Texas Amends Conditional Approval and Conditional Pre-Qualification Letter

The Texas Finance Commission has amended the loan status forms to be provided as written confirmation of conditional qualification (“Conditional Pre-Qualification Letter”) and of loan application approval on the basis of credit worthiness (“Conditional Approval Letter”), effective May 1, 2020. These loan status forms are not required. However, if a lender chooses to provide such a form to an applicant or prospective applicant, it must use either the promulgated forms or a version which provides the same information contained in the promulgated forms.

Additional States Issue Temporary Authority for Remote Online Notarization

As previously reported, numerous states which previously required notarizations to be done in person have enacted emergency legislation or issued emergency orders giving temporary authorization for remote online notarization (“RON”) in response to the current COVID-19 pandemic.

Recent state updates include the following:
• Hawaii, Massachusetts, New Jersey and Rhode Island have temporarily authorized RON until the state of emergencies declared in each state are lifted;
• The use of RON is authorized in Maine until 30 days after the termination of the state of emergency;
• The Missouri order authorizing RON is set to expire on May 15th unless the order is extended; and
• The Kansas order remains in effect until May 1st unless the state of emergency is lifted prior to that date.

As of April 30, 2020, the only states in which RON is not currently permitted, even temporarily, are Alaska, Delaware, the District of Columbia, North Carolina, Oregon and South Carolina.

Note that the states permitting remote online notarization are changing frequently and the requirements for remote online notarization in each state may vary. Please verify your state’s legislation or emergency orders for specific details and requirements.

The Consumer Financial Protection Bureau (“CFPB”) issued a policy statement outlining the responsibility of credit reporting companies and furnishers in light of the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

The CFPB indicated it will take a “flexible supervisory and enforcement approach during this pandemic regarding compliance with the Fair Credit Report Act (“FCRA”) and its accompanying Regulation V” and sets forth the following specific flexibilities:

Furnishing Consumer Information - The CARES Act requires lenders to report to credit bureaus that consumers are current on their loans if consumers have sought relief from their lenders due to the pandemic. The CFPB has indicated that it does not intend to cite in examinations or take enforcement actions against lenders who furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing.

Disputes – The statement also indicated the CFPB is providing flexibility in regard to the timeframe for investigating disputes. Generally, lenders furnishing credit information are required to investigate disputes to credit reports within 30 days of receipt of the dispute with an extension given in certain circumstances. The CFPB indicated that it does not intend to cite in an examination or bring an enforcement action against a lender making good faith efforts to investigate disputes as quickly as possible, even if dispute investigations take longer than time period set forth in the statute.

Fannie Mae and Freddie Mac (the “GSE’s”) have issued additional guidance related to COVID-19 in an attempt to address lender’s concerns.

The newest guidance from Fannie Mae in an update to Lender Letter 2020-3 provides additional information in the following areas on loans with application dates on or after April 14, 2020 through May 17, 2020 unless otherwise noted:

Age of documentation – Age of documentation requirements for most income and asset documentation has been modified from four months to two months.

Verification of self-employment – When a borrower is using self-employment income to qualify, the lender must verify the existence of the borrower’s business within 120 calendar days prior to the note date. There is now an additional requirement that lenders confirm the borrower’s business is open and operating within 10 business days of the note.

Market-based assets – When the borrower is using stocks, stock options, or mutual funds for assets for down payment or closing costs, the lender must obtain documentation of the borrower’s actual receipt of funds received from the sale or liquidation. When such assets are used for reserves, only 70% of the value of the asset must be considered, and liquidation is not required.

Power of attorney – Additional flexibilities are now available for use of a Power of Attorney effective immediately for all loans in process and remain in place for loans with application dates on or before May 17, 2020. Currently, persons “connected to the transaction” may serve as an attorney-in-fact or agent in refinance transactions. This provision will also now apply to purchase transactions as well as limited cash-out refinances. Whenever an attorney-in-fact or agent is an employee of the insuring title insurer or is an employee of the policy-issuing agent of the insuring title insurer, the title insurer must have issued a closing protection letter (or similar contractual protection) for the transaction for such policy issuing agent. Additionally, the limitations requiring at least one borrower signature on the note and security instrument are suspended.
Remote Online Notarization – Lenders may sell loans with remotely notarized loan documents in the states in which such notarization is authorized by law as long as certain conditions are met. These policies are effective immediately for all loans and are intended to remain in effect until further notice.

