Mortgage servicers committed several Regulation X violations in 2020, according to a recent report by the Consumer Financial Protection Bureau (CFPB).

“Today’s release of Supervisory Highlights reinforces the importance of the Bureau’s supervisory work, including during the COVID-19 pandemic, to find and correct systemic problems that hurt consumers,” said CFPB Acting Director Dave Uejio.

The report, which was released June 29, didn’t name any lenders/servicers or levy any penalties, although prior CFPB supervisory findings led to more than $124 million in consumer remediation and civil money penalties in 2020.

The CFPB report covered several areas under its jurisdiction — including debt collection, payday lending and more — as well as mortgage origination, servicing and fair lending. The Bureau highlighted mortgage foreclosure issues in particular.

CFPB examiners found that several mortgage servicers violated Regulation X, which requires lenders to provide borrowers with timely disclosures on the nature and costs of the real estate settlement process.

One key violation was that some servicers made the first notice or filing for foreclosure when it was still prohibited. In some instances, servicers filed for foreclosure before they had evaluated borrowers’ appeals, and in others they engaged in “a deceptive practice” when they informed borrowers that they wouldn’t initiate a foreclosure action until a specific date, only to do so before that date.

“The inaccurate representations regarding the day foreclosure action would be initiated were likely to mislead borrowers into believing that they had more time until foreclosure than they actually did,” the report stated.

CFPB examiners also found some lenders ran afoul of Regulation Z by compensating loan originators differently based on whether the loan was a Housing Finance Agency (HFA) loan or construction loan.

Additionally, several lenders reported inaccurate data, putting them in violation of the Home Mortgage Disclosure Act (HMDA) and Regulation C, which requires financial institutions to collect and report loan application data.

The American Land Title Association (ALTA) also noted that the report found some lenders are in violation of Regulation Z due to inaccurately disclosing fees for lender’s title insurance on the TILA-RESPA Integrated Disclosures.

For more information, read the report.

Related Content:

• FHFA director replaced following Supreme Court decision (7/6/2021)
• GSE guidance for revised General QM definition (6/7/2021)
• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)

On June 23, 2021, the U.S. Supreme Court issued a 7-2 decision in Collins v. Yellen, which held that the structure of the Federal Housing Finance Agency (FHFA) was unconstitutional in that Congress overstepped its authority by placing a single director in charge of the agency that could only be removed for cause. 

Under the Housing and Economic Recovery Act of 2008, Congress placed Fannie Mae and Freddie Mac into conservatorship overseen by a new federal agency, the FHFA. The agency was created with a single director, who is appointed by the president and confirmed by the Senate to serve a five-year term. Once appointed, the head of the agency could only be removed by a president for cause, which the decision states is not the same as “at will.” The Supreme Court ruled that the restriction on the president’s ability to remove the agency director violates the Constitution’s basic principle of separation of powers. 

Writing for the majority, Justice Samuel Alito states that the agency’s leadership structure “clashes with constitutional structure” by “concentrating power in a unilateral actor insulated from Presidential control.” Justice Alito also referred to the Supreme Court decision in the last term which struck down similar restrictions on the president’s ability to remove the head of the Consumer Financial Protection Bureau (CFPB), stating that “the Constitution prohibits even ‘modest restrictions’ on the President’s power to remove the head of an agency with a single top officer.”

The Supreme Court decision also ruled against a group of shareholders on a statutory claim that the FHFA exceeded its authority by agreeing to a new variable dividend formula referred to as the “net worth sweep.” The court is allowing the shareholders to go back to the lower courts to agree whether the unconstitutional restriction on removal of the director led to compensable harm.

Following the decision, the White House released a statement advising that the Biden administration would replace FHFA Director Mark Calabria, a Trump appointee, with a director “who reflects the Administration’s values.” Calabria announced his resignation, and within hours, Sandra L. Thompson was appointed as Acting Director, effective immediately. Thompson has been at the FHFA since 2013, serving as the Deputy Director of the Division of Housing Mission Goals, and overseeing housing and regulatory policy, capital policy, financial analysis, and fair lending activities. Prior to the FHFA, Thompson worked for the Federal Deposit Insurance Corporation for 23 years in various leadership roles. In a statement released by the FHFA, Thompson said, “There is a widespread lack of affordable housing and access to credit, especially in communities of color. It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing.”

DocMagic will continue to monitor agency announcements for any further developments.

