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REGULATION Z MORTGAGES RULES

The Federal Reserve Board issued a number of rules on August 16, 2010 amending Regulation Z. Those rules, which are described briefly below, have been published in the Federal Register.

Final Rules

  • Loan originator compensation practices: This final rule, which implements the Truth in Lending Act (TILA), as amended by the Home Ownership and Equity Protection Act, regulates loan originator compensation (including “yield spread premiums”) and steering by loan originators. See 75 Fed. Reg. 58509 (Sept. 24, 2010). The rule is effective on April 1, 2011.
  • Notification of mortgage loan sales or transfers: This final rule, which implements Section 131(g) of the TILA, as amended by the Helping Families Save Their Homes Act, requires a purchaser or assignee of a mortgage loan to provide written notice to a consumer of the sale or transfer of the consumer’s mortgage loan no later than 30 days after sale, transfer or assignment. See 75 Fed. Reg. 58489 (Sept. 24, 2010). The mandatory compliance date is January 1, 2011. The November 2009 interim rule may be followed until then.

Interim Rule

  • Disclosure requirements for closed-end mortgages: This interim rule, which implements the TILA, as amended by the Mortgage Disclosure Improvement Act of 2008, requires mortgage lenders to disclose in tabular format certain summary information about interest rates and payment changes, as well as a statement that consumers are not guaranteed to be able to refinance in the future. See 75 Fed. Reg. 58470 (Sept. 24, 2010). Although the interim rule is effective on October 25, 2010, compliance is optional until January 30, 2011. Comments on the rule must be received on or before November 23, 2010.

Proposed Rules

  • Dodd-Frank Act escrow requirements for jumbo mortgages: This proposed rule, which implements the TILA, as amended by Section 1461 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, provides for a separate, higher threshold for determining coverage of the Board’s escrow requirement applicable to higher-priced (or “jumbo”) mortgage loans. See 75 Fed. Reg. 58505 (Sept. 24, 2010). Comments on this rule, including the proposed effective date of 30 days after publication in the Federal Register, must be received on or before October 25, 2010.
  • Consumer protections and disclosures for home mortgage transactions: This proposed rule, which represents the second phase of the Board’s comprehensive review and update of mortgage lending rules, includes changes relating to (i) rescission rights, (ii) when a modification is deemed to be a new transaction requiring new disclosures, (iii) the threshold for “higher-priced” mortgage loans subject to the special protections in Section 226.35, (iv) rights to fee refunds after receipt of early disclosures and (v) disclosures and practices related to reverse mortgages. See 75 Fed. Reg. 58539 (Sept. 24, 2010). Comments must be received on or before December 23, 2010.

Judy Scheiderer