There are nine (9) major laws and regulation pertinent to mortgage lending and servicing.
Most importantly, the OCC’s regulations provide for the implementation of standards by lenders to prevent abusive, predatory, unfair and deceptive lending practices. Lenders should avoid certain unfavorable loan terms and sparingly use other terms that are unfriendly to consumers. They should also avoid consumer confusion.
Federal Reserve Board’s Proposed Statement on Subprime Lending 2007; 72 FR 10533
Regulations were proposed by a number of different agencies in order to compel the industry to educate consumers on the ramifications of loan terms (like ARMs and balloon payments), so that consumers will not be shocked by any financial terms or compromised in their ability to pay.
HUD regulations require mortgage servicers to report all FHA mortgages that go into default within 30 days of default. HUD also has a procedure in place for loss mitigation, a process in which a lender helps a borrower who’s delinquent in loan payments. In an FHA mortgage, the FHA will reimburse the lender for certain costs if the borrower meets the guidelines, such as the length of time that the borrower has owned the home and the like. Loss mitigation plans include receiving a special forbearance (where the borrower pays a lower payment or stops payments for a period of time), a partial claim (where a borrower can get an interest free loan from HUD to bring his payments up to date) and mortgage modification (where the life of the loan is lengthened so that the borrower can make smaller payments each month).
Federally Related Mortgage Loans.
Federally related mortgage loans are loans that are made by federally insured depository lenders (unless for temporary financing), HUD-related loans, and loans intended to be sold on the secondary mortgage market to Fannie Mae or Freddie Mac or to creditors who make or invest over one million dollars a year in residential secured loans.
Veterans Administration -Insured Home Loan Servicing Handbook.
The Handbook is a manual that contains servicing guidelines for loans guaranteed by the Veterans Administration. Regulates access by the borrower to the servicer, the fees that the servicer can charge and caps the amount of the charges, servicing transfers, and procedures for collection actions.
Fannie Mae/Freddie Mac and Private Label Loan Servicing.
Fannie Mae (Federal National Mortgage Association) is a federally-chartered
enterprise owned by private investors. Fannie Mae purchase mortgage-backed securities on the secondary mortgage market with the goal of providing funds so that lenders can afford to offer low cost loans. Freddie Mac (Federal Home Loan Mortgage Corporation) is a federally-chartered corporation that purchases home loans, securitizes them and sells them to investors with the goal of helping to keep the cost of a mortgage low. Fannie Mae and Freddie Mac use private companies to service the loans that they purchase.
Homeownership Counseling Act; 12 U.S.C. §1701x
The Homeownership Counseling Act requires that lenders give information about available counseling resources to qualifying homeowners who fail to pay any amount due. Homeowners who qualify are those whose loan is secured by their primary residence, those whose loan is not assisted by the Farmers Home Administration, and those who are not expected to be able to make up a deficiency in a reasonable amount of time due to an unexpected loss or reduction of employment income by the homeowner or someone who contributes to the household income. The notice must provide information about any of the lender’s counseling services (if any) and a list of HUD-approved non-profit homeownership counseling organizations or HUD’s toll free number where the department will provide a list of such organizations.
Foreclosure Prevention: Comptroller of the Currency Report 2007
The Foreclosure Prevention report details how the lending industry is reacting to the foreclosure epidemic and details why lenders should want to prevent foreclosures, how to contact borrowers, what are the regulatory risks of foreclosure prevention, and the barriers that have impeded foreclosure prevention.
Service Members Civil Relief Act (SCRA); 50 U.S.C. §§ 501-506
Purpose. SCRA provides special protections for active duty military personnel and their dependents.
Scope. The Act applies to active duty members of the Army, Navy, Marine Corps, Air Force and Coast Guard, the commissioned corps of the National Oceanic and Atmospheric Administration and the Public Health Service, members of the National Guard who have been called to active service by
the President or Defense Secretary for more than thirty consecutive days in order to respond to a national emergency, reservists ordered to report for military service, persons ordered to report under the Military Selective Service Act and United States citizens serving with the allied forces.
Protections. The Act places limitations on foreclosures of the real property owned by active duty service members, protects service members from default judgments, tolling of the statute of limitations, reduces the interest rate on pre-active duty loans to six percent, places restrictions on eviction from rental property and gives the right to terminate vehicle and residential leases.
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