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Mortgage Lending: 12.1 Overview

Most mortgages in the United States are structured as closed-end loans with fully amortizing monthly payments, as described elsewhere in this treatise. See § 2.2, supra. But there are many other ways to structure a mortgage loan. These can be called “nontraditional” loans, for lack of a better name.

Mortgage Lending: 10.6 Other Applicable Federal Laws

In addition to the Truth in Lending Act, reverse mortgages are generally subject to other federal statutes that govern mortgage lending.132 For example, the Real Estate Settlement Procedures Act (RESPA) governs the settlement process and the servicing for most home-secured mortgage loans. Several of RESPA’s origination and servicing provisions, however, do not apply to reverse mortgages.

Mortgage Lending: 7.2.4.4 Residual Income Standards

Residual income is an essential component of an affordability analysis, especially among lower-income families.224 A high total debt-to-income ratio loan may be perfectly affordable for a higher-income family, but a loan with that same debt-to-income ratio may be unaffordable for a family who is left with insufficient residual income to cover basic life necessities.

Mortgage Lending: 7.2.4.1 Overview

The basic presumption of residential lending is that the homeowner will be able to repay the loan from current income.191 Asset-based lending, sometimes acceptable in the commercial context, has always been suspect in the residential context.192 In order to determine the homeowner’s ability to repay from income and not assets, the lender must compare the homeowner’s income to the homeowner’s anticipated expenses after the mortgage loan is made.193

Mortgage Lending: C.1 Overview of RESPA and Regulation X Statutory, Administrative, and Legislative History Archive

The Real Estate Settlement Procedures Act (RESPA) statutory and administrative materials available as part of this treatise include the Act, which is codified in the United States Code, and its implementing regulation, Regulation X, which is codified in the Code of Federal Regulations. Both the Act and Regulation X have been amended multiple times. In addition, the regulators responsible for implementing the Act have issued numerous items of guidance over the years.

Mortgage Lending: Introduction and Listing of Provisions

This section reprints selected provisions of the Real Estate Settlement Procedures Act (RESPA) relevant to loan origination. Amendments to some of these provisions were made by the Dodd-Frank Wall Street Reform and Consumer Protection Act Pub. L. No. 111-203, 124 Stat. 1376 (2010) (hereinafter the Dodd-Frank Act). With the exception of changes to 12 U.S.C. §§ 2603–2605, these RESPA amendments are found in Title X of the Dodd-Frank Act and thus became effective on July 21, 2011.

Mortgage Lending: § 2601. Congressional findings and purpose [§ 2]

(a) The Congress finds that significant reforms in the real estate settlement process are needed to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country.

Mortgage Lending: § 2605. Servicing of mortgage loans and administration of escrow accounts [§ 6]

(a) Disclosure to applicant relating to assignment, sale, or transfer of loan servicing

Each person who makes a federally related mortgage loan shall disclose to each person who applies for the loan, at the time of application for the loan whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.

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(f) Damages and costs

Mortgage Lending: § 2606. Exempted transactions [§ 7]

(a) In general

This chapter does not apply to credit transactions involving extensions of credit—

(1) primarily for business, commercial, or agricultural purposes; or

(2) to government or governmental agencies or instrumentalities.

(b) Interpretation

Mortgage Lending: § 2607. Prohibition against kickbacks and unearned fees [§ 8]

(a) Business referrals

No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.

(b) Splitting charges

Mortgage Lending: § 2608. Title companies; liability of seller [§ 9]

(a) No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company.

(b) Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance.

Mortgage Lending: § 2610. Prohibition of fees for preparation of truth-in-lending, uniform settlement, and escrow account statements [§ 12]

No fee shall be imposed or charge made upon any other person (as a part of settlement costs or otherwise) by a lender in connection with a federally related mortgage loan made by it (or a loan for the purchase of a mobile home), or by a servicer (as the term is defined under section 2605(i) of this title), for or on account of the preparation and submission by such lender or servicer of the statement or statements required (in connection with such loan) by sections 2603 and 2609(c) of this title or by the Truth in Lending Act [15 U.S.C. 1601 et seq.].

Mortgage Lending: § 2614. Jurisdiction of courts; limitations [§ 16]

Any action pursuant to the provisions of section 2605, 2607 or 2608 of this title may be brought in the United States district court or in any other court of competent jurisdiction, for the district in which the property involved is located, or where the violation is alleged to have occurred, within 3 years in the case of a violation of section 2605 of this title and 1 year in the case of a violation of section 2607 or 2608 of this title from the date of the occurrence of the violation, except that actions brought by the Bureau, the Secretary, the Attorney General of a

Mortgage Lending: § 2616. State laws unaffected; inconsistent Federal and State provisions [§ 18]

This chapter does not annul, alter, or affect, or exempt any person subject to the provisions of this chapter from complying with, the laws of any State with respect to settlement practices, except to the extent that those laws are inconsistent with any provision of this chapter, and then only to the extent of the inconsistency. The Bureau is authorized to determine whether such inconsistencies exist.

Mortgage Lending: § 2617. Authority of Bureau [§ 19]

(a) Issuance of regulations; exemptions

The Bureau is authorized to prescribe such rules and regulations, to make such interpretations, and to grant such reasonable exemptions for classes of transactions, as may be necessary to achieve the purposes of this chapter.

(b) Liability for acts done in good faith in conformity with rule, regulation, or interpretation

Mortgage Lending: C.3.1 Chart of Regulation X Amendments

The following subsection reprints selected provisions of Regulation X, 12 C.F.R. part 1024, as repromulgated by the Consumer Financial Protection Bureau (CFPB) on December 30, 2011. Prior versions of Regulation X, 24 C.F.R. part 3500, as promulgated by the Department of Housing and Urban Development (HUD), are available online as companion material to this treatise. When the CFPB repromulgated the regulation it made a number of technical and stylistic changes but did not make any significant substantive changes. See 76 Fed. Reg. 78,978 (Dec. 20, 2011).

Mortgage Lending: Listing of Provisions

Title 12—Banks and Banking

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Chapter X—Bureau of Consumer Financial Protection

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Part 1024—Real Estate Settlement Procedures Act (Regulation X)

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Subpart A—General

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Sec.

1024.2 Definitions.

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Mortgage Lending: § 1024.4 Reliance upon rule, regulation, or interpretation by the Bureau.

(a) Rule, regulation or interpretation.

(1) For purposes of sections 19(a) and (b) of RESPA (12 U.S.C. § 2617(a) and (b)), only the following constitute a rule, regulation or interpretation of the Bureau:

(i) All provisions, including appendices and supplements, of this part. Any other document referred to in this part is not incorporated in this part unless it is specifically set out in this part;

Mortgage Lending: § 1024.5 Coverage of RESPA.

(a) Applicability. RESPA and this part apply to federally related mortgage loans, except as provided in paragraphs (b) and (d) of this section.

(b) Exemptions.

(1) [Reserved.]

(2) Business purpose loans. An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by 12 C.F.R. § 1026.3(a)(1) of Regulation Z. Persons may rely on Regulation Z in determining whether the exemption applies.

Mortgage Lending: § 1024.6 Special information booklet at time of loan application.

(a) Lender to provide special information booklet. Subject to the exceptions set forth in this paragraph, the lender shall provide a copy of the special information booklet to a person from whom the lender receives, or for whom the lender prepares, a written application for a federally related mortgage loan. When two or more persons apply together for a loan, the lender is in compliance if the lender provides a copy of the booklet to one of the persons applying.