By Michelle R. Rodriguez, Esq.
Woodland Hills Mortgage

On May 24, 2018, Donald Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act, saying that it would ease the crushing regulations on small banks and credit unions. Unfortunately, it does not offer any significant relief for private mortgage lenders, and instead creates an uneven playing field for private mortgage lenders as compared to small banks and credit unions.

The intent of this article is to give a brief summary of the provisions that either impact, in some way, private mortgage lenders, or on which there are questions regarding their applicability to private mortgage lenders.1

Regulation of PACE loans – The Bureau of Consumer Financial Protection (apparently we’ve all been calling it by the wrong name all these years) is required to make regulations to require administrators of Property Assessed Clean Energy (“PACE”) loans to follow the Truth-in-Lending Act ability-to-repay (“ATR”) requirements.2 This could even the playing field a little bit between private mortgage lenders and PACE administrators.

Restores the Protecting Tenants in Foreclosure Act of 2009 – The Protecting Tenants in Foreclosure Act expired through sun-set provisions on December 31, 2014. This law that requires that after a foreclosure sale, the new owner must allow a bona fide tenant under a bona fide lease to remain on the premises until the end of their lease term, unless the new owner is going to live in the property as their primary residence. If the owner is
going to live in the house as their primary residence, or if there was no lease, then the new owner must give the tenant a 90 day notice to vacate the premises.3

New qualified mortgage safe harbor for small banks and credit unions – Small banks and credit unions still have to follow the ATR rules, and the 3% points & fees cap for qualified mortgages, but they can be more flexible with the terms of the loan.4

HMDA (Home Mortgage Disclosure Act) – Small banks and credits unions that do fewer than 500 covered loans are exempt from HMDA, unless they get bad marks on their Community Redevelopment Act reviews. There is no relief for anyone else in the law, including private mortgage lenders.5

Nationwide Mortgage Licensing System (NMLS) reform – This provision allows mortgage loan originators (“MLOs”) moving from a state-licensed institution to a depository, or moving from state to state, to work at their new place for 120 days while their NMLS transfer is being processed. This means it will be easier for MLOs to leave a Bureau of Real Estate (“BRE”) licensee’s employment. It is less likely that MLOs working for depositories will move to private mortgage lenders, because the MLO doesn’t need the BRE license to work for the depository, but would need to get it to work for a BRE licensee.6

Closing Disclosure (“CD”) waiting period – Lenders and borrowers no longer have to wait the three days prior to signing final loan docs after re-disclosing the CD due to a decrease in interest rate.7

Database to reduce identity theft – This provision mandates the creation of a database which houses consumers’ names, social security numbers and dates of birth. Financial institutions can then use this database to verify the information they have in their file. It doesn’t mandate the financial institutions use this database (yet).8

Credit freezes – This provision allows consumers to freeze or unfreeze the release of their credit report for free for up to 2 years at a time.9

The lion’s share of the relief went to small depository institutions, with only a few tidbits for private mortgage lenders. With the climate of regulatory reform in Washington DC right now, we have reason to hope for more regulatory relief to come.

Endnotes
1 There are other parts of this law, which impact lenders other than California’s private mortgage lenders. Please see the law for the full provisions. www.congress.gov/115/bills/s2155/BILLS-115s2155enr.xml
2 Economic Growth, Regulatory Relief, and Consumer Protection Act , Pub. L. NO. 115-174, §307, 132 Stat 1296, 1347 (2018).
3 Id. at §304, 132 Stat 1296, 1339.
4 Id at §101, 132 Stat 1296, 1298.
5 Id at §104, 132 Stat 1296, 1300.
6 Id. at §106, 132 Stat 1296, 1302.
7 Id. at §109, 132 Stat 1296, 1305.
8 Id. at §215, 132 Stat 1296, 1323.
9 Id. at §301, 132 Stat 1296, 1326.