MULTI-STATE MORTGAGE COMMITTEE
Officially on Behalf of the Identified Joint States
INITIAL INFORMATION REQUEST
To: INSTITUTION
As indicated in the Joint Examination cover letter, the identified states are conducting a Joint Examination of INSTITUTION (INSTITUTION) with an on-site review date scheduled for June 15, 2009. This information request is intended to provide the Joint Examination States with necessary information prior to the commencement of the on-site portion of the examination. Production dates for information are listed at the beginning of each section; however, as information becomes available I would appreciate receiving it on a flow basis.
An additional information request will be made prior to the on-site portion of the examination. As Examiner-in-Charge I am assigned as your primary contact for all Joint Examination issues. In this role I will be communicating with you frequently over the next few weeks. Please feel free to address any Joint Examination concerns with me directly and where necessary I will relay the concerns to the appropriate state.
If you should have any questions regarding the attached information request or the Joint Examination review process in general, please feel free to contact me at or 717-772-XXXX. Thank you for your cooperation.
Sincerely,
Jennifer Kropa, Financial Institutions Examiner
Multi-State Examiner-in-Charge
AUTHORIZING STATE SIGNATURES
Don Debastiani John Prendergast
Director, Bureau of Non-Depository Examinations Chief Risk Officer
PA Department of Banking MA Division of Banks
Charlie Fields, Jr. Darin Domingue
Non-Depository Entities Division Deputy Chief Examiner
NC Commissioner of Banks Office LA Department of Financial Institutions
Traci McCain Rodney E. Reed
Director, Mortgage Division Finance Bureau Chief
MS Department of Banking & Consumer Finance IA Division of Banking
Kevin Glendening Thomas J. Giallanza
Deputy Bank Commissioner Assistant Superintendent
KS Office of the State Bank Commissioner AZ Department of Financial Institutions
NOTE: THE ABOVE PARTIES ARE FOR ILLUSTRATION PURPOSES ONLY
Information Request: INSTITUTION
Index
Page
Section I Loan Portfolio Request 4
Section II Information Request 6
Section III Institution Questionnaire 10
Section IV Financials and Background Information 16
Attachment 1 Required Data Fields – Mortgage Loan Delinquency Report 17
Attachment 2 Attestation of Corporate Officer 20
Section I – LOAN PORTFOLIO REQUEST
Date Due: May 14, 2009
The Joint Examination States have entered a contractual agreement with LogicEase Solutions, Inc. to provide examination data upload capability for electronic analysis of the loan portfolio. Prior to beginning the onsite portion of the examination, the Joint Examination States will conduct an offsite review of your loan portfolio through ComplianceEase examination software. Use of the ComplianceEase software is intended to make our review more efficient and lessen your regulatory burden and overall cost. Please provide the electronic transaction data as instructed below for all real estate secured loans originated or closed in the Joint Examination States for the period beginning April 1, 2007 through March 31, 2009.
Directions:
1. Launch www.RegulatorConnect.org.
2. Click on Register on the top right hand corner. Enter all of the required information to register and configure a user ID and password to access the resources available in RegulatorConnect.
3. Once you have logged into RegulatorConnect, in the Instructions page, confirm whether the loans that are being requested for review have been processed through the ComplianceAnalyzer application already.
a. If the loans have been processed through ComplianceAnalyzer, contact ComplianceEase to utilize RegulatorDirect.
b. If the loans have not been processed through ComplianceAnalyzer, there are two options.
i. Confirm whether your loan origination system is certified with RegulatorConnect using the RC Certified Systems tab. If the loan origination system is certified with RegulatorConnect, functionality is available to directly export all of the necessary loan information for ComplianceAnalyzer.
ii. If the loan origination system is not certified with RegulatorConnect, download the appropriate CSV templates available on the Instructions page. Separate templates are available for fixed rate mortgages (FRM), adjustable rate mortgages (ARM), and home equity lines of credit (HELOC). For pay option ARM, utilize the ARM template. For buydown and construction loans, utilize the FRM template.
4. Within each template, complete instructions are provided on what loan information is required.
a. Please note that all of the information mandatory for examination purposes are marked “REQUIRED”. If the information is not applicable, the field can be left blank.