Related Content:

• GSE guidance for revised General QM definition (6/7/2021)
• GSEs announce plans to limit purchases to loans meeting revised General QM rule (5/11/2021)
• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)

Some lenders pay an intermediary, such as a law firm, processing center or fulfillment company, to generate their mortgage documents and conduct print fulfillment services.

However, lenders can cut out the middleman and draw their own docs — at the exact same quality and at a fraction of the price — by using DocMagic’s document generation solution for initial disclosures and closing documents.

“I think some lenders are hesitant to take on that doc gen burden,” said Aimee Eyre, a sales executive at DocMagic. “But drawing their own docs is easier than they think, and it would save them a lot of money.”

Another reason that lenders use a fulfillment company is because many lack an in-house compliance expert and the intermediary companies offer compliance checks as part of their service — but so does DocMagic’s doc gen solution, which includes an automated compliance system designed to catch any errors and issues before documents are processed. 

In fact, “a lot of fulfillment companies that use DocMagic advertise that they’ll handle the compliance piece for the lender, but they’re actually using DocMagic’s compliance system,” said account executive Shandi Smith.

Smith and Eyre often get calls from lenders who realize their fulfillment company is using DocMagic for document generation.

“They say, ‘I saw your logo in the bottom corner of the box and wanted to talk to you directly,’” Eyre said. 

To reiterate, there are a host of advantages for lenders who draw their own docs, including:

• Money: What DocMagic’s document generation clients pay to draw a doc gen set is a fraction of what they have to pay to the intermediary companies to do it for them.
• Time: When lenders use DocMagic, it takes less than 10 seconds to generate a doc set. When lenders go through an intermediary, the process is out of their hands; they have to get in line and are at the mercy of whatever time frame the fulfillment company sets, which could be as much as two to three days. By using DocMagic’s document generation solution, lenders have the power to pull documents on their schedule, putting them firmly in control.
• Compliance: DocMagic’s document generation solution comes with built-in compliance checks, supplied by an expert team that’s constantly monitoring the regulatory landscape to ensure the document library is evergreen. As Smith noted, in many cases, lenders are already getting DocMagic’s compliance service if their fulfillment company is also using DocMagic.
• Ease: Some lenders worry that generating their own documents is a complicated process. That couldn’t be further from the truth. “As soon as you show lenders a demo, they realize that it’s not as hard as they thought it would be,” Eyre said. Smith added that after lenders are trained, they become extremely proficient at pulling their own docs.

DocMagic’s Sales Team can be reached at sales@docmagic.com.

Related Content:

• Did You Know: You can get all your eClosing needs met by one vendor? (6/16/2021)
• Ask the eClosing Team: What steps should lenders take to get set up for eClosing? (6/2/2021)
• Ask the eClosing Team: What do lenders need to get set up for eNotes? (3/4/2021)

Lenders are finding there are a host of upsides to eClosings — and their post-closing departments are reaping some of the main benefits.  

In a series of recent webinars, DocMagic clients reveal three key reasons that their post-closing departments prefer digital closings, and especially eNotes (electronic promissory notes):

1. No more time wasted hunting down missing signatures or initials.

This is actually a benefit with any eClosing, including basic eSign Hybrids that produce paper promissory notes.

“The post-closing department, previous to eClosings, had to scrub every document for accurate signatures. For some reason, borrowers just simply could not find the exact same name on every document,” said Chrissy Brown, COO at Atlantic Bay Mortgage Group, which has branches in nine states. “Did they miss a date? Do we have to go back and get something re-dated? Anytime you replace that human element with an electronic or technological advancement, you definitely increase your accuracy.”

Watch the webinar: True Stories: Hybrid, eNote and RON implementation

Beth Eller, the vice president of mortgage services at North Carolina-based Truliant Federal Credit Union, agrees. “The efficacy of it from an operational standpoint is tremendous. There is no missed signature. There is no missed initial. You can't move forward in an electronic closing without hitting every single one,” she said. “So that post-closing follow-up becomes really a non-event as far as the closing package itself goes.”

2. Speed and simplicity: It’s faster and easier to deliver eNotes where they need to go.

A common refrain among the clients was how quick and simple it is after the closing to transfer the eNote. With the click of a few buttons, the eNote is immediately registered with the MERS eRegistry and then sent via instantaneous eDelivery to the eVaults of various participants (whether the lender’s own or downstream to investors and servicers).

