EYE ON THE INDUSTRY

New Reg Z Restrictions on Prepayment Penalties

Current Regulation Z restrictions on prepayment penalties apply to “high–cost mortgages”—mortgages secured by a consumer’s principal dwelling that meet either a “rate” or “fees” test. Regulation Z imposes disclosure requirements, contract restrictions, and operational restrictions.

On October 1, 2009, the rules will also apply to “higher–priced mortgage loans”—loans with a security interest in the consumer’s principal dwelling that also meets a “rate” test. However, the rules differ slightly depending on which type of loan is at issue.

Under the new rules, creditors can impose a prepayment penalty only if the prepayment occurs during the first two years (rather than the first five years as under the current rule). Learn how the new restrictions affect you. Read More

COMPLIANCE SPOTLIGHT

Fannie Mae Revises Loan Modification Agreements

Fannie Mae has made changes to the language in its Loan Modification Agreements to remove references to borrowers waiving their right to set–off or counterclaim, or any defense to obligations under their loan documents (“Borrower Waiver Provisions”).

Lenders may use their existing supply of loan modification agreements until the revised VMP® forms are completed, or they may use the revised forms posted on the Fannie Mae web site. Read More

OTS Urges Foreclosure Suspension

The Office of Thrift Supervision (OTS) has urged OTS–regulated institutions to temporarily suspend foreclosures on owner–occupied homes. The suspension gives the Treasury Department time to finalize the Financial Stability Plan’s “home loan modification program.” Read More

Fannie Mae/Freddie Mac Adopt Changes to Appraisal Process

Effective May 1, 2009, Fannie Mae and Freddie Mac will not purchase mortgages from lenders and servicers who do not adopt the Home Valuation Code of Conduct with respect to single–family mortgage deliveries. Both agencies will require lenders to represent and warrant that the appraisal report is obtained in a manner consistent with the code. Read More

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