Regulatory Compliance
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Mortgage Q&A Round 1, and one question from Round 2

As promised, the Q&A from the CUNA/PolicyWorks Mortgage Webinar Round 1, covering ability to repay/QM, HOEPA and escrow rules is now available. Please keep in mind that the answers to these questions may change as the CFPB provides us with additional guidance and clarity (they have indicated they will publish updates to the official interpretations, aka the commentary).

A second set of Q&As will be published in a few weeks for the Mortgage Webinar Round 2 that covered the two appraisal rules, TILA servicing and RESPA servicing.

However, one question that was raised in the Round 2 webinar during the phone Q&As was: For force-placed insurance, can we charge the member retroactively for the 45 days during the notice period, or do we have to absorb the cost of insurance during the notice period? We responded, but indicated we would double-check on this. So, to clarify,  the servicer may not assess a premium charge or fee related to force-placed hazard insurance unless there is a reasonable basis to believe that the borrower has failed to comply with the insurance requirements of the loan agreement. In order to charge the premium or fee, the servicer (1) must provide up to two notices, the first being mailed at least 45 days prior to charging the premium or fee, and (2) cannot have received evidence that the borrower has had hazard insurance in place continuously. More importantly, to answer the question, the commentary to the rule indicates, “Subject to the requirements of 1024.37(c)(1)(i) through (iii) [the notice requirements and lack of evidence from the borrower], if not prohibited by State or other applicable law, a servicer may charge a borrower for force-placed insurance the servicer purchased, retroactive to the first day of any period of time in which the borrower did not have hazard insurance in place.” Thus, it appears from the commentary that as long as you follow the section 1024.37 provisions of notice and do not receive evidence from the borrower that hazard insurance was in place continuously, the charge to the borrower can be retroactive to the date that the hazard insurance was not in place.

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