A couple of forms you might not need anymore. Plus a note on one mortgage lender’s death penalty from a CFPB enforcement action. 

Here at SCA we’ve been fighting a war to help shrink, update, and simplify loan files. This is a war where battles are fought one page, sometimes one sentence, at a time.

Bloated loan files decrease borrower satisfaction and increase uncertainty (sometimes confusing ourselves). The good news here is that there is always PLENTY of things that can be cut out of a standard loan file package — and imagine the time savings with even removing one form. One less form to have signed. One less form to chase down (when it’s not signed). One less form that needs to be scanned. One less form that needs to be discussed with an auditor. And on and on.

So what’s on the chopping block for today?

Servicing Disclosure Statement

This is a disclosure that advises the borrower, among other things, that the lender may assign, sell, or transfer servicing after closing. Here’s a picture of a standard format for one.

If you still include this in your loan files, you can get rid of it.  Unless the loan is exempt from TRID and you’re not using the Loan Estimate/Closing Disclosure, the TRID disclosures replaced the Servicing Disclosure Statement and this has long since been unnecessary to include.

But Distinguish: The “Notice of Servicing Rights” disclosure has not been replaced and still needs to be provided to the borrower 15 days before transfer or at closing (so most lenders choose closing). Where the Servicing Disclosure Statement (should be removed) tells the borrower servicing might be transferred, this Notice of Servicing Rights tells the borrower that servicing actually has been transferred. So don’t get rid of this one!

• The Notice of Servicing Rights is required by RESPA 1024.33(b).
• The Servicing Disclosure Statement was required by 1024.33(a), but if you read it now, you’ll see it’s no longer in the rule.

Extra Rescission Notice with E-Disclosure

Every consumer always needs an extra rescission notice–meaning we give each consumer two copies of the same disclosure–right?  Actually, no. Where you provide the rescission notice electronically (in compliance with E-Sign), you only need to give one copy to each consumer. For reference read the rule at 1026.34(b)(1).

Note: Even when sent electronically, each individual consumer still must receive a separate copy. But since it’s electronic, they only need to receive one each, not two.

In Other News

• Love the thought of affordable housing opportunities that might stem from the ability to use a 3-D printer to build a (pretty nice) house in 24 hours for $10,000. Check it out  and let your imagination run wild.
• Santander receives negative rating (“Needs to Improve”) from OCC, read the story here … many problems related to its “poor oversight of its vendors” and the OCC also found its CRA investments of $905,000 over two years “stingy”, as compared to Eastern Bank’s $7,000,000. While the regulators won’t fine Santander for these CRA problems, they might wish they would, since this rating will limit Santander’s ability to build new branches, purchase other institutions, and more.
• Speaking of regulatory sanctions – did anyone else notice that the CFPB’s action against Prospect Mortgage included a “death penalty” sanction (see #97), forcing them to give up their licenses? Appreciate a friend forwarding that along – surprised it’s not getting more attention.

Thank you to Ben Giumarra, Spillane Consulting Associates, Inc., a member of our Education Committee, who with the support of other experts at SCA have put together this newsletter.