Lender Quality Control Requirements – Lenders are given temporary flexibilities in regard to reverifications, field reviews of appraisals, and prefunding QC reviews. These temporary flexibilities are effective immediately for all loans in the process of a post-closing quality control (QC) review and all loans selected for a post-closing QC review until June 2020 QC selections.

Freddie Mac issued similar guidance in Bulletin 2020-8. To review the details of the guidance provided by both entities, please visit the following links:

Fannie Mae Lender Letter 2020-3, updated March 31, 2020

Freddie Mac Bulletin 2020-8

 

The Washington legislature has amended the state’s data breach notification laws, effective March 1, 2020.  The Ohio Department of Commerce announced the annual loan prepayment penalty adjustment, effective January 1, 2020.

 

WASHINGTON HOUSE BILL 1071

 

 “Personal Information” has been expanded to included:

• An individual’s first name or first initial and last name in combination with any of the following:
  • Social security number;
  • Driver’s license number or state identification card number;
  • Account number or credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual’s financial account, or any other numbers or information that can be used to access a person’s financial account;
  • Full date of birth;
  • Private key that is unique to an individual and that is used to authenticate or sign an electronic record;
  • Student, military, or passport identification number; or
  • Biometric data generated by automatic measurements of an individual’s biological characteristics such as a fingerprint, voiceprint, eye retinas, irises, or other unique biological patterns or characteristics that are used to identify a specific individual;
• Username or email address in combination with a password or security questions and answers that would permit access to an online account; and
• Any of the above data or combination of data without the consumer’s first name or first initial and last name if the data is not encrypted or redacted and the data would enable a person to commit identify theft against a consumer.

If the breach involves a user name or password, notice may be provided electronically or by email.  The notice must inform the consumer to promptly change his or her password and security question or answer or take other appropriate steps to protect the online account.  If the breach involves email login credentials, the person or business may not provide the notification to that email address but most provide notice using another permitted method.

 

Any person or business that is required to issue a breach notification to more than 500 Washington residents must notify the state attorney general of the breach no more than 30 days after discovering the breach (previously 45 days).  In addition to the number of Washington consumers affected, the notice must include a list of the types of personal information believed to have been the subject of the breach, the date of the breach and date of the discovery of the breach, a summary of steps taken to contain the breach and a single sample copy of the notification.

 

OHIO PREPAYMENT PENALTY ADJUSTMENT

 

A penalty may not be charged for the prepayment or refinancing of a residential mortgage obligation of less than $92,564 (previously $91,466) that is made or arranged by a mortgage broker, loan officer, or nonbank mortgage lender, and that is secured by a mortgage on a borrower's real estate that is a first lien on the real estate.

 

 

MICHIGAN HOUSE BILL 5084

 

The Michigan legislature amended their Mortgage Loan Originator Licensing Act effective December 5, 2019.

 

An individual who is a registered loan originator will have temporary authority to act as a mortgage loan originator for a specified period without first obtaining a mortgage loan originator license, if all of the following apply:

• The individual becomes employed by an entity that is licensed or registered under the mortgage brokers, lenders and servicing licensing act, the secondary mortgage loan act, or the consumer financial services act;
• The individual has not had an application for a mortgage loan originator license denied or a mortgage loan originator license revoked or suspended in any state;
• The individual has not been subject to, or served with, a cease and desist order in Michigan or any other state;
• The individual has not been convicted or, or pled guilty or no contest to, a misdemeanor or felony that would preclude licensure;
• The individual has submitted a mortgage loan originator license application and the required fee, and has met the applicable surety bond requirements;
• The individual was registered in the NMLS as a mortgage loan originator during the 1-year period immediately preceding the date on which the information required for licensure is submitted;
• The individual is not subject to a prohibition order issued by the director of the Department of Financial Institutions (“director”),

