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1 | DocMagic, Inc. Copyright ©2013
DocMagic, Inc. Copyright ©2013. All rights reserved.
Compliance Edge Dodd-Frank Webinar Series
The Implementation Road Map
2 | DocMagic, Inc. Copyright ©2013
Meet the Presenters
Melanie Feliciano,
Chief Legal Officer
DocMagic, Inc.
Laurie Spira,
Chief Compliance Officer
DocMagic, Inc.
Sue Baker,
Senior Vice President
& Chief Product Officer
D+H Mortgagebot
Steve Rattray
Compliance Manager,
Real Estate Production
Compliance & Operational Risk
Wells Fargo Mortgage
Special Guests
3 | DocMagic, Inc. Copyright ©2013
Goal & Agenda
What is the goal?
Agenda
• So many rules, so little time
• Creating an action plan
• Advice from the front line
• Q&A
4 | DocMagic, Inc. Copyright ©2013
So many rules, so little time
Escrow Requirements
Loan Originator Compensation
Ability to Repay & Qualified Mortgage Standards
High-Cost Mortgage & Homeownership Counseling
Amendments
Mortgage Servicing Final Rules
Truth in Lending Act Mortgage Servicing
Disclosure and Delivery Requirements - Appraisals
Appraisals for Higher-Priced Mortgage Loans
So… how will you stay on top of it all?
5 | DocMagic, Inc. Copyright ©2013
The clock is ticking
Final rules: 3,377 pages and counting
Guides for small entities: another 154 pages
Bottom line - we are responsible
6 | DocMagic, Inc. Copyright ©2013
ConsumerFinance.Gov
www.consumerfinance.gov/regulations
7 | DocMagic, Inc. Copyright ©2013
Compliance…everyday
The effect on your business… and the consumer
is cumulative
All the rules in conjunction
Policies, procedures, and systems that take all
the rules into account
Compliance has to be automatic
8 | DocMagic, Inc. Copyright ©2013
Definitely not business-as-usual
Implementation is not temporary
Resources are tight
But… it’s still a project:
• Initiation
• Planning and Design
• Execution
• Monitoring
• Closing
9 | DocMagic, Inc. Copyright ©2013
What’s your action plan?
Initiation Phase:
• Who is going to decipher the rules?
• Identify outside resources
• Review your products and services
• Identify planning and implementation teams
• Reach out to your third party vendors
• Automate!
Planning and Design phase:
• Identify deliverables
• Lay out a plan to complete deliverables
• Assign tasks and deadlines
10 | DocMagic, Inc. Copyright ©2013
The Implementation Checklist
If – Over 50% of your first-lien
covered transactions in the prior
year were secured by properties in
rural or underserved areas
And – You have assets under $2
billion, and have originated no more
than 500 covered transactions in
the preceding calendar year
Then – You may comply with the
Ability to Repay rule by originating
Balloon-Payment Qualified
Mortgages
Sample : exemption grid
11 | DocMagic, Inc. Copyright ©2013
Dodd-Frank Applicability Analysis
12 | DocMagic, Inc. Copyright ©2013
Implementing the Dodd-Frank Rules
Regulatory Compliance Challenges
As a provider of a consumer direct online POS and an
LOS we have to:
• Implement appropriate changes for consumer direct
applications
• Understand the implications for multiple business
channels – wholesale, correspondent and retail
• Insure that we can support the regulation
interpretations across our entire customer base and
allow for configuration to meet those needs
13 | DocMagic, Inc. Copyright ©2013
Implementing the Dodd-Frank Rules
Communication and collaboration are key to a successful
implementation. Our plans include:
Creating a cross-functional internal team of legal,
mortgage, and product experts
Complimenting internal resources with appropriate
outside counsel
Involving and informing our client base
Working with vendor partners to insure data integration
meets requirements
Participating in industry discussion groups
14 | DocMagic, Inc. Copyright ©2013
Implementing the Dodd-Frank Rules
Anticipated Programming Updates
HOEPA
• Support revised coverage tests
• Delivery of Homeownership Counseling Disclosure to online
applicants at the point of sale
• Appropriate alerts to insure compliance
TILA
• Support ability to repay points and fees test
ECOA
• Track Consumer appraisal delivery in LOS
• Enhance POS consumer status module to allow for compliant
electronic appraisal delivery
15 | DocMagic, Inc. Copyright ©2013
Implementing the Dodd-Frank Rules
What should you expect from your LOS?
Regular communication about their plans to comply with
the new requirements
Coordination with the vendors they partner with
The opportunity to provide ideas and feedback
The ability to test changes well in advance of effective
dates
16 | DocMagic, Inc. Copyright ©2013
How are Dodd Frank rules being implemented?
Establishment of Financial Reform Program Office
• Responsible for organizing the project across all business lines
• Ensure consistent methodology and interpretation among the various delivery
channels
• Responsible for coordinating things such as Know Before You Owe and
proposed rule comment letters
Business line project work streams
• Retail, Home Equity, Servicing, Correspondent
• Managed through channel Project Management teams
• Individual work streams for each new rule
• Project teams include representation from business, sales, legal, risk and
compliance
Project teams focusing on
• Line by line review of rules to determine business line impacts
• Developing systematic and automated solutions to evidence compliance
17 | DocMagic, Inc. Copyright ©2013
What can you expect from us?
Request for additional loan level data
• Comprehensive fee itemization
• Affiliate information
• Greater detail on LO compensation
• DTI calculation
More communication and webinars on Wells Fargo purchase
requirements
• Expect to see communications pick up over the summer
New forms or disclosures
• Nothing in stone, still working with industry to determine best
approach
Updates to our current Loan Submission Summary
Enhanced pre-fund file review to verify compliance
18 | DocMagic, Inc. Copyright ©2013
What should you be doing to prepare?
Establish project teams or working groups
• They should include individual subject matter experts from all facets of the business
• Engage legal counsel (internal or external)
• Complete your own impact assessments
Do not wait for the secondary market to provide instruction
Engage LOS and Doc vendors
Access the quality of your Underwriting
• Determine current underwriting practices that pose additional risk with FR
• Implement effective QC efforts to ensure consistency and accuracy in the UW process
• Understand Appendix Q
• Design and implement better underwriter training
Test your current compensation, fee and affiliate fee practices to see where you stand with points
and fees
• Lenders control their own destiny with points and fees
• It is within your controls
Understand who in your organization is an LO
19 | DocMagic, Inc. Copyright ©2013
Evidence of Compliance
DTI – show your work
• In systems
• In paper and imaged files
LO compensation
• Document, at a loan level, the compensation
attributable to the loan
• Work with vendors to automate
Fees and Affiliate fees
• Transparency and itemization required
Greater transparency for secondary market
20 | DocMagic, Inc. Copyright ©2013
What are some of the greatest challenges?
Defining Loan Originators in your shop
Modifying compensation plans to comply
Documenting compensation at a loan level
Accuracy of DTI
Meeting 3% points and fees
Secondary market transparency
21 | DocMagic, Inc. Copyright ©2013
Questions &
Answers
22 | DocMagic, Inc. Copyright ©2013
Upcoming Dodd-Frank Webinar
Compliance Edge Dodd-Frank Webinar Series
Ability-to-Repay Rule: June 19, 2013