory Panel 1: TILA, RESPA and HMDA Update TILA and HMDA

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    1. Regulatory Panel 1: TILA, RESPA and HMDA Update TILA and HMDA Richard Andreano, Jr. Weiner Brodsky Sidman Kider PC

    2. Topics Mortgage Disclosure Improvement Act. Became law July 30, 2008. Regulation Z amendments regarding unfair or deceptive mortgage practices. Published July 30, 2008. Omnibus Appropriations Act, 2009. Became law March 11, 2009. FTC advertising enforcement. HMDA rate spread reporting changes. Published October 24, 2008.

    3. The MDIA Mortgage Disclosure Improvement Act. Amends Truth in Lending Act. Part of the Housing & Economic Recovery Act. Amended by the Emergency Economic Stabilization Act. July 30, 2009 effective date. In December 2008, FRB proposed a rule to implement the MDIA.

    4. The MDIA Initial Truth in Lending disclosure requirement: Expanded to all dwelling-secured loans that are subject to RESPA. Must provide within 3 business days of application and at least 7 business days before consummation. FRB proposed that the general business day definition apply to the 7 business day delivery requirement.

    5. The MDIA Final Truth in Lending disclosure: If initial disclosure is out of tolerance, consumer must receive a final disclosure at least 3 business days before consummation. If mailed, consumer deemed to receive 3 business days after mailing. FRB proposed that the specific business day definition apply to the delivery requirement and mailing rule.

    6. The MDIA If there is a bona fide personal emergency, a consumer may waive the waiting periods applicable to the initial and final disclosures. A consumer must receive the applicable disclosures before waiving the related waiting period. As proposed, the MDIA rule would require that the bona fide personal emergency necessitate consummation before the end of the waiting period.

    7. The MDIA Fee Limitation: No fee may be imposed on the consumer before receipt of the initial TIL disclosure, except a credit report fee. If mailed, consumer deemed to receive the initial TIL disclosure 3 business days after mailing. Specific business day definition applies to this mailing rule.

    8. The MDIA Notice Requirement: Both the initial and final TIL disclosures must include the following notice: You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.

    9. The MDIA Includes new variable rate disclosure requirements regarding payments. Effective earlier of January 30, 2011 or date established by FRB in implementing regulations. FRB has not proposed rules yet. Violation of new variable rate disclosure requirements will be included in violations that are subject to statutory damages.

    10. Regulation Z Most changes effective 10/1/2009. FRB used authority under various TILA sections to address what it perceived to be unfair or deceptive mortgage practices. Section 105(a), general rule authority. Section 122, authority to provide for clear and conspicuous disclosure of required information. Section 129(l)(2) authority, which was added by HOEPA.

    11. Regulation Z Section 129(l)(2) contains authority for FRB to prohibit acts or practices in connection with: Mortgage loans it finds to be unfair, deceptive or designed to evade 129. Refinancing of mortgage loans that it finds to be associated with abusive lending practices or otherwise not in the borrowers interest. FRB interprets authority to apply to all mortgage loans.

    12. Regulation Z For liability purposes: Section 105(a), administrative enforcement. Section 122, administrative enforcement and civil liability. Section 129(l)(2), administrative enforcement and civil liability, including special statutory damages equal to sum of all finance charges and fees.

    13. Regulation Z Section 105(a) authority used for: New information requirements for ads. Intent is to prohibit advertisements that emphasize low initial rates or payments without providing further details. Extension of initial TIL disclosure to primary-dwelling secured loans. MDIA extended initial TIL disclosure requirement to all dwelling-secured credit. MDIA rule proposed under 105(a).

    14. Regulation Z Section 122 authority used for: To require clear and conspicuous disclosures with respect to certain advertising requirements.

    15. Regulation Z Section 129(l)(2) authority used for: Prohibition of 7 specific advertising practices. Prohibition of certain acts or practices with regard to any primary dwelling-secured credit. Substantive limits on a new class of loans called higher-priced mortgage loans. Changes to HOEPA loan rules.

    16. Regulation Z 7 prohibited advertising practices: Misrepresentation re govt endorsement. Misleading: Statement of fixed rates or payments. Comparison of existing and advertised rates or payments. Use of current lenders name. Claim of debt elimination. Use of term counselor. Use of foreign language.

    17. Regulation Z Prohibited practices with primary dwelling-secured loans: Coercing, influencing or encouraging appraiser to misstate value. Relying on non-conforming appraisal. Not crediting payments as of date of receipt. Failing to provide pay-off statement in a reasonable period of time. Pyramiding late charges.

    18. Omnibus Appropriations Act, 2009 Became law March 11, 2009. Section 626: Directs FTC to initiate rulemaking by June 9, 2009 with respect to mortgage loans. Violation of rules adopted will be a violation of FTC Act Section 18 regarding unfair or deceptive acts or practices. Authorizes States to bring civil actions on behalf of citizens to enforce TILA Section 128.

    19. FTC EnforcementAdvertising In January of 2009 the FTC issued complaints and proposed consent orders against 3 mortgage firms regarding advertising practices. Based on FTC allegations: Ads violated Reg. Z ad requirements. Ads would violate new Reg. Z ad requirements to become effective October 1, 2009. FTC determined ads also violated FTC Act on basis the ads were deceptive.

    20. HMDA In October 2008 the FRB revised Regulation C to modify the rate spread reporting requirements. Current method is tied to rates for Treasury securities. New method tied to Average Prime Offer Rate to be calculated by FRB for 14 loan products based on Freddie Mac Primary Mortgage Market Survey. Conforms with higher-priced mortgage loans under Regulation Z.

    21. HMDA New rate spread reporting requirement applies to loans: For which the application is taken on or after October 1, 2009. That close on or after January 1, 2010, regardless of when the application is taken. Issue regarding when interest rate is set for purposes of determining whether loan is subject to rate spread reporting.

    22. TILA and HMDA Thank You. Richard Andreano, Jr. Weiner Brodsky Sidman Kider PC Washington, DC 20036 202-628-2000 andreano@wbsk.com

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