 

An individual who is licensed as a mortgage loan originator in another state will have temporary authority to act as a mortgage loan originator in Michigan without first obtaining a license if all of the following apply:

• The individual meets the licensing requirements set by the department;
• The individual was licensed in another state during the 30-day period immediately preceding the date when the Michigan license application was submitted;

 

The period of temporary authority begins on the date when the license application is submitted, the required fee is paid, and the applicable surety bond provisions have been met, and ends on the earliest of the following dates:

• The date when the individual withdraws the application;
• The date when the director denies, or issues a notice of intent to deny, the application;
• The date when the director approves the application;
• The date that is 120 days from the date when the individual submits the application, if the application is listed on the NMLS as incomplete.

 

A person employing an individual who has temporary authority to act as a mortgage loan originator is subject to the applicable laws to the same extent as if the individual is licensed as a mortgage loan originator.

 

An individual with temporary authority to act as a mortgage loan originator in Michigan and who engages in residential mortgage loan origination activities is subject to all applicable laws to the same extent as if that individual is licensed as a mortgage loan originator.

 

 

The Alaska Department of Commerce, Division of Banking and Securities (“Department”) has amended their regulations dealing with mortgage lending and nonprofit exemptions, effective February 6, 2020.  The Massachusetts Department of Banking has amended the rules related to licensing of mortgage loan originators, effective January 10, 2020.

 

3 ALASKA ADMINISTRATIVE CODE CHAPTER 14

 

A bona fide nonprofit organization may submit an application for exemption registration to the department through the NMLS registry to determine if the organization qualifies for an exemption.  The nonrefundable fee for an annual bona fide nonprofit exemption registration is $400.  A bona fide nonprofit organization must apply annually for the exemption between November 1 and December 1 each year to maintain the exemption for the following year.  The bona fide nonprofit organization must comply with the record keeping and notice requirements for mortgage licensees. 

 

With respect to applicants for a mortgage license, the requirement to designate a qualifying individual has been repealed. 

 

An applicant for mortgage loan originator license must submit to the registry that the applicant has completed the prelicensing education as required.  However, the prelicensing education expires, and the applicant must complete an additional 20 hours of approved prelicensing education in order to be eligible for a mortgage loan originator license, if the applicant:

• Fails to acquire a valid state license or federal registration as a mortgage loan originator within 3 years from the date of completion of any approved prelicensing education course; or
• Fails to acquire a valid state license or federal registration as a mortgage loan originator within 3 years from the last date of licensure or registration as a mortgage loan originator.

 

 

 

MASSACHUSETTS 209 CMR 41.00        

 

“Bona fide nonprofit affordable homeownership organization” is defined as a Massachusetts nonprofit whose primary purpose is helping qualified low-income individuals build, repair and purchase affordable housing, and meets the definition in federal law. 

 

“Instrumentality created by the United States or any State” means a federal, state, municipal government, quasi-governmental entity or nonprofit agency or corporation that has tax exempt status granted under federal law, that exclusively makes or issues commitments for mortgage loans on residential property to be financed with public funds, or negotiates, places, assists in the placement of, finds, or offers to negotiate, place or assist in the placement of or find mortgage loans on residential property to be financed with public funds only under a contract with a federal, state, or municipal government, any instrumentality thereof or any quasi-governmental entity as defined by the Commissioner of Banking (“Commissioner”).  The making of a mortgage loan will include being named as the lender or mortgagee on the note, mortgage, or other loan documents.

 

Added to the definition of those persons not required to obtain a mortgage loan originator license are the following:

• Any person who otherwise meets the definition of a mortgage loan originator but who is employed by an organization determined by the Commissioner to be a nonprofit affordable housing organization;
• Any person who otherwise meets the definition of a mortgage loan originator but who is employed by an instrumentality created by the United States or any state.

