federal consumer financial laws by summarizing existing legal requirements and violations identified during examinations. Some highlights are: • 2.6.1 Compensating loan originators differently based on product type: “Regulation Z generally prohibits compensating mortgage loan originators in an amount that is based on the terms of a transaction. … As explained by the Bureau, it is not permissible to differentiate compensation based on credit product type, since products are simply a bundle of particular terms. Examiners found that certain lenders’ loan originator compensation agreements provided for higher loan originator compensation where … [Fannie Mae] conforming fixed-rate loans surpassed a designated threshold percentage of the total loans closed by the loan originator,” according to the report. While this finding doesn’t relate directly to reverse mortgages, companies that offer HECMs and private-label reverse mortgages are bound by these same requirements in Regulation Z. Members should consult with their legal counsel to ensure compliance. • 2.6.2 Insufficient documentation for changed circumstance: “Regulation Z requires a creditor to provide the consumer with good faith estimates on the Loan Estimate for certain transactions. The closing cost estimates are generally considered to be in good faith if the amount paid by or imposed on the consumer does not exceed the amount originally disclosed. A creditor is permitted to use a revised estimate of a charge instead of the estimate of the charge originally disclosed to reset tolerances when there is a valid changed circumstance permitted by Regulation Z that resulted in the increased costs. … Examiners found that certain lenders failed to retain sufficient documentation to establish the changed circumstance’s validity. Specifically, the lenders disclosed an appraisal fee on initial Loan Estimates and subsequently disclosed appraisal rush fees, in a higher amount, on revised Loan Estimates. The lenders claimed the rush appraisals, which led to the appraisal rush fees, were requested by consumers. However, in each instance, the lender failed to maintain sufficient documentation of the consumer’s request of the rush appraisals,” according to the report. To read about these issues in greater detail, download the “Supervisory Highlights” report at bit.ly/3ug5jjJ. The press is talking about ... WSJ: Reforms Make HECMs More Appealing The Wall Street Journal (WSJ) published a positive article about reverse mortgages on June 3 that highlights many of the recent reforms implemented by the U.S. Department of Housing and Urban Development to make HECMs safer and more appealing to consumers. WSJ reporter Lori Ioannou writes, “HECMs offer protections to borrowers that include limits on how much borrowers can obtain, so seniors don’t opt for large lumpsum distributions they cannot afford; protection from default if the value of the home declines to less than the loan amount; and provisions that secure a surviving spouse’s right to remain in the home after the borrower’s death.” Retirement expert Wade Pfau told Ioannou that for seniors who are concerned about outliving their savings and who want to remain in their homes until they die, a HECM “may be a product to consider. It’s a way to free up money to pay for long-term care, and other unexpected living expenses.” Read the full article at on.wsj.com/3I4BCIg. Report: Equity Remains Key to Care Costs Someone turning 65 has a nearly seven in ten chance of needing long-term care in the future, says the U.S. Department of Health and Human Services, and many people don’t have the savings to manage the cost of assisted living. But they may have a mortgage-free home—and the equity in it, giving them the potential option of a reverse mortgage to help cover care costs. That’s according to an article by NerdWallet writer Kate Ashford that was published by the Associated Press. What’s News continued on page 10 REVERSE MORTGAGE / SEPTEMBER–OCTOBER 2022 9
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