04 Jan Pennsylvania Legislative, Federal and New Jersey Regulatory Update
The Pennsylvania legislature recently amended its Mortgage Licensing Act (the “Act”) to add new licensing requirements for most residential mortgage servicers, effective December 22, 2017. The Consumer Financial Protection Bureau (“CFPB”) announced the asset-size exemption thresholds for 2018 for Regulation C and Regulation Z. The New Jersey Department of Banking and Insurance (the “Department”) recently amended its regulations addressing appraisal fees, effective December 18, 2017.
Pennsylvania Senate Bill 751
“Delinquent” means the date when an amount sufficient to cover a periodic payment of principal, interest and, if applicable, escrow becomes due and unpaid, and lasts until the time no periodic payment is due and unpaid, notwithstanding if the borrower is afforded a period after the due date to pay before the servicer assesses a late fee.
“Loss mitigation option” means an alternative to foreclosure offered by the owner, holder or assignee of a delinquent mortgage loan that is made available through the servicer to the borrower.
“Mortgage loan business” now includes the servicing of mortgage loans.
“Mortgage servicer” means a person who engages in the mortgage loan business by directly or indirectly servicing a mortgage loan.
“Single point of contact” means an individual or team of personnel, each of whom has the ability and authority to discuss mortgage loan mitigation options with a borrower on behalf of a mortgage servicer. The mortgage servicer must ensure that each member of the team is knowledgeable about the borrower’s situation and current status.
A mortgage lender may act as a mortgage servicer without a separate mortgage servicer license for mortgage loans the mortgage lender has originated, negotiated and owns. A person only licensed as a mortgage servicer may only perform the services of a mortgage servicer.
A person who originates, services or negotiates less than four mortgage loans in a calendar year is not required to be licensed unless determined to be engaged in the mortgage loan business by the Department of Banking and Securities (“Department”).
For a mortgage servicer, if a mortgage loan is paid in full and, in the case of an open-end mortgage, a mortgage lender is no longer obligated to make future advances to the consumer, the mortgage servicer must act in good faith to do all of the following:
- Request the mortgage holder release the lien on the dwelling or residential real estate and cancel the same of record and, at the time the mortgage loan agreement or promissory note evidencing the mortgage loan is returned, deliver to the consumer good and sufficient assignment, releases or other certificate, instrument or document as may be necessary to evidence the release;
- Request the mortgage holder cancel any insurance provided in connection with the mortgage loan and refund to the borrower, in accordance with regulations promulgated by the Insurance Department, any unearned portion of the premium for the insurance; and
- If a mortgage holder has delegated the responsibility to record satisfaction of security instruments to a mortgage servicer, the mortgage servicer must be treated as a mortgage holder for purposes of satisfying the above two conditions.
If mortgage lenders are in compliance with the provisions of the Act, they have the power and authority to service first and secondary mortgage loans that are originated, negotiated and owned by the mortgage lender.
If a mortgage servicer is in compliance with the Act, the mortgage servicer will have the power and authority to collect and remit for a lender, mortgagee, note owner, note holder, trustee or primary beneficiary or a residential mortgage loan payment of principal, interest or an amount to be placed into escrow for any combination of the payment of insurance, hazard insurance or taxes.
A licensee under the Act engaged in the mortgage servicer business may not fail to establish or attempt to establish a single point of contact with whom a borrower can communicate about foreclosure matters or loss mitigation options later than the 36th day of a borrower’s delinquency, unless contact is inconsistent with applicable bankruptcy law or court order.
The Department must issue a mortgage servicer license under the Act if the applicant has:
- Been approved by or meets the current eligibility criteria for approval as a residential mortgage loan servicer of at least one federal government-sponsored entity, government corporation or federal agency;
- Established a minimum net worth of $250,000 at the time of application and maintains the minimum net worth;
- Been approved for and maintains as a licensee fidelity bond coverage in accordance with the guidelines established by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation;
- Obtained and maintains a surety bond that meets the requirements set forth in the Act; and
- Designated an individual as the qualifying individual for the principal place of business.
The initial application fee for mortgage servicers is $2,500 for the principal place of business with an additional fee of $1,250 for each branch location. The renewal fee for mortgage servicers is $1,000 for the principal place of business with an additional fee of $500 for each branch location.
The Department will promulgate regulations to address mortgage servicing.
82 FR 61145 REGULATION C (HOME MORTGAGE DISCLOSURE ACT)
The Home Mortgage Disclosure Act (“HMDA”) requires lenders located in metropolitan areas to collect data about their housing-related lending activity. Banks, savings associations, and credit unions are exempt from collecting data based on their assets. The CFPB has indicated the asset-size exemption will increase from $44 million to $45 for the upcoming year. Therefore, banks, savings associations, and credit unions with assets of $45 million or less as of December 31, 2017 are exempt from collecting HMDA data in 2018.
82 FR 61147 REGULATION Z (TRUTH-IN-LENDING ACT)
The Truth-in-Lending Act (“TILA”) requires lenders to establish an escrow account for a higher-priced mortgage loan. The CFPB has amended Regulation Z’s Commentary to reflect a change in the asset size threshold for certain lenders to qualify for an exemption to the requirement to establish an escrow account for a higher-priced mortgage loan based on the annual percentage change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (“CPI-W”) for the 12-month period ending in November. The exemption threshold is adjusted to increase from $2.069 billion to $2.112 billion. Therefore, lenders with assets of $2.112 billion or less as of December 31, 2017 are exempt, if other requirements of Regulation Z are met, from establishing escrow accounts for higher-priced mortgage loans in 2018.
New Jersey Administrative Code 3:1-16.2 (effective December 18, 2017)
“Appraisal Fee” is a fee charged to a borrower by a lender or broker to recover the direct cost of the fee charged by a duly credentialed real estate appraiser for an appraisal in connection with a mortgage loan application. An appraisal fee may be charged to a borrower by a residential mortgage lender or by a residential mortgage broker, but not by both in connection with the same mortgage loan application. The initial charge to the borrower may be based on a reasonable estimate, provided that any amount in excess of the direct cost of the appraisal performed by a duly credentialed appraiser is refunded to the borrower at or prior to closing. The direct cost of any subsequent appraisal may be charged to a borrower in connection with the same property subject to the same mortgage loan application only for good cause shown. In determining good cause for such purposes, the following factors must be considered:
- Any changed circumstances shown to materially affect the value of the appraised property;
- The period of time since any prior appraisal was performed in connection with the same property subject to the same mortgage loan application, provided no material delay was caused by the lender;
- Compliance with applicable federal regulations; and
- Such other factors as may be reasonably be deemed material to the specific determination.
Previously, the Department was required to conduct an annual survey of third party appraisal fees charged by lenders to determine “usual, customary and reasonable” fees that would be the benchmark for permissible fee amounts. The survey and “usual, customary and reasonable” fee pricing concepts have been removed from the regulation.