 

 

The New Jersey Department of Banking has updated their definition of a high cost loan.  The Oklahoma Secretary of State has issued rules implementing the Oklahoma Remote Online Notary Act (“Act”).  Both provisions discussed here were effective January 1, 2020.

 

NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE BULLETIN 20-01

 

The New Jersey Department of Banking and Insurance (“Department”) issued a bulletin updating the definition of a high cost home loan.  The Department has issued a bulletin increasing the maximum principal amount that will result in a loan being considered a high cost home loan to $506,059.40 (formerly $498,610).  This update is effective for all completed applications on loans subject to the New Jersey Home Ownership Security Act and received by the lender on or after January 1, 2020.

 

OKLAHOMA NOTARY PUBLIC RULES, TITLE 655, CHAPTER 25

 

A notary public may perform remote online notarizations if the notary public has registered with the Oklahoma Secretary of State in the manner prescribed. 

 

A notary public must use the same unique electronic seal for all remote online notarizations.  When affixed to an electronic record, an electronic seal must include the notary public’s name exactly as indicated on the notary’s commission, the words “State of Oklahoma” and “Notary Public,” the notary public’s commission number, and the date of expiration and be clear, legible and photographically reproducible.

 

If a notary public does not have satisfactory evidence of the identity of a principal, the notary public must reasonably verify the identity through a multi-factor authentication procedure as provided in the rule. 

 

The certificate of notarial act for a remote online notarization must indicate that the notarial act was a remote online notarial act performed by means of communication technology.  A form of certificate for a remote online notarization satisfies the above requirement if it is in the form provided by applicable law and contains a statement substantially as follows: “This remote online notarization involved the use of communication technology.”

 

A notary public must retain an electronic journal and an audio-visual recording of remote online notarial acts for at least 10 years.

 

 

The Colorado and Georgia regulators have amended their rules related to temporary authority for mortgage loan originators. 

 

COLORADO RULES 4 CCR 725-3 CHAPTER 2

 

The Colorado Department of Regulatory Agencies, Division of Real Estate (the “Division”) has amended the rules related to temporary authority for mortgage loan originators, effective November 20, 2019.

 

An applicant for a mortgage loan originator temporary license that is eligible for temporary authority must meet the following requirements:

• Submit a set of fingerprints to the NMLS;
• Be eligible for temporary authority with the NMLS in accordance with NMLS policies and procedures;
• Be employed and sponsored by a Colorado NMLS registered mortgage company;
• Has not had any of the following:
  • An application for a mortgage loan originator license denied in any jurisdiction;
  • A mortgage loan originator license revoked or suspended in any jurisdiction;
  • Been subject to, or served with a cease and desist order; or
  • Been convicted of, plead guilty or nolo contendre to, a misdemeanor or felony of a crime involving fraud, deceit, material misrepresentation, theft, breach of fiduciary duty, money laundering.
• The applicant has met either one of the following:
  • Registered in the NMLS as a loan originator for a depository during the one-year period preceding the date of application for a temporary license; or
  • Had a license issued as a mortgage loan originator in another jurisdiction during the 30-day period preceding the date of application for a temporary license.

 

The applicant has 7 business days from notice of issuance of temporary authority from the NMLS to submit the Division’s “Mortgage Loan Originator License Application” which includes state specific requirements.  This includes identifying the Colorado licensed mortgage loan originator who is responsible for the supervision of the applicant during the time they hold an active temporary mortgage loan originator license (“Responsible Mortgage Loan Originator”). 

 

A mortgage loan originator holding a temporary license must be employed and sponsored by a Colorado NMLS registered mortgage company and must be supervised by a Responsible Mortgage Loan Originator licensed in Colorado.  The Responsible Mortgage Loan Originator will be held responsible under all applicable provisions of Colorado law for the actions of the mortgage loan originator holding the temporary license and is personally subject to all applicable penalties under the law.  The Responsible Mortgage Loan Originator must notify the Division of the beginning and ending dates of supervision for mortgage loan originators holding temporary licenses.  The Responsible Mortgage Loan Originator will be held responsible for the activities of mortgage loan originators holding temporary licenses through and including the date of the temporary license expiration or termination of supervision, whichever is sooner.

