Correcting RESPA Violations

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Question:

The FDIC recently completed a compliance examination at our bank. TheCompliance Report of Examination identified significant violations ofRESPA. In the first violation the bank was cited for not detailing thenames, addresses, and telephone numbers of each lender-designatedservice, [Section 3500.7(e)(1)(iii)] and for not describing the natureof any relationship between each and the bank [Section3500.7(e)(1)(ii). In the second violation, the bank was cited forproviding mortgage servicing disclosure statements that did notdisplay the bank's servicing transfer record for the most recent threecalendar years [Section 3500.21(b)(3)(ii)]. Finally, in the thirdviolation, the bank was cited for having five mortgages that containedGood Faith Estimates and HUD-1 or HUD-1A statements that did notreflect an estimate for hazard insurance.I am new to the compliance arena and I have been assigned the task ofcorrecting these violations. Since these mortgage loans are already onthe books, should the bank issue "correct" Good Faith Estimates,Servicing Disclosure Statements, and HUD-1 or HUD-1A's that reflectestimates for hazard insurance? Or should the bank take note of theviolations and not make any corrections because this problem is akinto "closing the barn door after the horse has already left"? Anyrecommendations that you can offer to correct these violations iswelcomed!

Answer:

You cannot correct these errors for loans that have already been consumated. These disclosures must be given at specific times (at application, within 3 days of application and at closing). Since these events have already happened, you cannot fix the information provided. You can fix computation errors (APR, Finance charge, payment schedules).

To "correct" these errors, you need to provide training to all applicable loan personnel. Management should be holding these people responsible to properly comply. After training them, check their work for the same errors in the near future. Provide training, audit, train, audit, etc.

First published on BankersOnline.com 7/15/02