Compliance Updates

May: Weekly Compliance Updates

IDS Publishes a VA IRRRL QM Checklist

May 27, 2014

The VA definition for a Safe Harbor Qualified Mortgage in general encompasses any loan guaranteed by the VA; however, the VA carved out additional requirements in the rule before an IRRRL will qualify as a Safe Harbor loan—if the loan doesn't meet the additional requirements then it will be considered a Rebuttable Presumption loan.

IDS Compliance completed a huge project to implement the new VA Qualified Mortgage test into its proprietary software system. The implementation includes several new audits available for IDS Customers to review on the QM page in the Settings section of the IDS website. Also, to help IDS customers comply with the new Safe Harbor requirements of a VA IRRRL QM, IDS has developed a checklist that logically walks creditors through the steps that ensure Safe Harbor status will be achieved on the IRRRL. Be sure to watch for the checklist in your VA IRRRL packages.

IDS Compliance wants to remind its customers that this VA interim final rule defining QM was published and effective on May 9, 2014, which also means that the CFPB's temporary definition of QM for VA loans has effectively come to an end. IDS implemented the changes at 5 pm on Tuesday, May 20, 2014. IDS made the changes effective for loans with an application date of May 9, 2014, or later.

The "Incurable" NMLS# Mistakes

May 19, 2014

An IDS Client recently asked us if we could clarify where exactly the "incurable" language comes from with regards to making sure NMLS#s appear as they should on the Note and Security Instrument. This problem is made "incurable" mostly by the way that investors are interpreting the statute. Here's how a couple of the big investors are addressing it:

Wells Fargo Newsflashes C13-067FR & C13-074FR:

    "As a result, Wells Fargo Funding is expanding our pre-purchase review to ensure the required information is present on the application, Note, and Security Instrument as required by the rule.

  • Because the rule specifies that the information must be present when these documents are “provided to the consumer/presented to the consumer for signature," non-compliant Loans must be recommended for non-purchase.
  • Failure to provide name/NMLSR information as stipulated in the rule cannot be cured post-closing." (Read More)

VA Issues Interim Final Rule Regarding Qualified Mortgages

May 12, 2014

IDS Compliance received Federal Register, Vol. 9, No. 90, dated Friday, May 9, 2014, which contains the Department of Veterans Affairs interim final rule definition of Qualified Mortgage and Ability-To-Repay required under the Truth in Lending Act. In general, The VA defines a Qualified Mortgage for the purposes of a VA Loan as being "any loan guaranteed, insured, or made by VA, with certain limitations on streamlined refinances, also known as Interest Rate Reduction Refinance Loans (IRRRLs)." All standard VA loans appear to have QM Safe Harbor status; however, IRRRLs may either have a "rebuttable presumption" status or a "safe harbor" status. Safe harbor status on IRRRLs is achieved when certain additional requirements are met.

IDS Compliance is reviewing this information and making plans for the best way to implement it into our system. The interim final rule is effective May 9, 2014, with a comment period that expires June 9, 2014. The rules states that the final-final rule should be published within 90 days of May 9, 2014, or shortly thereafter with a matching effective date. IDS Compliance anticipates complete implementation of this new rule in our system before this date.

IDS Compliance Updated Docs to Conform with Freddie Mac Bulletin 2014-6

May 5, 2014

Due to FHLMC bulletin 2014-6, which states:

Rent loss insurance for 2- to 4-unit Primary Residences

Prior to this Bulletin, the Guide required that the Borrower maintain six months’ rent loss insurance for a 2- to 4-unit Primary Residence when rental income is used in qualifying.

We are removing the requirement for rent loss insurance when the property is a 2- to 4-unit Primary Residence. Sections 22.19, General Property Insurance Requirements, and 58.3.2, Rent Loss Insurance, have been updated to reflect this change.

As a result of this change, we are adding a permitted change to the 1-4 Family Rider, Form 3170. If the Mortgaged Premises is a 2- to 4-unit Primary Residence, originators must delete Paragraph D (Rent Loss Coverage) from the 1-4 Family Rider. (emphasis added) (Read More)