Now that the dust has started to settle on the new mortgage rules, making sure you have properly implemented the rules in your institution is critical to remain in compliance.  Basically, it comes down to how well you have documented meeting each of the requirements. Much of the documentation can be done using existing checklists and adding new requirements to it.

To ensure you adhere to the regulations, Doeren Mayhew’s regulatory compliance advisors offer some tips to keep in mind during the implementation stages.

Ability to Repay

  • Use a standard form to document income calculations for consistency across files and underwriters.
  • Ensure that there is a calculation that matches the final income used. Consider purging any documentation that does not match the final income.
  • Document the final income used on the same form across files, for example, the Underwriting Transmittal.

Appraisal Rules

  • Record when the appraisal disclosure is given, either on a checklist/log or by retaining a dated copy in the file.
  • Document when the appraisal is mailed to the borrower, either by checklist/log or by retaining the cover letter sent with the appraisal.

Higher-Priced Mortgage Loans (HPMLs)

  • Put a process in place to easily identify higher-priced mortgage loans, such as putting a colored sticker on the front of the file.
  • Use a checklist similar to the below to indicate specific requirements.
    • No appraisal delivery waiver. Appraisal delivered on __________
    • Escrow for taxes and insurance required
    • Escrow account must be maintained for at least 5 years

Counseling List

  •  Keep a copy of the counseling list in the file, or indicate the zip code used and date sent on a checklist.

Flood Insurance

To avoid new penalty fees of $2,000 per violation, with no maximum penalty cap, implement the following best practices:

  • Ensure flood certificates are pulled on all properties.
  • Send flood notices for loans in a flood zone at least 10 days prior to closing.
  • Obtain borrower acknowledgment of receipt of flood notice by requiring a borrower to sign and return the notice.
  • Make sure flood insurance covers at least the principal balance of the loan.
  • Escrow for flood insurance premiums when an escrow account is set up for any other fee (e.g. taxes, hazard insurance, mortgage insurance).

 Safeguard Borrower Information

  • Don’t allow copying of documents on external copy machines since the information is maintained on the machine’s hard drive.
  • Use secure e-mail.
  • Implement a clean desk policy.
  • Go paperless.

For assistance in implementing the new mortgage rules in your financial institution, contact our regulatory compliance advisors in Michigan, Houston or Ft. Lauderdale.