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“Oh what a tangled web we weave”… Walter Scott was referring to the web woven by people who intend to deceive others. The CFPB has created a “tangled web” while crafting regulations intended to prevent deception. This webinar will help you untangle the intricacies of numerous fee disclosure requirements.
The proper disclosure of fees on consumer loan transactions has always been complicated, take for example the multi-page calculation of a finance charge in §1026.4. Fee disclosure has become more complicated over the past few years with the addition and revisions of rules for:
- High-Cost Mortgages;
- Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosures (TRID);
- Ability to Repay/Qualified Mortgage Rules;
- Home Mortgage Disclosure Act/Regulation C; and
- The Military Annual Percentage Rate.
This recording explains:
- Which fees are included in or excluded from the:
- Finance charge, per §1026.4 – The finance charge is a critical component in the calculation of the APR. Regulation Z provides a list of fees that are included in the finance charge and a list of fees that may be excluded, if certain conditions are met. Violations often occur when a fee is excluded from the finance charge but all of the conditions for the exclusion have not been met.
- Annual Percentage Rate (APR), per §1026.22 – The APR is based on the finance charge. Violations frequently occur when the finance charge is not properly calculated.
- Total Points and Fees, per §1026.32 – Jack has declared this number as “the most important number in the world of compliance.” It is used to determine coverage for Section 32 rules, it is disclosed in a Section 32 disclosure and on the HMDA LAR, and it is used to determine QM status under Section 43. A single miscalculation can result in multiple violations.
- Military Annual Percentage Rate (MAPR), per the Department of Defense’s §232 – Disclosure of the MAPR has been required since October 2007, but as a result of the limited scope of the rule most lenders have not needed to disclose the number. As a result of revisions to Part 232, effective October 3, 2016, the scope of the rule is dramatically expanded and most lenders will need to disclose the number. Although the calculation of the MAPR is similar to the calculation of an APR, differences generally result in a much higher number.
- The TRID Tolerance rules contained in §1026.19;
- The proper disclosure of fees on the Loan Estimate and Closing Disclosure, per §1026.37 and .38; and
- How some of these numbers impact a HMDA disclosure.
Violations of any of the requirements listed above may result in:
- Regulatory reimbursement;
- Consumer lawsuits;
- Regulatory cures;
- Higher liability from the failure to meet QM standards; and
- Civil monetary penalties.
This recording provides the information needed to fully understand the rules and to avoid the liability inducing problems.
Upon completion of the program, participants understand that improper fee disclosure may result in violations. In some cases a violation of one section may result in one or more violations of other sections. It is a tangled web. For example:
- A violation of the finance charge rules contained in §1026.4 may also cause a violation of the disclosure requirements in §1026.18 or §1026.38 since the finance charge is included in those disclosures;
- Improper categorization of fees on the TRID disclosures contained in §1026.37 and .38 may result in a violation of the tolerance rules contained in §1026.19;
- Failure to follow the APR calculation rules contained in §1026.22 may result in:
- The incorrect APR appearing in the disclosures contained in §1026.18, §1026.32, §1026.37 or §1026.38;
- Inadvertently triggering coverage of §1026.32;
- An inaccurate calculation of the rate spread disclosed on the HMDA LAR and used to determine the applicability of the high-cost mortgage loan rules contained in 1026.32 and the higher-priced mortgage loan rules contained in §1026.35; or
- The incorrect disclosure of the HOEPA status disclosed on the HMDA LAR;
- An inaccurate determination of the higher-priced covered transaction status of a loan for purpose of determining which a transaction achieves safe harbor or presumption of compliance status for the ability to repay rules in Section 1026.43;
- Failure to properly calculate the total points and fees as prescribed by the high-cost mortgage loan rules contained in §1026.32 can:
- Inadvertently trigger §1026.32 coverage;
- Violate the disclosure rules contained in §1026.32;
- Result in an incorrect entry on the HMDA LAR; and
- Blow the Qualified Mortgage status for purposes of §1026. 43; or
- Failure to follow TRID rules contained in §1026.38 may result in the incorrect disclosure of the total of all itemized amounts that are designated borrower-paid at or before closing on HMDA LAR
This recording is designed for everyone involved in the origination and management of consumer credit (including mortgage loans), including lenders, the compliance staff and auditors.