5. Please note that the requested loan data must be separated by state into individual templates. For example, if there are five states conducting the joint examination, the requested loan data must be divided into five templates at the minimum.
6. Once all of the appropriate information is populated into the CSV template, utilize the Data Validation tool in RegulatorConnect. Click on Data Validation and follow the instructions on the page.
a. Please note that all data validation errors must be corrected prior to delivering the file to the regulator/examiner.
b. Please also note that RegulatorConnect has a 30 minute timeout security setting. Large CSV files in excess of 500 loans may require more than the allotted time to validate. It is suggested to split the loans into separate files if possible.
7. Save the CSV template(s) after all of the validation errors are corrected.
8. Zip the individual CSV template(s) and assign a password to the file.
9. In RegulatorConnect, click on Submit File and follow the instructions on the page to deliver the CSV template(s) directly to the EIC State.
Section II – Information Request
Date Due: May 24, 2009
Please provide the following information and documents for INSTITUTION on a flow basis as available. Unless otherwise noted, the review period for the responses should be April 1, 2007 through March 31, 2009:
Lending Administration
1. Descriptions and program parameters for each type of real estate secured loan originated (please note if certain products are no longer offered). Indicate whether INSTITUTION offered or purchased:
a. Interest Only ARMs
b. Step ARMs (e.g. 2/28s, etc.)
c. Payment Option ARMs
d. Hybrid ARMs
e. Extended term loans (e.g. 40 year amortization)
f. Transactions where borrowers have subprime characteristics (e.g. low credit score)
g. Transactions with reduced documentation or no documentation
h. Transactions with simultaneous second lien mortgages
i. Transactions with prepayment penalties
j. Transactions with balloon payments
k. Transactions with no monthly payments escrowed for taxes, insurance or other charges
l. Reverse mortgage loans
m. Other (describe each additional type of loan offered or purchased)
2. Pricing and underwriting standards for all real estate secured loans originated.
3. Volume of originations and purchased loans by product type for all real estate secured loans.
4. The number of loans that were repurchased and the percentage of repurchased loans compared to total loans.
5. Copies of all policies, procedures, and standards in place during the examination period. If significant changes have been made since the review period, please describe. Policies should include, but are not limited to:
a. Third-party coverage (e.g. mortgage broker relationships, appraisers, etc.);
b. Direct and indirect origination activities;
c. Marketing and solicitation;
d. Underwriting;
e. Loan servicing;
f. Quality control, monitoring and management review;
g. Employee compliance training;
h. Compensation and incentives;
i. Investment lending; and
j. Secondary market activities.
6. Provide a list of all originators and lenders with whom you regularly did business, along with the estimated percentage of total activity conducted with each. In other words, if you were an originator, the list should include each lender for which you originated loans. If you were a lender, the list should include each originator you accepted loan submissions from.
7. A list of any entities from which servicing or ownership rights to mortgage loans were purchased.
8. A description of compensation/incentive programs, fees and overage guidelines, including third party compensation.
9. Descriptions of insurance or ancillary products offered in connection with real estate secured loans. If debt cancellation agreements were offered, please list separately.
10. A description of the method of conducting residential property appraisals, including the criteria used for appraising properties. If an outside appraiser or other organization provides this service, provide the firm’s name and a copy of its procedures.
11. Procedures for loans subject to Section 32 of Regulation Z to the Truth in Lending Act (HOEPA or High Cost Loans).
12. Procedures for providing notice of the right of rescission and disbursement of proceeds in rescindable transactions.
13. A description of the firm’s method(s) used to calculate the annual percentage rate (APR) for the various types of real estate secured loans and lines the firm extends.
14. Copies of notification forms used in conjunction with administering ARM rate changes for all products.
15. A copy of the billing error resolution policy and procedures for home equity transactions and copies of error resolution notices and related forms.
16. Copies of loan payment histories and monthly statements for two different customers who have had late payments for at least two consecutive months. Provide at least six months of account history, including the period in which payments were late. In addition, provide a copy of the original note signed by the borrower(s).
