HOEPA - Section 226.36: No-nos related to principal dwellings; NCUA Chairwoman Speaks on CARD Act Compliance
Posted by Anthony Demangone
I HOEPA you enjoyed this overview.  Today, we've come to the last "new" provision in the HOEPA rulemaking: 226.36.  This section has a title that just rolls off the tongue: Prohibited acts or practices in connection with credit secured by a consumerâÂÂs principal dwelling.  While the title will not win marketing awards, it is fairly accurate. And note: the requirements below do not apply to HELOCs.
Broker defined. Â 226.36(a) defines the term "mortgage broker." Â The definition excludes an employee of the creditor.Â
Coercion of appraisers. Â 226.36(b) addresses practices that will constitute impermissible coercion of appraisers for consumer credit transactions secured by a consumer's principal dwelling. Â This sort of closes the loop on appraisals. Â The HVCC only applied to Fannie/Freddie transactions, and some of the anti-coercion guidance on appraisals was just that - guidance. Â Now, such practices are a violation of Regulation Z. Â This section lists a number of examples of impermissible coercion, such as implying to an appraiser that current or future work depends on the value of an appraisal. Â But it also gives a number of examples that are not impermissible coercion, such as asking an appraiser to consider additional information about the basis for a valuation.
In addition, this section states that a creditor may not extend credit secured by a consumer's principal dwelling if it is aware of impermissible coercion in relation to the appraisal. Â There is an exception to this; if the creditor acts with reasonable diligence to determine that the appraisal does not misrepresent the value of the dwelling, then all is hunky-dory.
Servicing requirements. Â Section 226.36(c) places new requirements on loan servicers, which often are the creditors themselves. You may see a trend here: these requirements apply to loans that are secured by a consumers principal dwelling. Â Servicers must credit payments when they are received. Â If you provide specific instructions for payments that are not followed, and you accept the payment, you can credit it no more than 5 days after it is received. Â Servicers cannot pyramid late fees, and they cannot refuse to provide an accurate payoff statement within a reasonable time of receiving such a request. Â What is a reasonable amount of time? Â The Fed doesn't say for sure, but it states that 5 days would be reasonable. Â Or in other words, a safe harbor.
As always, there are additional details lurking within the Official Staff Interpretation section of the regulation.
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On Friday, new NCUA Chairwoman Deborah Matz issued a statement regarding CARD ACT Compliance for credit unions.
Â..We understand some credit unions may experience difficulties complying with the requirement of the Credit CARD Act and the Federal Reserve BoardâÂÂs interim rule regarding the mailing of periodic statements. The amount of time necessary to come into full compliance will likely vary, depending on the type of credit arrangements a credit union offers its members and, in many cases, the cooperation of third party vendors in revising billing procedures and statements. All credit unions are expected to come into full compliance as early as reasonably possible, and to demonstrate their efforts to do so. In the interim, credit unions should follow the alternative allowed by the Federal Reserve. Like any regulatory compliance matter, examiners will review credit union efforts to achieve compliance. In no event can credit unions impose a late fee or change terms except as permitted by the Credit CARD Act and the Federal ReserveâÂÂs regulation. (Emphasis added.)
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OK, it is a Monday, and we're still slogging through Regulation Z. Â With that in mind, enjoy the following photo that I took of my son recently. Â It never fails to crack me up. Â How he finds this pose comfortable is beyond my understanding. Â Let's have a great week, everyone!
