In a letter to HUD Secretary Shaun Donovan dated September 29, 2009, the Federal Reserve Board has reversed its position with respect to the prepayments on FHA loans.  Prior to the date of this letter, the staff of the Division of Consumer and Community Affairs of the Federal Reserve Board (the group responsible for issuing official interpretations of Regulation Z) took the position that interest charged on an FHA loan for prepayments made other than on a regularly scheduled payment due date from the date of prepayment until the next installment due date should be treated as a prepayment penalty for disclosure purposes.  In this letter, however, the staff takes the position (consistent with HUD's interpretation) that "(l)enders that engage in this [monthly interest accrual amortization] practice would not be required to treat the interest charged from the date of prepayment until the next installment due date as a prepayment penalty for any purpose under Regulation Z."  The letter includes a statement that the letter may be relied upon as an official interpretation of Regulation Z that, under TILA, relieves creditors of liability for actions taken in good faith reliance upon the guidance set forth in the letter to the same extent as if set forth in the commentary to Regulation Z.  Because of this definitional change, it is permissible for FHA loans to also be HPML loans.  The following audit described under the heading "HPML Regulations and FHA Loans" below has been removed from the Federal Higher-Priced Mortgage Loan (HPML) Audit article here:

It comes as no surprise that DocMagic's Compliance Department has been receiving an increasing number of inquiries regarding the upcoming, significant amendments to RESPA's Regulation X, which become effective January 1, 2010.  As many of our readers are aware, the practical effect of these amendments is that the form of each of the Good Faith Estimate (GFE) and HUD-1 Statement will change dramatically.

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In King v. American General Finance, the South Carolina Supreme Court recently addressed the timeliness of the Attorney Preference Form.  In the lower court, 11 of the 12 jurors found that the Attorney Preference Disclosure was provided on the day of closing, which the Court found to be too late and stated that providing the form at closing is "nonsensical."  Accordingly, this form should be signed and dated with enough time before the loan closing to enable the borrower an opportunity to select and utilize a counsel of his or her choice.

In order to keep DocMagic software users better apprised of document changes and additions as they occur, DSI posts listings of all newly created and revised documents. Here is the list of forms created or modified in September, 2009