Once the eNote is signed, said Stephanie Zinsmeister, senior vice president of operations at AnnieMac Home Mortgage, “Boom, it's in MERS and it's ready to be sold instantaneously without having to transfer it [among] five or six different hands and risk losing that note.”

Jeff Reeves, co-founder and CTO of Canopy Mortgage, which operates in more than half the states, agrees: “It’s this simple: literally when that package is signed and you have an eNote, I go to DocMagic’s console, I hit the button to transfer Control and Location to the warehouse bank, and then they go into their system and they hit the button to send it to Fannie or to PennyMac or to whoever’s going to buy that loan from us.”

Watch the webinar: Managing a successful eClosing initiative

Truliant’s Eller noted that the immediate delivery of the eNote easily shaves six to eight days off the servicing and backend process. Loans can be sold immediately. “It is a better delivery method than paper, any way you cut it,” she said.

Additionally, there’s less of the traditional back-and-forth that happens with a paper note.

“You have one place that you go to grab that package,” Zinsmeister said. “You don't have to wait for paper to come in. You don't have to wait for a title company to email it to you. Post-close, I can just go in there and grab that closed loan package.”

This speed and ease of delivery is why Atlantic Bay’s Brown wasn’t too concerned when in August 2020, Fannie Mae and Freddie Mac suddenly instituted a new Adverse Market Refinance Fee that added 50 basis points to most mortgage refinances.

“Luckily, that [fee] got extended, but in that moment, it was amazing to have that eNote capability … we were able to deliver a lot longer into the process than some of our competitors that didn’t have that [eNote] process, because we’re able to sell instantaneously,” she said.

3. Paper notes can be lost, while eNotes are impossible to lose or destroy.

Let’s be honest: Sometimes FedEx or UPS mess up.

As the lenders noted, with just a few clicks, eNotes are instantly sent where they need to go. With paper notes, however, lenders have to rely on a shipping company such as FedEx or UPS to deliver the note to the correct custodian. But this leaves room for human error, and many, many lenders know what it’s like to have the delivery service lose a note.

In April, UPS lost one of Canopy Mortgage’s paper notes. Usually in such a scenario, the borrower is willing to re-sign the note. Not in this case.

“This person was a real estate attorney and made a huge stink about the fact that he didn’t want to sign another note because it’d be a duplicate, and somehow, we were going to shaft him because we have two notes. ‘What if we found the other one?’ and on and on,” Reeves said. The borrower forced Canopy to draw up an indemnity document with their attorneys.

Despite that, the borrower still refused to re-sign the note. “So here I have this $400,000 note that, really, I can’t do anything with, because UPS lost it,” Reeves said. “If that shouldn’t scare you into wanting to do eNotes, then I don’t know what will.”

Related Content:

• Atlantic Bay surpasses 10,000 eClosings using DocMagic's Total eClose (5/25/2021)
• DocMagic client Truliant transfers FHLBank Atlanta's first eNote (4/15/2021)
• Ask the eClosing Team: What do lenders need to get set up for eNotes? (3/4/2021)

ICE Mortgage Technology, a leading global provider of data, technology and market infrastructure, is deploying an eVault solution for secure storage of digital mortgages and notes, based upon technology acquired from DocMagic.

The eVault technology will be integrated into ICE’s mortgage closing platform, Encompass eClose, a leading-edge solution that helps to transform the way loans are electronically closed in the United States. Encompass eClose enables lenders to electronically facilitate every aspect of the eClosing workflow, from ordering documents to delivering loans to investors — and all steps in between — without ever having to leave Encompass, the industry’s most recognized loan origination system (LOS).

“ICE Mortgage Technology and DocMagic have been helping lenders implement digital mortgage processes for years,” said Dominic Iannitti, president and CEO of DocMagic. “The migration towards digital mortgages is progressing quickly, and we’re happy to have provided ICE with capabilities to enable fully-paperless lending workflows along with better supply chain connectivity.”

Both ICE and DocMagic are committed to delivering technology to increase eClosing adoption in the mortgage industry.

“By creating an end-to-end solution and further automating the mortgage closing process, we’re helping the industry transition to paperless closings and enabling more efficient processes for our customers,” said Joe Tyrrell, President, ICE Mortgage Technology. “We acquired technology from DocMagic, who has deep experience in the mortgage space, and when this technology is integrated with our other services, Encompass eClose will enable customers to eliminate time and cost in the closing process and create better experiences for borrowers.”