17. For each type of real estate secured open-end account offered, provide a copy of two customer periodic billing statements (front and back) for three consecutive months and a description of the method(s) used to calculate annual percentage rate (APR) changes. In addition, provide a copy of the original note signed by the borrower(s). Please do not provide employee accounts.
18. A copy of the firm's policy and procedures to:
a. Calculate escrow amounts for settlement and the annual analysis of monthly payments and
b. Notify borrowers of transfer of servicing.
Collections, Workouts and Modifications
1. Copies of all policies, procedures, standards, and training manuals for mortgage collection and loan workouts/modifications.
2. Sample copies of any reports produced and used for monitoring servicing, distressed accounts, (e.g., work-outs, modifications) and collections.
3. A copy (one each) of examples of all form letters sent to consumers concerning mortgage collections including loan workouts/modifications.
4. Provide a mortgage loan delinquency report for all real estate secured loans sixty (60) days or more delinquent as of March 31, 2009. This information should be produced in an Excel spreadsheet using the fields and instructions provided in Attachment 1 to this request.
Regulatory Reports, Compliance Testing and Internal Audit
1. Copies of compliance risk assessments completed during the examination period.
2. Copies of all compliance-related regulatory review reports (state or federal) and compliance testing reports from April 1, 2007 to present.
3. A list of compliance related audits completed during the last five years.
Complaints and Litigation
1. A list of mortgage borrower complaints received from April 1, 2007 to present, along with the reason for the complaint and resolution of the complaint. Also, provide copies of reports used in reviewing or tracking the handling of consumer complaints processed during the review period.
2. A list (including current status/outcome) of any threatened, pending or settled litigation. Include:
a. The nature of the claim and the stage of the proceeding (including a probable trial date);
b. The amount in question
c. How management is responding or intends to respond to the claim (for example, contest the claim vigorously or seek an out of court settlement)
d. An estimate of the amount of the potential loss or the range of such loss
Marketing and Disclosures
1. All marketing materials, including but not limited to solicitations for non-conventional loan[1]. Samples should include, but are not necessarily limited to, printed materials (print ads, brochures, direct mailings, flyers, etc.), radio or television transcripts, telemarketing scripts, Internet screen shots, email solicitations, and any instructions on oral solicitations by sales staff.
2. A sample of communications used with consumers including:
a. Letters, notices, instructions, warnings, etc.
b. Monthly payment statements for each type of loan.
3. Copies of additional disclosures (those not required by federal or state law) and indicate when they were provided to the customer.
4. A description of the methodology used to select existing and potential customers for new originations, refinances and collection re-writes.
Current Business Plan
1. A copy of the current business plan. Identify any new or proposed material changes in business strategy. Include the mission statement, budget projections, and assumptions.
Attestation of Corporate Officer
1. The Attestation of Corporate Officer contained in Attachment 2 to this request must be completed by a duly authorized corporate officer.
2. The Attestation covers this entire request and any subsequent written requests made under this Joint Examination.
3. The Attestation is to be signed in ink and the original returned to the EIC no later than the start of the onsite examination.
Section III – Institution Questionnaire
Date Due: Please begin providing answers to this questionnaire as soon as possible, and continue to provide on a flow basis. Electronic production is preferable. By May 12, 2009, please provide an estimate of the date upon which each section will be produced. Contact the EIC immediately with any concerns or questions about delay in production.
The following questionnaire is intended to save time and resources for both the institution and the review team. Please answer all questions thoroughly; simple yes/no answers are not sufficient for most questions. Please provide further explanation as needed to assist in clarifying your response and aid the examiner in understanding your practices.
The following questions pertain to transactions originated or closed during the review period, unless otherwise indicated. If significant changes have been made since the review period, please note that in the response.
A. GENERAL
1. If applicable, detail your test for determining if a borrower falls into the subprime category.
2. Describe the lending institution’s various origination channels (e.g., correspondent, wholesale, retail) used to source mortgage loans and the number of approved and active members for 2007 versus current day (e.g. 2,000 approved brokers of which 1,000 are active).
B. CONSUMER CONTACT/ORIGINATION