Deposits and Regulation E
Examiners found financial institutions violated the stop payment requirements of Regulation E by failing to honor stop payment requests for preauthorized transfers tied to debit cards . The institutions ’ systems did not enable stopping a payment tied to a debit card .
Mortgage Origination Compensation
Regulation Z generally prohibits compensating mortgage loan originators in an amount based on the terms of a transaction . It is not permissible to differentiate compensation based on credit product type , since products are simply a bundle of particular terms . According to the CFPB , permitting different compensation based on different product types would create “ precisely the type of risk of steering ” that the statutory provisions implemented through the 2013 Loan Originator Final Rule sought to avoid . Examiners found the following Regulation Z violation for mortgage originations :
• Certain lenders ’ loan originator compensation agreements provided for higher loan originator compensation where Federal National Mortgage Association ( Fannie Mae ) conforming fixed rate loans surpassed a designated threshold percentage of the total loans closed by the loan originator . This compensation was higher than the compensation paid when such loans did not surpass the designated threshold percentage . Paying higher commissions under these circumstances constitutes paying compensation based on credit product type , which , in turn , violates the Loan Originator Rule as compensation based on the term of a transaction , since products are simply a bundle of particular terms .
Mortgage Origination Changed Circumstance
Regulation Z requires a creditor to provide consumers with good faith estimates on the loan estimate for certain transactions . The closing cost estimates are generally considered to be in good faith if the amount paid by or imposed on the consumer does not exceed the amount originally disclosed . A creditor is permitted to use a revised estimate of a charge instead of the estimate of the charge originally disclosed to reset tolerances when there is a valid changed circumstance permitted by Regulation Z that resulted in the increased costs . One such valid changed circumstance is where the consumer requests revisions to the credit terms . For a creditor to successfully reset tolerances as permitted by Regulation Z , it must , among other things , maintain documentation explaining the reason for revision . Examiners found the following Regulation Z violation :
• Lenders failed to retain sufficient documentation to establish the changed circumstance ’ s validity . Specifically , the lenders disclosed an appraisal fee on initial loan estimates and subsequently disclosed appraisal rush fees , in a higher amount , on revised loan estimates . The lenders claimed the rush appraisals , which led to the appraisal rush fees , were requested by consumers . However , in each instance , the lender failed to maintain sufficient documentation evidencing the consumer ’ s request of the rush appraisals ; in fact , the documentation maintained reflected that either the appraisal management company notified the lenders that a rush appraisal would be needed , or the lenders ’ loan officers requested the rush appraisal . In certain instances , the lenders ’ documentation included only a checked box indicating the consumer requested the rush appraisal , but there was no other evidence retained reflecting this occurred .
Mortgage Origination and Disclosures Reflecting the Terms of the Legal Obligation
Regulation Z requires closed-end disclosures , including the mortgage closing disclosure , must reflect the terms of the legal obligation between the parties . Examiners found the following violation of Regulation Z :
• Items on closing disclosures did not reflect the legal obligation between the parties . Specifically , examiners identified instances where lenders ’ closing disclosures failed to reflect the fully-indexed-rate as required by the promissory note because the lenders ’ software miscalculated the disclosed rates . The software used a rounding method different from the method used in the corresponding promissory notes . The software automatically rounded up to the nearest one-eighth percent , despite the promissory note ’ s instruction to round to the nearest one-eighth percent – up or down . This practice resulted in closing disclosures that do not reflect the terms of the legal obligation between the parties , and likely affected files and loans transferred to other loan servicers . •••
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