ICE Mortgage Technology combines technology, data and expertise to automate the entire mortgage process from consumer engagement through loan registration. Today, more than 3,000 mortgage lenders, 45,000 agents, as well as technology partners and mortgage investors can use the powerful capabilities of ICE Mortgage Technologies solutions to drive efficiencies and profitability for their businesses.

Related Content:

• AmeriSave leverages DocMagic's Total eClose, doc gen solutions to maximize productivity (6/10/2021)
• Atlantic Bay surpasses 10,000 eClosings using DocMagic's Total eClose (5/25/2021)
• DocMagic client Truliant transfers FHLBank Atlanta's first eNote (4/15/2021)

AmeriSave, one of the country’s largest mortgage lenders — best known for pioneering the first truly digital mortgage experience for borrowers — has been utilizing DocMagic’s Total eClose and document generation solutions to drive digital mortgage efficiency.

"DocMagic has been a wonderful partner to work with throughout the pandemic and refi boom, proving to be a key technology partner that has helped rapidly scale AmeriSave," said Magesh Sarma, AmeriSave’s CIO. "We look forward to continuing our partnership with DocMagic to establish even more efficiencies for our customers and internal teams."

AmeriSave, which offers simple self-service options so that borrowers can directly engage in the loan process, has grown exponentially over the past several years, in part by leveraging DocMagic’s technology to establish system-wide interoperability, newfound business process efficiencies, compliance adherence, and more. DocMagic’s document preparation solution, eSigning and eClosing technology, which integrate tightly with AmeriSave’s proprietary loan origination system (LOS), has helped AmeriSave operate smoothly throughout a volume-intensive environment.

Many of DocMagic’s functions automatically occur at the appropriate time within the workflow of AmeriSave’s LOS — without any human intervention whatsoever. This maximizes employee productivity throughout the lending process, including with many of AmeriSave’s vendor partners.

“AmeriSave understands the importance of always ensuring that borrowers have as many options and tools as possible available at their fingertips to walk away with a good experience that ultimately creates repeat business,” said Dominic Iannitti, DocMagic’s president and CEO. “Everything we do at DocMagic places ease of use, simplification and elegant design as a top innovation priority, which is reflected by AmeriSave’s ongoing achievements. We are elated that AmeriSave is having such immense success with our technology.”

Moving forward, AmeriSave plans to implement DocMagic’s remote online notarization (RON) capability, eNotes and eVault technology to establish further lending efficiencies.

Related Content:

• Ask the eClosing Team: What steps should lenders take to get set up for eClosing? (6/2/2021)
• Atlantic Bay surpasses 10,000 eClosings using DocMagic's Total eClose (5/25/2021)
• DocMagic client Truliant transfers FHLBank Atlanta's first eNote (4/15/2021)

Fannie Mae and Freddie Mac (FNMA or FHLMC, respectively, or the “GSEs” collectively) recently provided additional guidance on their changes in response to the revised General QM definition, as well as their Preferred Stock Purchase Agreement (“PSPA”) with the Federal Housing Finance Agency (“FHFA”).  

As we discussed in our prior article last month, “GSEs announce plans to limit purchases to loans meeting revised General QM rule,” the GSEs have entered into a Preferred Stock Purchase Agreement with the FHFA which requires the GSEs to only accept for purchase those loans meeting the new, revised General QM definition as of its original mandatory compliance date on July 1, 2021.  The CFPB has since officially postponed the mandatory compliance date of the new rule to October 1, 2022, as discussed here.  

The new guidance released by the GSEs last week reiterates their previously announced position, that due to the terms of the PSPA with the FHFA, only loans meeting the new definition of General QM will be accepted for purchase, as of loans with an application date of July 1, 2021 or after, or with a settlement date after Aug. 31, 2021, no matter the loan’s application date. Effectively, this means there will be no “GSE Patch” or Temporary Agency carve out to the General QM rule as of these dates, and all loans with an application date of July 1 or later will be expected to comply with the new General QM definition. 

Note, the GSE Patch to the prior General QM definition allowed loans eligible for sale to the GSEs to meet the General QM definition up until the sunset date (prior date was Jan. 10, 2021, then modified to match the new mandatory compliance date of the new General QM rule), or when the GSEs left conservatorship, whichever was later. However, since as of applications dated July 1, the GSEs will only purchase loans meeting the new General QM definition, then effectively, those loans are the only ones eligible for sale to the GSEs thus the only loans meeting the GSE patch rules as well. As a result, effectively, because of the GSEs' actions, there will no longer be any GSE patch as of July 1 (or Sept. 1 for loans with application dated before July 1 but not yet sold to the GSEs). 