 

A mortgage loan originator temporary license will expire on one of the following dates, whichever is sooner:

• The applicant withdraws the application for a Colorado mortgage loan originator license;
• The Board of Mortgage Loan Originators (“Board”) denies the application for a Colorado mortgage loan originator license;
• The Board approves and issues a Colorado mortgage loan originator license;
• Supervision termination date between the Responsible Mortgage Loan Originator and the mortgage loan originator holding the temporary license;
• 120 days after the date the applicant was issued a temporary license.

 

Applicants seeking a temporary license will be granted one mortgage loan originator temporary license provided the applicant meets the requirements for such a license.  Additional or extended temporary licenses are prohibited.  A temporary mortgage loan originator license issued by the Board will have the same force and effect as a mortgage loan originator license issued by the Board.  

 

GEORGIA RULES CHAPTER 80-11

 

The Georgia Department of Banking and Finance (“Department”) has amended its Residential Mortgage Brokers and Lenders rule to provide for temporary authority for mortgage loan originators.  The rules are effective January 9, 2020.

 

A mortgage lender or mortgage broker sponsoring a mortgage loan originator who has temporary authority to act as a mortgage loan originator must disclose in writing to each applicant that the mortgage loan originator has temporary authority to operate.  The disclosure must be made no later than the date the consumer signs an application or any disclosure, whichever event comes first, and must include the following language in at least 10-point bold-faced type:

“The Georgia Department of Banking and Finance requires that we inform you that our company is licensed but the mortgage loan originator responsible for your loan is not currently licensed by the Georgia Department of Banking and Finance. The mortgage loan originator has applied for a mortgage loan originator license with the Georgia Department of Banking and Finance. Federal law (12 U.S.C. § 5117) authorizes certain mortgage loan originators to operate on a temporary basis in the state of Georgia while their application is pending. The Georgia Department of Banking and Finance may grant or deny the license. Further, the Georgia Department of Banking and Finance may take administrative action against the mortgage loan originator that may prevent such individual from acting as a mortgage loan originator before your loan closes. In such case, our company could still act as your broker or lender.”

 

The applicant is required to sign the disclosure and the lender or broker must keep a copy of the signed disclosure.  The disclosure is required after April 1, 2020. 

 

In the event that a mortgage broker or mortgage lender sponsors a mortgage loan originator with temporary authority, any advertisements by the mortgage broker or lender that mention the mortgage loan originator’s ability to act as a mortgage loan originator in Georgia must clearly and conspicuously indicate that the individual has temporary authority to operate in Georgia.  The advertisement must also clearly and conspicuously indicate that the individual is unlicensed, has submitted a license application to the Department, and the Department may grant or deny the application.

 

The Mortgage Loan Transaction Journal maintained by the mortgage broker, lender, or loan originator must clearly identify if the mortgage loan originator utilized temporary authority to operate at any point in the application or loan process.  For mortgage loan originators that utilize temporary authority, the journal must also identify the final status of the mortgage loan originator’s Georgia license application as one of the following:  approved, withdrawn, or denied. 

 

It is a violation of the Georgia Residential Mortgage Act to permit an unlicensed person, or one acting without temporary authority, to engage in licensed mortgage loan originator activities.

 

A mortgage loan originator operating under temporary authority is jointly responsible with the mortgage loan originator’s sponsor for ensuring that the required disclosure regarding the temporary authority is provided. 

 

A mortgage loan originator operating under temporary authority must include “TAO,” “temporary authority to operate” or a substantially similar designation next to the signature line on any document, application, or disclosure signed by the mortgage loan originator in connection with any residential mortgage loan application, including but not limited to the negotiation of terms or the offering of a loan. 

