LenderNews by Rob Chrisman
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Dec. 8: State law changes; letters on lender cybersecurity concerns in NY, URLA changes, Realtor business models

December 8, 2018

NAMB time in Las Vegas. Feeling lucky? If you’re attending the NAMB National 2018 at Caesars Palace in Las Vegas, drop by the Home Point Financial booth (902) to get the inside scoop on great new product offerings coming in early 2019 – and enter for a chance to win one of three great Apple prizes – an iPod Pro, Series 4 Apple Watch or AirPods. Home Point is excited to unveil big news about its new product line that’s sure to help brokers grow their business – and extend their offerings. Look for Home Point at booth 902; maybe you’ll take home one of those great prizes just in time for the holidays!
1003 fun
Last Saturday this commentary illustrated the possible challenges for the industry with the new 1003 (URLA).
Jeff Reeves with Canopy Mortgage sent, “I first saw the new URLA at the MBA Tech Conference in 2016, and I immediately had the following thought when representatives from Fannie were explaining how much easier it would be for borrowers to complete the form. Who on earth still hands a borrower a physical loan application anyway? Thus, why all the talk about how much easier it will be for a borrower to complete the form? Hey Agencies, the 90’s called and they want their paper or PDF reader back. Even in the late 90’s when I started taking loan applications as a new loan officer, my clients never even saw the 1003 form until it was completed. I would interview them and enter the data directly into my LOS. I suspect I was then, and still am, in the majority of loan officers who took that approach.
“Today, if an LO does not interview the client and then directly enter application data herself into her LOS, then she directs them to her online application, either proprietary (like ours) or from one of the many POS providers, who do a very good job of creating an intuitive user experience to collect the URLA data. Technologists will always be better and faster than the agencies at designing a more intuitive and seamless way to collect URLA data from the borrower. Before we pat ourselves on the back for creating a more user-friendly PDF, we ought to realize that few borrowers will actually use that PDF to complete the application.
“That said, there are many great things about the new URLA form. I appreciate the rewording of the declarations, the addition of the new data points, and the removal of two borrowers from one form, doing away with the concept of the co-borrower. The form is definitely better but let’s be real about how it will benefit the borrower: few will use the actual form to complete their application.”
Doing business in New York?
A veteran broker in the mid-Atlantic area sent this note to any lender operating in New York. “If you are operating in the real estate industry within the State of New York, in any capacity, please take a moment to read this. Contrary to NY State’s use of the word “Exempt,” you are NOT EXEMPT from the NY State Cyber-Security Law 23 NYCRR 500. No one is EXEMPT from the bulk of the requirements in 500, and it goes deeper.
“If you are acting as a Broker/Originator you have obligations, and, basically, in section 500.03 (a-n) these must be in the form of written policies. Your systems need to be encrypted and logged, and you must acquire some compliance confirmation from all Third Parties: SSAE-16 or a Service Provider Addendum. 
“Who qualifies as a ‘Third-Party Provider?’ By the definition, a third-party provider ‘maintains, processes or otherwise is permitted access to non-public Information through its provision of services to the Covered Entity.’ This could encompass the following: Wholesale Lenders, Credit Companies, Software Providers, Cloud Storage, Title Agents, Closing Attorneys, Realtors. By my estimate anyone with access to the consumer’s information may be considered a Third-Party Provider. Verbally I was told that these are third-party providers: Wholesaler mortgage lenders, AMCs, credit reporting companies, title agencies, bank closing attorneys, website hosting companies, and Realtors if they have access to non-public information.
“Wholesalers or retail lenders have requirements to those you serve, despite your belief that you have met your compliance requirements this is probably not complete. I have requested an SSAE-16 or a Service Provider Addendum information from four wholesalers in the past two weeks. Only one has responded rapidly, and I had to initially sign an NDA. The others are still looking into forwarding me the documentation. With one wholesale company its AE claimed the organization is exempt because it is privately owned. 
“Personally, I would have expected the industry to have developed a boiler plate addendum to the Contracts or a simple document with language stating the lender is in 500.01 cyber security compliant. 
“My advice to other brokers and real estate professionals is when you request cyber security compliance documentation, under the new regulations, which you should be doing, keep a record of all communication. I am not a lawyer, politician, regulator nor a cyber security expert, so I recommend that you do your own homework/due diligence and do it today. ‘Ignorance of the law is not a viable defense.’
“It is my understanding, in combination with the below question, that all NY Mortgage Broker Companies must acquire and retain evidence of compliance by the above listed sectors. Similarly, all of the above must have available a NYDFS 500 Compliance form of some nature.
“In Section 500.11 there is a clause, ‘the service provider must obtain an authorization form if it intends to hire a third party to support the outsourced service, function or process.’ I was previously told to acquire a SSAE-16 from the company or Third-Party Service Provider Agreement Addendum. Are SSAE-16s required, or will a Service Provider Agreement Addendum addressing Cybersecurity Compliance be acceptable to meet the NY DFS 500 requirements from each of the industry sectors listed above? It appears that either will be acceptable, so long as the covered entity is assured the Third Party Is in Compliance.”
State law changes continue to impact lenders
The Pennsylvania Department of Banking and Securities has updated its definition of “base figure” under the Loan Interest and Protection Law. The new base figure for the 2019 year of $256,023 goes into effect on January 1, 2019.
The Rhode Island Department of Business Regulation has recently adopted provisions relating to mortgage foreclosure disclosures, which are effective immediately. The new provisions specify that prior to initiating the foreclosure process, a mortgagee must provide a Notice of Pending Foreclosure to the mortgagor of the residential real estate at issue. Also, a Notice of Mediation Conference must be provided to all mortgagors of the real estate at issue prior to initiating the foreclosure process. 
