MetaSource Mortgage Blog

Answers to Questions from our Webinar “Managing the Year of Change”

Thursday, October 28, 2010

We want to thank everyone who attended our webinar "Managing the Year of Change." As promised, below you will find answers to the questions asked during the webinar

Question 1 – You have stated that MDIA defines an application the same way as a GFE. So, you are saying that if we do not disclose a GFE because we do not have all of the pieces, then we do not have to issue the TIL either?

  • Answer – Yes. This is correct. TILA/MDIA shares RESPA's definition of an application. If you do not have what is defined as an application then you are not required to disclose a TIL statement. This can be found in 12 CFR 226.19 for the Truth in Lending Act.

Question 2 – The Dodd 1 yr GFE and TIL combined implemented from what effective date?

  • Answer – The effective date is 1 year after transfer. That would be July 22, 2011. However, there is already a working copy going around, and I would expect it to be implemented well before this date.

Question 3 – I had a question related to the LO compensation that we discussed in webinar today. Changing LO compensation is a fairly easy regulation to comply with. It requires a change to the existing mind set, but logistically, it is not difficult. The requirement is to pay the LO based on total volume as a percentage or flat fee per until or some other method that doesn’t result in steering the borrower to an undesirable product.

Ok, so I'm with the regulators so far. Then, here is where I get lost. The regulation also says that companies that broker loans are also subject to the regulations. Ok, so now a brokerage firm or even a lender when acting as a broker also can not be paid differently for different pricing tiers or loan programs? So, effectively investors have to stop by brokerage firms how they are currently paying them. It is not simply paying the loan officer appropriately, but you also have to change the way you pay the firm. The interesting part is that secondary market transactions are exempt, so investors can still pay lenders but not brokers in spread premiums that change with loan program. So, it appears that the regulation much like RESPA is trying to put brokers at a competitive disadvantage. Am I understanding this correctly?

  • Answer – Yes, according to the rule, an originator is a loan originator and a broker company. Therefore, a broker company cannot be compensated based on the terms of the loan.

Question 4 – What is GSA and LDP?

  • Answer – GSA and LDP are lists compiled by the government that include individuals and companies that have violated certain rules, laws, or who have defaulted on an obligation. If a borrower or company is on either of these lists, then they would be excluded from receiving a loan in certain circumstances.

Question 5 – For an FHA loan, how do we handle where purchasing spouse is legal US resident with valid SS#, but non purchasing spouse is illegal with only an ITIN?

  • Answer – FHA does not allow a borrower with an ITIN. You will need to search out a different solution for this or not use the non-purchasing spouse in the approval.

Question 6 – It appears under the new LO compensation rules that take effect 04.01.2010 apply to mortgage broker companies and retail lender companies when their broker loans and not just to how the LO is paid.  Of course, secondary market exception applies to non-brokered rules but it appears that companies not just LO compensation cannot be paid differently based on the loan program. Therefore, it appears to make YSP or market price now illegal even if the LO is paid consistent with the rule.  So, investors are going to have to change the way they pay the broker companies as well is my understanding.

  • Answer – Yes, according to the rule, an originator is a loan originator and a broker company. Therefore, a broker company cannot be compensated based on the terms of the loan.

(MetaSource makes reasonable efforts to ensure the accuracy of the answers. MetaSource makes no express or implied warranty of any kind respecting the information presented and assumes no responsibility for errors or omissions. This online chat is not legal advice and should not be used as a substitute for proper professional or legal advice.)

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