IMA Prime Times: May 2020 Iowa Mortgage Association

MAY 2020

PRESIDENT'S MESSAGE
Quarantine Fatigue
Ever since I have been asked to write this monthly excerpt as the Iowa Mortgage Association president, I have always tried to keep my stories away from the ins and outs of the industry and to a lighter side of things. I guess I have tried to give it a more personal touch than just some stats and figures. For some reason this month has just been really tough to write. I am working remotely from home, and I miss the other employees in my office. I miss the stop-ins from the regular customers that duck their heads in for a second or longer. I miss talking about the Hawkeyes with my fellow fans. I miss just running to the grocery store for that one item. I miss sitting in our break room, eating my lunch and catching a half hour or so of the court show that is on.

I guess what I am trying to say is that we all probably have things that we are missing right now, and we all know that things will get back to normal … eventually. The state seems to be starting to open up again. I have heard that our branches are going to reopen the lobbies. It will take some time, but things will get back to normal.

We at the IMA have been trying to provide you some normalcy with Zoom meetings to keep in touch. Tim Lamb, Chuck Simmons and the experts they have brought on the call have offered some great tips and insights. We are continuing to hold these so please sign up for them when they are announced. If anyone has any specific people that they would like to hear from or topics they would like to discuss, please reach out to one of us on the IMA board or Darcy Burnett directly.

We have also started to plan for the fall IMA Conference in Des Moines. I sit on a few other boards that have had to make some decisions on what to do with their future events and if you don’t plan for normalcy to happen in the future, normalcy will never happen. Keep in mind that all leaders at all levels are trying to manage what is best for all sides of any issue. For every person that thinks a decision is wrong stands another person that thinks the decision is right.

I hope you all are doing well and I hope to see you all sometime soon. Wash your hands, cover your face when needed and don’t forget the hand sanitizer.

Thanks!

Scott Brekke
Great Southern Bank


ASSOCIATION UPDATES
Nominations Open for IMA’s Mortgage Professional of the Year Award
The Iowa Mortgage Association is pleased to announce the formation of the Mortgage Professional of the Year Award. The award will be given at the 2020 Fall Convention on Oct. 13, to recognize a distinguished mortgage professional in the industry. The nomination deadline is Aug. 7, 2020.

Nominees symbolize excellence in the following categories:

  • Represents themselves, their company and the industry with the highest standards of ethics and excellence.
  • Demonstrates a continued commitment to community involvement.
  • Has made a significant contribution to the mortgage industry.
  • Is a member in good standing of the IMA.

Nominate a candidate.

INDUSTRY NEWS
Agencies Defer Appraisal Timing Requirement
Due to the impact of COVID-19 on businesses and individuals, on April 14, 2020, the federal banking agencies issued an interim final rule to temporarily defer the timing of real estate-related appraisals and evaluations. Title XI requires institutions to obtain an appraisal for all federally related real estate transactions. This interim final rule does not remove the appraisal/evaluation requirements but merely defers the timing requirement for certain real estate-related transactions.

The interim final rule:

  • Applies to both residential and commercial real estate financial transactions.
  • Does NOT apply to loans for the purpose of purchasing, developing or constructing real estate.
  • Defers the requirement to obtain an appraisal or evaluation for up to 120 days following the closing of covered residential and commercial real estate transactions.
  • Conveys the agencies expectation that institutions make best efforts to obtain credible valuation of real property collateral before closing when possible.
  • Includes expectations that institutions develop procedures for estimating the collateral’s value for purpose of extending or refinancing credit as well as processes for obtaining an appraisal or evaluation that is consistent with safe and sound banking practices by the end of the 120-day deferral period.
  • Reiterates agency expectations that institutions otherwise underwrite loans consistent with safety and soundness/ real estate lending standards that focus on the borrower’s ability to repay a loan and other relevant laws and regulations.

The interim final rule was effective upon publication in the April 17, 2020 Federal Register. The deferral period expires Dec. 31, 2020 (includes a transaction closed on or before Dec. 31, 2020, unless the rule is extended). Read the interim final rule. Note: individual investors may not permitted appraisals to be deferred until after consummation. As a result, lenders should follow investor requirements for non-portfolio loans.

CFPB Interpretive Rule Addresses COVID-19 Hardships
On April 29, the Consumer Financial Protection Bureau issued an interpretive rule providing guidance to mortgage lenders and consumers regarding temporary business disruptions and challenges stemming from the COVID-19 pandemic. The interpretive rule was effective upon publication in the Federal Register and contains two principal provisions.