The regulations provide that a sixty-day timeline for scheduling a mediation conference will then begin once the Notice of Mediation Conference, single point of contact for the mortgagee, and payment for initiating the mediation process have been received by the medication coordinator. The provisions add that the mortgagee must designate an agent to participate in the mediation conference and respond to all requests from the mediation coordinator, mortgagor, or counselor assisting the mortgagor within a reasonable time up to 14 days. 
Finally, all written correspondence and documents related to the mediation conference process received by or submitted to the mediation coordinator must be provided to the mortgagee and maintained by the mortgagee consistent with the Department’s record-keeping requirements.
There have been things happening with remote notarization all year. Recall earlier this year the Indiana Remote Notarization Bill (SB-372). Notarize co-founders Pat Kinsel and Adam Pase have been working with Indiana state legislators to validate remote notarization in the state. Indiana is the first state to approve an online notarization bill during the 2018 legislative session; they follow Texas and Nevada who each approved legislation last year. The legislation embraces the operating model that Virginia originally enabled and that Notarize is pioneering. For additional details, check out Notarize’s blog post on that news.
Rhode Island Department of Business Regulation has recently adopted provisions regarding its Home Loan Protection Act.  These updates include procedures, clarification, and guidance to mortgagees, and are effective as of October 18, 2018. To protect consumers, the new provisions lay out record-keeping requirements for lenders, a list of prohibited acts and practices, and set of regulations that apply to high-cost home loans. Additionally, lenders must provide all applicants who refinance a previous loan that was consummated within the prior sixty months with the Flipping a Home Loan Disclosure Form 3 entitled “Rhode Island Home Loan Protection Act Disclosure-Tangible Net Benefit” prior to or upon consummation of the loan.  
The Act also lists five prohibited acts and practices for lenders. These include (1) the financing of credit insurance premiums or any other health or life insurance premiums or debt cancellation charges; (2) the making of a home loan to a borrower that refinances a previous loan that was consummated within the prior sixty months which does not have reasonable, tangible net benefit to the borrower; (3) encouraging or recommending default; (4) including a provision that permits the creditor, in its sole discretion, to accelerate the indebtedness (which does not prohibit the acceleration of the home loan in good faith due to the borrower’s failure to abide by the material terms of the Home Loan); and (5) requiring a borrower to assert any claim or defense in a forum that is less convenient, more costly, or more dilatory for the resolution of a dispute, than a judicial forum where the borrower may otherwise bring a claim or defense, or limiting in any way a claim or defense the borrower may have.
Connecticut has modified its provisions regarding security freezes on credit reports, identity theft prevention services, and regulations of credit rating agencies. Under the new provisions, a credit rating agency must place a security freeze on a consumer’s credit report as soon as practicable, but not later than five business days after receipt of a consumer’s written request to do so. The same time line applies when the consumer requests the security freeze to be removed. It is prohibited to charge a fee to a consumer for the placement of a security freeze or for the temporary or permanent removal of said freeze.
Upon discovery of a security breach, the person conducting business in the state of Connecticut shall notify each resident whose personal identification was compromised of the breach. The person conducting business in the state must also provide to the resident appropriate identity theft prevention and mitigation services at no cost to the consumer for at least twenty-four months. The previous provision only required these services to be provided for twelve months. The Banking Commissioner is also required to adopt regulations requiring credit rating agencies to provide to the Banking Commissioner points of contact to be used by the Department of Banking in assisting consumers in the event of a data breach.
Changes to real estate agent’s business models
“Rob, we won the Christmas tree light contest in our neighborhood. No matter that we live in a Hasidic Jewish area.” So began a note from a veteran real estate agent in Northern California that went on to opine, “People are definitely talking about this ‘virtual Realtor’ thing that seems to be going on. It is my opinion that X and Y buyers want things to be emotionless. Ergo, many of the ads I am seeing on TV these days. It makes the early 70’s move ‘Soylent Green’ so similar to attitudes that I am experiencing in these buyers. I think everyone should revisit that movie. (Plus, Michael York was severe eye candy.) Again, I mention how freaked out agents became when ‘For Sale By Owner’ became a possible option. My feeling is that people want emotional support during a transaction, not merely to check boxes.”
And this from a top agent. “I have been watching all of this with great interest. Our county, which is definitely on the high end of values, has been at 5% as the norm for a while, but out average sale price is very high. As the market is slowing, you are starting to see 6% occasionally as Sellers want to provide added incentive. But in general, I would agree with the belief that for a purchase this large and complex, most clients want personal attention and advice, especially since they do not do it very often. I’m watching, but not seeing a lot of action from these players here. It may be there is just too much money on the line.”
A sheriff in a small town in Texas walks out in the street and sees a blond-haired cowboy coming toward him with nothing on but his cowboy hat, his gun and his boots.
He immediately arrests him for indecent exposure.
As he is locking him up, he asks, “Why in the world are you walking around like this?”
The cowboy says, “Well it’s like this Sheriff. I was in this bar down the road and this pretty little red head asks me to go out to her motor home with her. So, I did.  
We go inside and she pulls off her top and asks me to pull off my shirt. So, I did.
Then she pulls off her skirt and asks me to pull off my pants. So, I did.
Then she pulls off her panties and asks me to pull off my shorts. So, I did.
Then she gets on the bed and looks at me kind of sexy and says, ‘Now go to town, cowboy. ‘
And here I am.”
Son of a Gun. Blonde men do exist!
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Servicing: Don’t Underestimate Liquidity.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2018 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)