The Consumer Financial Protection Bureau released its second round of alternative prototypes of a settlement disclosure form to be used during closing to replace the current HUD-1 and Truth in Lending disclosure. 

Right now, anyone who applies for a mortgage gets two disclosures that contain basic information about the mortgage: the Truth in Lending form and the Good Faith Estimate.

Last month, the CFPB tested two prototypes for a disclosure of final loan terms and closing costs. They were both similar. This time around, the CFPB created a different format for this information which are much longer. The current disclosures can be viewed online and are two different formats in five page drafts called Mimosa and Sassafras are available on the CFPB website.

The CFPB has indicated it will release the first draft of a revised HUD-1 before Thanksgiving.   The last revision to the HUD form, which was effective on January 1, 2010, completely changed the form from a 2 page form to a 3 page form and  is very unpopular in the industry.

The rule states that the Notice must be 11-by-17 inches in size, and it must be posted in all places where other employment-related notices are posted.  The Notice must be posted in English as well as a foreign language if the foreign language is spoken by 20% or more of the employer’s workforce (the NLRB will provide translations of the Notice in other languages).  Employers that typically post personnel rules and policies on an internet or intranet site should also post the Notice there, in addition to a physical posting. Employers are not required to distribute the posting by email, Twitter or other electronic means.  A copy of the Notice is available for download on the NLRB website at www.nlrb.gov. 

There is a chance that the rule will not go into effect on November 14, 2011 due to an increasing backlash against it.  Representative Scott DesJarlais of Tennessee recently introduced House Bill 2854 seeking to repeal the rule.  Additionally, the National Association of Manufacturers has filed a lawsuit against the NLRB in the federal district court in Washington, DC in an attempt to block the rule.   Due to these recent developments, we recommend that employers be prepared to post the Notice but refrain from posting it until the November 14, 2011 deadline in the event that the rule is successfully challenged.  

The Atlanta Journal Constitution reports that loan servicers have slowed foreclosures because home prices are weak and inventory is high and because servicers are working harder with borrowers to keep people out of foreclosure by restructuring loans.

But has the market bottomed out or is this just additional volatility in a difficult time?

The truth is no one knows but we can only hope that this is the beginning of a trend.

The Congressional Budget Office estimates that the yearly payments to Fannie and Freddie should go down, and the current estimate is that $5 billion will be sent to both mortgage giants by the end of 2011..

The outlook for the long-term mortgage market remains tentative. Fannie, Freddie and the Federal Housing Administration guaranteed or financed 95% of new mortgages in 2011.

The two prototypes combine the federal Truth in Lending Act mortgage disclosure form with the Real Estate Settlement Procedures Act to remove redundant information and hopefully allow consumers to make decisions based on clear and concise language. It would seem that the Ficus Bank is a bit simpler and easier to read but a second form call the Pecan Bank form is also available for review.

Of course there was just a major change in RESPA 18 months ago when the RESPA settlement statement form was substantially revised. 

New tax rules have made big gifts to family members popular this year, as Congress raised the limit on how much a person can give in a lifetime to $5 million without having to pay gift tax. Still, any time a gift to one person exceeds $13,000, the giver is supposed to let the agency know in a filing. 

The IRS is apparently underway with a coordinated effort to find people who haven't filed Form 709 to report U.S. gift and generation-skipping transfer taxes to the IRS. 

So far the following states that have handed over information on gift-like transactions:  Connecticut, Florida, Hawaii, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, Washington and Wisconsin. 

Please be aware that there is no special exception to the rules when making a transfer to a family member and if you are making a gift of property valued at more than $13,000, a gift-tax return must be filed.

The Dodd-Frank financial overhaul passed last year aims to prevent these practices from coming back, mandating that lenders ensure that all borrowers have the ability to pay back their home loans.

The Federal Reserve on Tuesday proposed a set of minimum standards for home lending, creating an “ability-to-repay” requirement for most home loans, as part of an effort to make sure that U.S. lenders don’t return to the shady practices of the housing market boom. Click on the highlights for more information.

Under the Dodd-Frank Act Lenders would be able to meet the standard by verifying the consumer’s income or assets or making a “qualified mortgage” that requires the lender to calculate the maximum interest payment in the first five years.  Loans that meet that standard would have protections against lawsuits and would have restrictions on fees and would not allow the principal balance to grow.

The Fed is seeking comments on the proposal by July 22^nd.