The ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ (CFPB) released updated procedures for examinations of financial institutions and mortgage lenders, which will begin taking place in January of next year.[IMAGE]
The new procedures, which will be published in the manuals for the Truth in Lending Act and the Equal Credit Opportunity Act, cover a range of topics, including compensation for loan originators, qualification standards for mortgage professionals, consumer rights, arbitration, and appraisals.
""The CFPB recognizes that the easier we make it for financial institutions and mortgage companies to follow the new regulations, the better off consumers will be,"" said Richard Cordray, director of the CFPB, with the release of the new procedures.[COLUMN_BREAK]
""By releasing details of what our examiners will be looking for well in advance of the effective date of most of the rules, we are giving the industry more time to adjust,"" he said.
New rules prohibit dual compensation for loan originators, which occurs when an originator receives payment from both a consumer and another party in the transaction.
Examiners will also look for ethical standards in loan originators, who will have to ""meet character, fitness and financial responsibility requirements; pass criminal background checks; and complete appropriate training,"" according to the CFPB.
The CFPB's new directives also disallow waivers of consumer rights. In other words, originators cannot prevent consumers from filing lawsuits regarding their mortgage loans. Mandatory arbitration is also prohibited.
Originators must also provide consumers with copies of all appraisals and valuation documents ""developed in connection with certain mortgage loan applications,"" according to the CFPB.
New rules also contain provisions for what the CFPB terms ""higher-priced mortgage loans."" The minimum time limit for escrow accounts for these loans is now five years as opposed to one year.
The CFPB also said with the announcement of the new examination procedures that these ""are the first round of updates for what will likely be multiple updates.""