Protecting Tenants at Foreclosure

The Protecting Tenants at Foreclosure Act (PTFA) went into effect in May 2009. The PTFA provides protections to tenants in foreclosed properties.

The PTFA is found in the Helping Families Save Their Homes Act of 2009 (a document of 1632 pages). Originally set to expire (or "sunset") on December 31, 2012, Dodd-Frank extended the expiration date of the PTFA to December 31, 2014. 

Under this legislation, the immediate successor of interest (generally the purchaser) of a foreclosed property must provide all tenants with at least 90 days notice prior to eviction because of foreclosure.

Additionally, tenants must be permitted to stay in the residence until the end of the lease, with two exceptions:

• The property is sold after foreclosure to a purchaser who will occupy the property as a primary residence, or

• There is no lease or the lease is terminable at will under state law.

Even if these exceptions apply, the tenant must be given at least 90 days notice prior to eviction. The rights of Section 8 tenants are also protected under the PTFA.

In this newsletter, we should like to direct you to further information on the PTFA.

• Protecting Tenants at Foreclosure Act

• Dodd-Frank extends the PTFA

• National Housing Law Project

• Library

Protecting Tenants at Foreclosure Act

The Protecting Tenants at Foreclosure Act (PTFA) is Title VII of the Helping Families Save Their Homes Act of 2009.

We have extracted the relevant section and placed it in our Library.

Dodd-Frank extends the PTFA

The PTFA was extended and clarified by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

We have extracted the relevant section and placed it in our Library.

National Housing Law Project

The National Housing Law Project (NHLP) has materials that can help housing counseling agencies understand the PTFA's provisions and help tenants exercise their rights under the law.

NHLP's materials include sample letters that tenants can use to inform their landlords, as well as sample letters that advocates can use to inform the courts and public housing authorities. 

These materials are available on the National Low Income Housing Coalition website.

LIBRARY

Protecting Tenants at Foreclosure Act (PTFA)
Title VII of the Helping Families Save Their Homes Act of 2009

PTFA Extension and Clarification -
Dodd-Frank Wall Street Reform and Consumer Protection Act

TILA Examination Procedures - Revised!

On May 2, 2011, the Office of Thrift Supervision (OTS) issued revisions to its examination procedures. The OTS has revised its examination procedures for closed-end loans as a result of recent Federal Reserve Board (FRB) revisions to Regulation Z, which implements the Truth in Lending Act (TILA).

Specifically, the revised procedures cover:

(1) Loan Originator Compensation: The prohibition on payments to loan originators, including mortgage brokers and loan officers employed by depository institutions, based on the terms of the transaction, other than the loan amount;

(2) Mortgage Disclosure Improvement Act: Required disclosure of payment examples if the loan's interest rate or payments can change and a statement that a consumer is not guaranteed to be able to refinance the transaction in the future;

(3) Appraiser Independence: Requirements for appraiser independence for consumer credit transactions secured by a consumer's principal dwelling, whether a closed-end loan or a home equity line of credit; and

(4) Helping Families Save Their Homes Act: Requirements that consumers receive notice when their mortgage loan has been sold or transferred. Examiners will be required to evaluate whether savings associations meet specific requirements.

LOAN ORIGINATOR COMPENSATION

Revised Examination Criteria

• A loan originator, including mortgage brokers and mortgage loan officers employed by depository institutions, may not receive compensation that is based on the interest rate of the loan (i.e., a yield spread premium) or other loan terms. Loan originators can continue to receive compensation that is based on a percentage of loan amount.

• A loan originator that receives compensation directly from the consumer may not receive compensation from the lender or another party.

• A loan originator may not direct or "steer" a consumer to a mortgage loan that is not in the consumer's interest in order to increase the loan originator's compensation.
• A loan originator can obtain a "safe harbor" for compliance with the anti-steering requirement by presenting the consumer with loan options that include: 1) the loan with the lowest interest rate; 2) the loan with the lowest interest rate without any risky features (such as prepayment penalties, negative amortization or a balloon payment in the first seven years); and 3) the loan with the lowest total dollar amount for origination points or fees and discount points.

MORTGAGE DISCLOSURE IMPROVEMENT ACT

Revised Examination Criteria

The Mortgage Disclosure Improvement Act (MDIA) of 2008 amended the TILA to require that borrowers are alerted to the risk of payment increases before they take out mortgages with variable rates or payments. This amendment requires that lenders' cost disclosures include a payment summary in the form of a table, stating the following:

• The initial interest rate and the corresponding monthly payment;

• For adjustable-rate or step-rate loans, the maximum interest rate and payment that can occur during the first five years and a "worst case" example showing the maximum rate and payment possible over the life of the loan; and,
• The fact that consumers might not be able to avoid increased payments by refinancing their loans.

