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Th e M Rep o RT | 47 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t ORIGINATION the latest ORIGINATION supervisory Highlights show dodd-Frank violations by mortgage Originators Inaccurate GFes, improper filing of denial notices, and improper originator compensation cited as issues. i n March, the Consumer Finance Protection Bureau (CFPB) released its Supervisory Highlights report, which examined compliance with Title XIV of the Dodd-Frank Act. In January 2013, the CFPB issued the Title XIV rules related to mortgage origination activities. The rules cover the ability-to-repay and qualified mortgage standards, escrow requirements, high-cost mortgage and homeownership counseling requirements, appraisal requirements for higher priced mortgage loans, and loan originator compensation. Regulation Z prohibits a loan originator from receiving compensation based, either directly or indirectly, on the terms of a consumer credit transaction secured by a dwelling. The CFPB found, in one or more institutions, that branch managers were also loan originators and owners of related marketing services entities, and as branch managers, they allocated compensation for themselves through the terms of transactions they originated. The report also found improper use of lender credit and failure to provide Good Faith Estimates (GFE) in a timely manner. Supervision found instances where lender amounts disclosed to HUD exceeded the GFE, due to inadequate training and policies. GFEs were delayed beyond the three-business-day requirement at some institutions due to policies and procedures that were not properly defined when an application was received. The CFPB also found social media advertising was not monitored by institutions, a violation of Regulation Z, which requires disclosures to be posted with any advertisements. CFPB examiners found that one or more supervised entities failed to provide the requisite information in denial notices as set forth in Regulation B and failed to notify an applicant of action taken within 30 days after receiving the completed application. These errors were attributed to weaknesses in the compliance audit programs and the monitoring and corrective action component of those compliance programs. At one or more institutions, examiners concluded that a weak compliance management system allowed numerous violations of Regulations B, X, and Z to occur. Some institutions hired compliance officers and adopted compliances programs shortly after new regulations were released and were unable to effectively implement new compliance programs. Training was either not comprehensive enough or nonexistent at some institutions. Examiners also found that third-party audits completed at some institutions were limited in scope, and results were not reported to directors. Examiners directed the institutions to take appropriate action to address the weaknesses in order to implement effective compliance management systems. Title XIV compliance findings will be discussed more in a future issue of Supervisory Highlights. The results cited above are focused largely on examinations and findings from July 2014 to December 2014. cFPB releases new tool kit Tools help homebuyers navigate the homebuying and mortgage processes. t he Consumer Financial Protection Bureau (CFPB) has released a new toolkit that guides consumers through the process of shopping for a mortgage and buying a home. The toolkit was developed as a part of the CFPB's "Know Before You Owe" mortgage initiative and helps consumers take full advantage of the new Loan Estimate and Closing Disclosure forms that lenders are required to begin providing in August. "This toolkit is a great re- source for consumers navigating the homebuying process and will help consumers make well- informed decisions about the biggest financial transaction of their lives," said CFPB Director Richard Cordray. The toolkit provides a step-by-step guide to help consumers understand the nature and costs of real estate settlement services, define what "affordable" means to them, and find the best-suited mortgage for their needs. The toolkit features interactive worksheets and checklists, conversation starters for discussions between consumers and lenders, and research tips to help consumers seek out and find important information. The toolkit is designed to replace an existing booklet that creditors currently must provide to mortgage applicants, which was initially developed by the Department of Housing and Urban Development (HUD). The updated toolkit is designed to be used in connection with the new Loan Estimate and Closing Disclosure forms that will be ef- fective on Aug. 1, 2015. Creditors must provide the toolkit to mortgage applicants as a part of the application process, and other industry participants, in- cluding real estate professionals, are encouraged to provide it to potential homebuyers as well. "The new mortgage disclosure forms coming in August will help consumers comparison- shop for mortgages and avoid surprises at the closing table," Cordray said. "We are releasing this toolkit well in advance of the effective date to help the mortgage industry come into compliance with the new rules." The CFPB is also providing an electronic version, complete with fillable text fields and interactive check boxes, so the consumer can save and print their progress as they work through the toolkit. The electronic version meets federal accessibility standards to ensure that all consumers, includ- ing those with disabilities, can use the resource. The CFPB encour- ages lenders to keep this level of accessibility when delivering the PDF to consumers. A Spanish language version will also be made available later in 2015.

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