Compliance Blog

Posted by Anthony Demangone

In November, the Federal Reserve Board issued an interim final rule to require that consumers receive notification when their mortgage loan has been sold or transferred.  The notification comes from the institution that receives the loan - not the one who sells or transfers it.  The new requirement will apply to both open and closed-end loans.

Compliance deadline: January 19, 2010.

The Fed issued its rule in response a new requirement mandated within the Helping Families Save Their Homes Act, which was enacted back in May.  Why this new requirement?  Currently, RESPA requires a notification when the servicer of a mortgage changes.  Congress wanted to make sure consumers know when the ownership of the mortgage changed as well. Here's a snippet:

Consistent with the legislative intent, this interim final rule implements Section 404(a) of the 2009 Act by applying the new disclosure requirements to any person or entity that acquires ownership of an existing consumer mortgage loan, whether the acquisition occurs as a result of a purchase or other transfer or assignment. A person is covered by the rule only if the person acquires legal title to the debt obligation....However, the interim final rule applies only to persons that acquire more than one mortgage loan in any 12-month period.

To comply with the interim rule, a covered person must mail or deliver the required disclosures on or before the 30th day following the date that the covered person acquired the loan. The disclosure need not be given, however, if the covered person transfers or assigns the loan to another party on or before that date. 

NAFCU has prepared a Regulatory Finalthat provides a great overview of the new requirement.  (Member log-in needed.)  Again, you can view the final rule via the link at the top of this post.  NAFCU members: we'd need any comments that you have by December 16th.  While the scope of this rule should not be too cumbersome (it only affects those who receive the loan, not those who transfer or sell it), there are some compliance issues that could be cleaned up.  For example, what about loan participations? Does every credit union that gets a piece of the mortgage need to send the notification?  Inquiring minds want to know.

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There soon could be a "midnight oil" shortage.  As you know, the House is attempting to finalize its regulatory reform legislation.  This legislation, if made into law, will affect every aspect of the American financial system.  As part of the process, there was a deadline for amendments to be submitted.  Well, nearly 300 such amendments are now in play.  Rest assured that NAFCU Compliance, Reg Affairs and lobbying staff worked late into the evening on Monday and all day yesterday to review each amendment.  We've already begun voicing our concerns or support to Congress on many of these proposed amendments.  Stay tuned.