Compliance Update with Amy K
by Amy Kleinschmit
Chief Compliance Officer

Taxpayer First Act – Express Permission Requirement.

The Taxpayer First Act included Section 2202 which is specifically "intended to limit redisclosures and uses of consent-based disclosures of tax return information."  Therefore, entities intending to order transcripts must provide to, and receive consent from, borrowers for the specific purposes for which their return information will be used. In connection with certain mortgage loans, this restriction on information sharing would also apply to any secondary market investor to whom the loan may eventually be sold. Both Fannie Mae (FNMA) and FreddieMac (FHLMC) have indicated that they will require said consent in connection with any loan to be sold to or securitized by them.

Here is a Notice from Fannie Mae that includes a link to a model taxpayer consent language from the Mortgage Industry Standards Maintenance Organization: Fannie Mae Notice

Report on Tax Lien Removal.

The Consumer Financial Protection Bureau (CFPB) issued its latest quarterly consumer credit trends report which can be found here. This report looks at the effect of the removal of public records. Almost half of tax liens survived the July 2017 removals, but by April 2018, none remained. Bankruptcies are now the only type of public record on credit reports.

The report looked at consumers in the CFPB’s Consumer Credit Panel who had a credit report in June 2017, before the National Consumer Assistance Plan provision took effect. Throughout, the report refers to the group of consumers that had a civil judgment or tax lien on their consumer credit report in June 2017 as the “PR group” (for “Public Records group”) and those that did not have a civil judgment or tax lien on their report as the “No PR group.”

Ultimately, the report concluded that, “the evidence suggests that the public records provision of the NCAP did not seem to have a large effect on the relationship between credit scores and consumers’ credit performance for consumers whose credit report included a lien or judgment compared with consumers whose credit report did not. Within credit score categories, the differences in delinquency rates across these groups of consumers did not change dramatically over time on all loans or new loans.”

TRID guidance for construction loans.

The CFPB published two guides, one on disclosing construction and construction-permanent loans with a separate loan estimate and closing disclosure for each phase of the transaction and one on disclosing one, combined loan estimate, and one, combined closing disclosure for both phases of a construction-permanent transaction. In addition to guidance, you will find illustrative examples for commonly asked questions about TRID and Regulation Z provisions related to completing these construction and construction-permanent loan disclosures. The new guides can be found here.

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