 

Any mortgage loan originator who qualifies to operate under temporary authority must submit proof to the Department of enrollment in a class to satisfy the prelicensing education requirements, as well as registering to take the written test required for mortgage loan originators.  Proof must be submitted to the Department within 30 days of receipt of the mortgage loan originator’s application. 

 

The Consumer Financial Protection Bureau (“CFPB”) announced the asset-size exemption thresholds for 2020 for Regulation C and Regulation Z.  The Oregon Department of Consumer and Business Services has amended its rules for mortgage lenders and mortgage servicer licensees.  All updates discussed are effective January 1, 2020.

 

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 $46 million to $47 for the upcoming year.  Therefore, banks, savings associations, and credit unions with assets of $47 million or less as of December 31, 2019 are exempt from collecting HMDA data in 2020.

 

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 $2.167 billion to $2.202 billion.  Therefore, lenders with assets of $2.202 billion or less as of December 31, 2019 are exempt, if other requirements of Regulation Z are met, from establishing escrow accounts for higher-priced mortgage loans in 2020.

 

OREGON RULES 441-890-0075 and 441-850-0045

 

The Oregon Department of Consumer and Business Services has amended its rules related to displaying mortgage lender and mortgage servicer license information.

 

Mortgage lender and mortgage servicer licenses are required to display a copy of their license in the principal place of business.  If the licenses are issued or renewed through the NMLS on or after January 1, 2020, a licensee can meet the posting requirement by posting the form provided by the Department of Consumer and Business Services with current and valid NMLS licensing information. 

 

The Alaska legislature amended its laws related to mortgage loan originator licensing exemptions.  The Nebraska legislature amended provisions related to its Installment Sales Act (“act”) which includes the purchase of mobile homes with an installment contract.  All the legislation discussed is effective January 1, 2020.

 

ALASKA HOUSE BILL 104

 

An employee of a bona fide nonprofit organization is exempt from mortgage loan originator licensing requirements if the employee acts as a mortgage loan originator only with respect to:

• The employee's duties to the bona fide nonprofit organization; and
• Residential mortgage loans that have terms that are favorable to the borrower by being consistent with mortgage loan origination for a public or charitable purpose rather than in a commercial context.

 

For a nonprofit organization to qualify as a bona fide nonprofit organization, the Department of Commerce, Community, and Economic Development must determine that the nonprofit organization:

• Has and maintains the status of a tax-exempt organization under federal law;
• Promotes affordable housing or provides home ownership education or similar services;
• Conducts its activities in a manner that serves a public or charitable purpose, rather than a commercial purpose, by offering mortgages that are not readily available from other lenders;
• Receives funding, receives revenue, and charges fees in a manner that does not provide an incentive for the organization or its employees to act other than in the best interests of its clients;
• Compensates its employees in a manner that does not provide an incentive to its employees to act other than in the best interests of its clients;
• Provides or identifies for a borrower residential mortgage loans with terms favorable to the borrower and comparable to mortgage loans and housing assistance provided under government housing assistance programs; for residential mortgage loans to have terms that are favorable to the borrower, the terms must be consistent with mortgage loan origination for a public or charitable purpose, rather than in a commercial context, and provide for interest rates that are less than the current market rate; and
• Meets other standards that the department determines are appropriate.

The department may establish by regulation the information that an organization must provide to qualify as a bona fide nonprofit organization. 

 

NEBRASKA LEGISLATIVE BILL 355

 

A license issued under the act is nontransferable and non-assignable. The same person may obtain additional licenses for each place of business operating as a sales finance company in Nebraska upon compliance with the act as to each license, except that on or after January 1, 2020, a person is no longer required to obtain a new license for each place of business and may maintain a branch office or offices.

 

A licensee under the act must notify the Director of Banking and Finance through the Nationwide Mortgage Licensing System and Registry at least 30 days prior to the occurrence of any of the following:

• The establishment of a new branch office (notice of each such establishment must be accompanied by a fee of $100 and any processing fee required);
• The relocation or closing of an existing branch office; or
• A change of name, trade name, or doing business as designation.