APPRAISER INDEPENDENCE 

Revised Examination Criteria

The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the TILA to include several provisions that protect the integrity of the appraisal process when the consumer's home secures the loan, whether a closed-end loan or a home equity line of credit. 

Specifically, the appraisal independence provisions:

• Prohibit coercion, bribery and other similar actions designed to cause appraisers to base the appraised value of properties on factors other than their independent judgment;

• Prohibit appraisers and appraisal management companies from having a financial or other interest in the property or the credit transaction;

• Prohibit a creditor from extending credit, if it knows, before consummation, of coercion or a conflict of interest;

• Require that creditors or settlement service providers that have information about appraiser misconduct file reports with the appropriate state licensing authorities; and,
• Require the payment of reasonable and customary compensation to appraisers who are not employees of the creditors or of the appraisal management company hired by the creditors.

HELPING FAMILIES SAVE THEIR HOMES ACT 

Revised Examination Criteria

The Helping Families Save Their Homes Act amended the TILA to require that consumers be notified of the sale or transfer of their mortgage loan. 

The purchaser or assignee that acquires the loan must provide the required disclosures no later than 30 days after the date on which it acquired the loan.

VISIT LIBRARY

Office of Thrift Supervision (OTS)
Consumer Affairs Laws and Regulations:
Examination Handbook - Section 1305
May 2011

HUD: Clarifies Lender Eligibility

The Helping Families Save Their Homes Act of 2009 (HFSH) and Mortgagee Letter 2009-31 stated that lenders are "subject to unresolved findings contained in a Department of Housing and Urban Development (HUD) or other governmental audit, investigation, or review."

A new Mortgagee Letter (ML 2010-38) clarifies that all principal owners and corporate officers of FHA mortgagees must confirm that their institutions and the officers, partners, directors, managers, principals, supervisors, loan processors, loan underwriters, and loan originators of their institutions who participate in FHA programs are not subject to any unresolved findings or federal lawsuits resulting from:

(1) an investigation, audit, or review by HUD, or
(2) other federal, state, or local governmental agencies, or
(3) any other regulatory/oversight entities (i.e., banking institution) with jurisdiction over the activities of their institutions and/or employees.

Entities already approved by FHA will not be permitted to renew their status at the next annual recertification date if they are not in compliance with the eligibility criteria.

What are "Unresolved Findings"?

Include, but are not limited to:

• Fair Housing Act lawsuits by the Department of Justice alleging an ongoing pattern or practice of discrimination

• HUD letters of findings or charges alleging systemic violations of the Fair Housing Act

• Open issues in any HUD OIG audit, investigation or review

• Any action by HUD's Mortgagee Review Board

• The suspension, surrender, or revocation of a license of any kind (i.e., Mortgage Broker License, CPA) by a state or local jurisdiction

• The imposition of fines, settlement agreements, or other monetary sanctions by a state or local entity

• Any other action taken by a government agency

Confirmation Associated with Criminal Activity - Timeframes

FHA lenders must confirm that none of its employees or their subsidiaries are involved in investigations or reviews that may be due to an instance of fraud, embezzlement, forgery, or any other crime related to the real estate or mortgage loan industry.

Matters remain "unresolved" until such time as an action is taken by the investigating entity, or the entity formally determines that no action is warranted.

Confirmation must provide that their officers, partners, directors, managers, principals, supervisors, loan processors, loan underwriters, and loan originators participating in FHA programs have not been convicted of, or pled guilty or nolo contendere to, a felony related to participation in the real estate or mortgage loan industry:

(i) during the 7-year period preceding the date of the application for licensing and registration; or

(ii) at any time preceding such date of application, if the felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering.

Confirmation of SAFE Act Compliance

FHA lenders must confirm that their institution and its officers, partners, directors, principals, managers, supervisors, loan processors, loan underwriters, or loan originators participating in FHA programs are not in violation of the provisions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) or any applicable provision of state law.

Principal owners and corporate officers must confirm that all employees, as required, consistently meet their respective state's licensing requirements as well as all federally-mandated licensing or registration requirements including registration with the Nationwide Mortgage Licensing System and Registry (NMLS).

Visit Library for Issuances

Mortgagee Eligibility Requirements and Clarification of FHA's Electronic
Annual Certification Requirements and Procedures,
Mortgagee Letter 2010-38, November 17, 2010

Strengthening Counterparty Risk Management,
Mortgagee Letter 2009-31, September 18, 2009

LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.