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New Regulations From Washington

JAN 24, 2013 5:15pm ET
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CFPB BACKS OFF ON ZERO POINTS ZERO FEES LOANS

FACTS

In August 2012 the Consumer Financial Protection Bureau proposed a rule requiring mortgage loan originators to offer a loan without any upfront origination charges whenever they were offering a loan with upfront origination charges. Based on the comments received, it decided not to finalize this part of the proposal(cfpb11813)

MORAL

That is a good way to develop laws and rules. First propose the law and rule and then later decide if it will work rather than investigate it first. What was it Shakespeare said about “all the lawyers?” Should it apply to all the rule makers?

CIVIL MONEY PENALTIES GO UP IF VIOLATE FEDERAL AGENCY LAWS

FACTS

This final rule increases the amount of civil money penalties for various violations of agency regulations and rules including but not limited to HUD, FHA and sponsored third party originators.

The maximum penalties for making a false claim or written statement as described in the regulation, is increased to $8,500.

The maximum penalties that the Mortgagee Review Board may impose for a series of violations identified in the regulations are increased to $8,500 per violation, and to $1,525,000 for all violations committed during any one-year period.

The maximum penalty that HUD may impose upon participants in FHA programs for violations identified in the regulation is increased to $7,050, and maximum of $1,335,000 for all violations committed during any one-year period.

The maximum penalty that HUD may impose upon a mortgagee or a holder of a guarantee certificate that violates the statutory provisions concerning loan guarantees for Indian housing is $8,000 per violation, and $1,525,000 for all violations committed during any one-year period.

The maximum penalty that may be imposed upon a mortgagor of a multifamily property or upon any person in a relationship with the mortgagor, as described in the regulations, is increased $42,500 per violation.

The maximum penalty that may be imposed against a Ginnie Mae issuer or custodian for a violation of any provision of 12 U.S.C. 1723i(b) or other authorities cited in the regulations is $8,500 per violation, and $1,525,000 for all violations committed during any one-year period.

The maximum penalty that HUD may impose upon any dealer or sponsored third party originator for, among other things, falsifying statements or making false representations in violation of section 2(b)(7) of the National Housing Act (12 U.S.C. 1703(b)(7)) is $8,500 for each violation, and $1,525,000 during any one-year period.

The maximum penalty that may be imposed against any owner, any general partner of a partnership owner, or any agent, as described in the regulation, that provides a knowing and material breach of a housing assistance payments contract, is $27,500 per violation.

The maximum penalties that the Administrative Law Judge may impose upon a respondent who is found to have engaged in a discriminatory housing practice is increased to $42,500, and to $70,000, respectively. (78 FR 4057-1/118/03)

MORAL

Now you know why you retain us, to avoid and or minimize the penalties and keep you out of the loop where possible. I would like the sponsored third party originators to note that though they no longer are “approved mortgagees” of HUD they are still subject to jurisdiction of HUD for disciplinary and penalty purposes.

FHA ANNUAL CERTIFICATION AND HOW TO LOSE YOUR LEGAL LICENSE AND DIRECT ENDORSEMENT APPROVAL

FACTS

Each year an FHA-approved mortgagee’s principal, chief executive or in-house general counsel signs an attestation as part of the Federal Housing Administration’s annual certification process that accompanies payment of the mortgagee’s yearly verification fees. Sometimes without thinking, the executive or in-house counsel then attests that the company complies with all HUD-FHA regulations and no state or federal agency lifted its license during the past year.

The attestation is quite serious. FHA-approved mortgagees have been finding themselves charged before the HUD Mortgagee Review Board and the primary executives threatened with debarment proceedings for failing to read the fine print. The Online Annual Recertification Attestation does state that the mortgagee has complied with and agrees to comply with all HUD regulations, handbooks, Mortgagee Letters, policies and other federal laws and regulations. No mortgagee, its principals, officers, managers and employees shall be subject to “unresolved findings: as a result of a HUD or other government audit, investigation or review.

Mortgagee Letter 2010-38 defines the term “unresolved findings.” The definition includes unresolved lawsuits resulting from government investigations at the state and federal level as well as allegations of ongoing patterns and practices of violations or findings of discrimination. The definition includes open issues on any audit, investigation or review, and any imposition of fines, settlement agreements or other monetary sanctions by a state or local entity or any other action by a government agency. If you forget to notify HUD that some loan officers were disciplined because of soliciting loans before they were licensed, then the company’s principal may have signed a false certification without knowing of the false statement when executing the FHA Online Annual Recertification Attestation. Even routine annual state audits that are presently ongoing are considered unresolved findings  

Remember, after signing a consent order or other agreement with a state or federal agency (including HUD), report the matter in writing to the Director of HUD’s Approval and Recertification Division. If your company is the subject of any ongoing state or federal audit, investigation or review, it should not sign a certification that implies the company has no ‘unresolved findings’ without first consulting competent legal counsel.  A lender should probably inform HUD that it is “unable to certify: and explain why. HUD has formed a committee to review the information. In most cases HUD approves the mortgagee for participation.

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