Critical Mortgage Compliance Updates for 2020

From a federal regulatory viewpoint, managing your compliance risk is an ongoing task, to say the least. As we head into 2020, here’s a list of potential changes as well as annual threshold adjustments of which to be aware. It will be necessary to update your compliance risk assessment, internal controls, and IT systems.

Annual Threshold Adjustments Effective January 1, 2020

HPML escrow exemption: The final rule, published December 23, 2019, adjusts the asset-size threshold for certain creditors to qualify for this exemption located in Regulation Z, section 1026.35(b)(2)(iii)(C) of Regulation Z. Creditors with assets of less than $2.202 billion, which includes assets of certain affiliates, as of December 31, 2019, are exempt, if other requirements of Regulation Z also are met, from establishing escrow accounts for HPMLs in 2020, and in 2021 for loans applied for by April 1, 2021.

HPML appraisal exemption: The final rule, published October 30, 2019, adjusts in Regulation Z to increase the threshold amount to $27,200 for the exemption from the special appraisal requirements for higher-priced mortgage loans.

HOEPA annual threshold: The final rule, published August 1, 2019, adjusted the total loan amount threshold for high-cost mortgages in 2020 will be $21,980. The adjusted points-and-fees dollar trigger for high-cost mortgages in 2020 will be $1,099. For qualified mortgages, which provide creditors with certain protections from liability under the Ability-to-Repay Rule, the maximum thresholds for total points and fees in 2020 will be 3 percent of the total loan amount for a loan greater than or equal to $109,898; $3,297 for a loan amount greater than or equal to $65,939 but less than $109,898; 5 percent of the total loan amount for a loan greater than or equal to $21,980 but less than $65,939; $1,099 for a loan amount greater than or equal to $13,737 but less than $21,980; and 8 percent of the total loan amount for a loan amount less than $13,737.

Residential appraisal threshold: The final rule, published October 8, 2019, increased to $400,000 the threshold for requiring an appraisal by a state certified or licensed appraiser for residential real estate transactions.

HMDA asset-size exemption: The final rule, published December 20, 2019, increases the HMDA asset-size exemption threshold for banks, savings associations, and credit unions from $46 million to $47 million. Therefore, these institutions with assets of $47 million or less as of December 31, 2019, are exempt from collecting data in 2020.

HMDA and EGRRCPA partial exemptions: The final rule, published October 10, 2019, extends for two years the current temporary threshold for collecting and reporting data about open-end lines of credit under HMDA. The rule also clarifies partial exemptions from certain HMDA requirements that Congress added in the EGRRCPA.

FinCEN penalty caps: The final rule, published October 10, 2019, made inflation adjustments of civil money penalties, as mandated by the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended. The rule adjusts certain penalties within the jurisdiction of FinCEN to the maximum amount required by the Act.

Look for a final rule regarding the CRA small bank, intermediate small bank, and large bank revised definitions.

Proposed Rulemakings to Watch in 2020

CRA modernization: On December 12, 2019, the FDIC and the OCC published a Notice of Proposed Rulemaking with Request for Comment seeking to modernize the CRA. The proposed rules are intended to increase bank activity in low- and moderate-income communities where there is significant need for credit, more responsible lending, greater access to banking services, and improvements to critical infrastructure. The proposals will clarify what qualifies for credit under the CRA, enabling banks and their partners to better implement reinvestment and other activities that can benefit communities. The agencies will also create an additional definition of “assessment areas” tied to where deposits are located, ensuring that banks provide loans and other services to low- and moderate-income persons in those areas.

TRID Rule assessment: The CFPB published a Request for Comment on November 22, 2019, where an assessment will be conducted on the TRID Rule. As part of its assessment, the CFPB stated it intends to address the TRID Rule’s effectiveness in meeting the purposes and objectives of Title X of the Dodd-Frank Act, the specific goals of the rule, and other relevant factors. Section 1022(d) of the Dodd-Frank Act requires the CFPB to publish a report of its assessment within five years after the effective date of the rule being assessed. The public is invited to comment on the feasibility and effectiveness of the assessment plan, recommendations to improve the assessment plan, and recommendations for modifying, expanding, or eliminating the TRID Rule, among other questions. Comments are due by January 21, 2019.

Fair lending: On August 19, 2019, HUD published a Proposed Rule that would amend HUD’s interpretation of the FHA’s disparate impact standard to better reflect the Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., and to provide clarification regarding the application of the standard to state laws governing the business of insurance.

Collection practices: On May 7, 2019, the CFPB published a Notice of Proposed Rulemaking with Request for Comment the proposed rule would provide consumers with clear protections against harassment by debt collectors and straightforward options to address or dispute debts. The NPRM would set clear, bright-line limits on the number of calls debt collectors may place to reach consumers on a weekly basis; clarify how collectors may communicate lawfully using newer technologies, such as voicemail, email and text messages, that have developed since the FDCPA’s passage in 1977; and require collectors to provide additional information to consumers to help them identify debts and respond to collection attempts. The proposal would amend Regulation F, which implements the FDCPA, to prescribe federal rules governing the activities of FDCPA-covered debt collectors. The proposal focuses on debt collection communications and disclosures and also addresses related practices by debt collectors. The CFPB also proposes that FDCPA-covered debt collectors comply with certain additional disclosure-related and record retention requirements. If a final rule is issued, the CFPB proposes that it would become effective one year after it has been published.

Privacy: With the California Consumer Protection Act and the General Data Protection Regulation, you may be impacted more than you realize. Refer to our various articles written on this topic.

More can certainly be added to this abridged list, and the intent is to start planning and keeping an eye out for regulatory change.

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