First, the CFPB makes an official determination that a consumer’s need to obtain funds due to financial hardships caused by the COVID-19 pandemic can create a “bona fide personal financial emergency,” enabling consumers the ability to waive or modify the waiting periods which require the creditor to deliver the Loan Estimate at least seven business days prior to consummation to the consumer, the requirement to deliver the Closing Disclosure to the consumer three business days prior to consummation (the TRID waiting periods) or the three business day period in which a consumer has the right to rescind a mortgage transaction. In order to modify or waive any of these waiting periods:

  • The consumer must determines that the extension of credit is needed to meet a bona fide personal financial emergency.
  • The consumer must present the creditor with a brief statement describing the emergency, and identify the financial need that is due to the COVID-19 pandemic.
  • The written statement must indicate the emergency necessitates consummating the credit transaction before the end of the applicable waiting period.
  • And the statement must be signed by all obligors and persons entitled to the right to rescind.

Second the CFPB clarified that, as with wars or natural disasters, COVID-19 is an example of an extraordinary event beyond the control of any interested party; a “changed circumstance.” Therefore in determining compliance with TRID's tolerance rules, creditors may use revised estimates of settlement charges if the COVID-19 pandemic has affected the estimate of such settlement charges. The creditor must follow the TRID rules for providing a revised disclosure within the required timeframes.

FEMA Extends NFIP Premium Renewal Grace Periods
The Federal Emergency Management Agency announced that the grace period to renew National Flood Insurance Program policies that expire between Feb. 13, 2020, and June 15, 2020, has been extended from 30 days to 120 days due to COVID-19. A borrower will be covered by the NFIP policy if the flood insurance premium is paid before the 120-day grace period expires.

The Federal Reserve System added a question to its COVID-19 Supervisory and Regulatory FAQ webpage, providing guidance related to the NFIP renewal grace period extension. The FAQ indicated:

  • A lender may provide the required notice to the borrower after determining the policy has expired with an indication that the NFIP grace period has been extended for 120 days. 
  • Alternatively, a lender may provide the required notice to the borrower at least 45 days before the end of the 120-day grace period.
  • For either alternative, the lender must force place flood insurance on the borrower's behalf if the borrower does not pay the premium by the end of the 120-day grace period.
  • Lenders should be aware that if they force place flood insurance for NFIP policies that expire during the FEMA emergency period prior to the expiration of the 120-day grace period and the borrower pays the premium by the end of the 120-day grace period, consistent with the flood insurance regulatory requirements, the lender would be required to refund the borrower for any overlapping flood insurance coverage.

The Federal Deposit Insurance Corp. also added a question (FAQ No. 29) to its COVID-19 FAQ on the topic of force-placed flood insurance and FEMA’s extension. The FDIC stated, “lenders should factor this extended grace period (or as further extended by FEMA) in working with borrowers or with respect to force placement of flood insurance.” The Fed and FDIC guidance are consistent with verbal guidance provided by the OCC to the Mortgage Bankers Association in April. 

CFPB Clarification on ECOA Valuation Rule
The Consumer Financial Protection Bureau released two factsheets on the ECOA valuations rule in response to frequently asked questions it has received. The factsheets in no way change the existing rule, but rather provide information on transaction coverage under the rule, and delivery method and timing requirements for appraisals and other written valuations. The transactions coverage factsheet and the delivery of appraisals factsheet are both considered “Compliance Aids”, meaning the documents are not “rules” under the Administrative Procedures Act. The CFPB also published an FAQ related to the ECOA valuations rule in light of the COVID-19 emergency, indicating an applicant could waive his/her right to receive a copy of the valuation three business days prior to consummation it the appraisal is delayed due to COVID-19 related matters, and instead agree to receive their copy at or before consummation or account opening rather than three business days prior to consummation.

USDA RD Updates Single Family Housing Guaranteed Loan Program Income Limits 
The Fiscal Year 2020 income limits for the U.S. Department of Agriculture Rural Development Single Family Housing Guaranteed Loan Program were published on May 4 through a Special Procedure Notice. The Guaranteed Underwriting System and the income eligibility calculator on the eligibility website have been updated with the new income limits. Questions regarding this announcement may be directed to the National Office Division at sfhgld.program@usda.gov or 202-720-1452.


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