One exception to the new GSE requirements is for construction-to-permanent loans which may be delivered under the prior QM definition until Feb. 28, 2022 (for loans with an application date prior to July 1, 2021).

As a result, DocMagic is proceeding with our original plans for phasing out the QM rules that allow for the GSE Patch/Temporary Agency QM. Thus, for loans with an application date of July 1 or later, DocMagic audits will run only the revised General QM definition, without a DTI component. As of Sept. 1, DocMagic Online will no longer allow selection of Temporary Agency rules for loans with an application date of July 1, and any transaction submitting a QM Type: TemporaryAgency, will automatically have the new General QM rules applied instead. Users will still be able to run the Temporary Agency rules on loans with an application date prior to July 1. 

Fannie Mae Lender Letter 2021-11

Freddie Mac Bulletin 2021-19

Related Content:

• GSEs announce plans to limit purchases to loans meeting revised General QM rule (5/11/2021)
• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)
• CFPB issues statement on financial institutions serving LEP customers (2/3/2021)

Some lenders think the only path to an eClosing is by employing a wide variety of vendors; for example, one vendor for document generation, another for compliance, another for electronic signatures, and so on.

But that’s a misconception. Not only is it possible to have a single-source vendor for all eClosing needs — it’s optimal.

“The lenders I speak to are really interested in using a doc provider that's foundational, that can provide everything,” said Darlyn Buthsombat, an account executive at DocMagic. “They want to use a doc provider that can also do eSign, that can also run all of the necessary compliance checks and have everything that’s needed for an eClose solution.”

An end-to-end technology vendor like DocMagic can provide what lenders need for every step of the eClosing process — something not even all DocMagic customers may realize. Lenders who are using DocMagic for document generation and eSignature are also in position to use the Total eClose platform to conduct any hybrid closing they want, or even a fully paperless eClosing, complete with eNotes, eVault and eNotarization options. 

“Sometimes I will run into a customer that was using another e-signature vendor because they didn’t know that we have eSign available for the disclosures,” Buthsombat said. “And then once they see our solution, they switch because it just makes more sense.”

Lenders who use multiple vendors can run into a variety of issues, including:

• Inefficiencies and errors: Having multiple vendors adds more steps to the process, which also becomes noticeably slower as every step requires a wait for each disparate system to complete its job. Additionally, if a problem should crop up, it may take longer to resolve because of the uncertainty over which vendor may have caused it, forcing lenders to deal with multiple customer service teams. While DocMagic has an open application programming interface (API) to easily integrate with alternate technology solutions, other tech vendors may not have an open API, potentially disrupting the process flow between multiple vendors and resulting in duplicated efforts for the lender. By using a single vendor, lenders get a seamless experience, with the entire doc gen or eClosing process taking place in one environment.
• Compliance: While most vendors run their own compliance, it might only apply to their specific specialty, which could complicate the process. “When the system is using different vendors and they run compliance, it doesn’t know which interpretation to believe,” Buthsombat said. “For example, one vendor may run the compliance audit but not the high-cost test, so that vendor might have a question on their audits or different information relating to the high-cost test. It can create some inconsistency there.”
• Vendor management: It is simply more of a hassle managing multiple vendors versus having one. Multiple vendors lead to multiple logins and passwords, multiple accounts and billing cycles to manage, and multiple onboarding processes and training sessions. There’s also continued education and communication for updates, which can seem repetitive when received from several different providers. Lenders also have to do their due diligence and ensure that every individual vendor is adhering to all compliance and security standards.

Lenders could avoid all these issues by using an effective single-source provider with years of experience and a record of success.

A few weeks ago, DocMagic signed a new client who had been using five separate vendors: one each for document generation, compliance, eNotarization, eVault and ad hoc signing.

However, the client will now get all those services provided by DocMagic.

“They switched to DocMagic because they were looking for a single-source provider,” Buthsombat said. “They wanted to eliminate the additional steps and inefficiency caused by using multiple vendors. Now their eClosing process is more seamless and efficient.”

DocMagic’s Sales Team can be reached at sales@docmagic.com.

Related Content:

• Ask the eClosing Team: What steps should lenders take to get set up for eClosing? (6/2/2021)
• Ask the eClosing Team: What do lenders need to get set up for eNotes? (3/4/2021)
• Magazine survey shows overwhelming demand for eClosings (2/24/2021)