Fredric J. Gooch – General Counsel/ V.P. Compliance, DocuTech Corporation
First of all, on behalf of the DocuTech team I would like to wish you a happy New Year. This New Year will bring several new challenges as the regulatory landscape continues to change at a rapid pace. The New Year ushered in two new compliance changes and we have another one coming at the end of January. As of the first of 2011 there are new requirements under the Graham Leach Bliley Act for new model privacy forms, new risk based pricing rules under the Fair Credit Reporting Act that require new forms and on January 30, 2011 there are changes to the Truth-in-Lending Act rules for new interest rate and payment summary tables on the TILA disclosures. In this article I would like to review the recent changes and let you know about the solutions DocuTech has put in place to help you comply with the new rules.
Model Privacy Notices
Risk Based Pricing Exception Notice
As of January 1, 2011 joint federal regulations from the Federal Trade Commission and the Federal Reserve Board require creditors to provide new risk based pricing notices to consumers who receive credit on materially less favorable terms than other consumers based on their credit score. The boards have published several model disclosure forms that can be used in conjunction with the new rules. The rule provides several exceptions that specify situations when a risk-based pricing notice does not need to be provided. One of these exceptions is for loans that are secured by residential real property. For these loans the requirements under the rules can be fulfilled if the creditor gives the H-3 model form to the borrower at the time the other FCRA disclosures are given, but no later than consummation of the transaction.
The Credit Score Disclosure (Cx 15313 model form H-3) will now print in all initial disclosure and closing document packages by default in ConformX. In order for the document to print correctly you need to make sure that you are sending the credit score disclosure information properly from your loan origination system. The document is programmed to handle credit scores from Experion, Transunion and Equifax. If you are using a different credit bureau you will need to contact DocuTech customer support to make sure that the software can support your chosen credit bureau. In many circumstances a new statistical graph will need to be added to support a new credit bureau. If no credit score is available the H-5 model form will print, which states that no credit score is available. A credit score matrix, Cx 5416, can also be set to print which will explain the key factors that are disclosed on the disclosure.
Truth-in-Lending Payment Tables
New rules have been promulgated under the Mortgage Disclosure Improvement Act which makes amendments to the Truth in Lending Act that are effective for transactions for which an application is received on or after January 30, 2011. The new rules require creditors to disclose examples of rates and payments including the maximum rate and payment for loans with variable interest rates. These disclosures are made by replacing the payment schedule on the TILA disclosure with a tabular payment table that contains specific examples of rates and payments that pertain to the loan. The new rule also requires creditors to disclose a statement to the borrower that they should not assume that they will be able to refinance their loan. This statement will also be added to the standard Truth in Lending disclosure.
The revised TILA disclosure is programmed to print in initial disclosure and closing packages where the application date is on or after January 30, 2011. ConformX users will still have the option to print the old payment schedule as a separate document in their loan packages. This can be used internally or to show the borrower the scheduled payments. There will be no new data required to generate the new form as it will automatically populate in your document packages when required.
Please know that DocuTech is committed to provide compliant solutions to help you navigate the increasingly complex regulatory landscape. If you have any questions or concerns regarding these, or any other compliance changes or issues please do not hesitate to contact your DocuTech account manager. We can help walk you through the changes and the process to ensure that you are staying compliant with these new regulations.