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Federal Register / Vol. 86, No. 128 / Thursday, July 8, 2021 / Notices lenders compensated loan originators by paying them more for originating construction loans than for other types of loans. Examiners determined that by compensating loan originators differently based on whether the loan was an HFA loan or construction loan, the lenders compensated loan originators based on the terms of the transaction because the compensation would have been different if the terms of the transaction had been different. As a result, each lender involved agreed to no longer compensate loan originators differently based on product type.

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2.6.2 Disclosure of Simultaneously Purchased Lender and Owner Title Insurance Where there is simultaneous purchase of lender and owner title insurance policies, Regulation Z requires creditors to disclose the lenders title insurance based on the amount of the premium, without any discount that might be available for the simultaneous purchase of an owners title insurance policy.84
Creditors are required to disclose the premium for the owners policy showing the impact of the simultaneous purchase discount.85 The intent of this rule is to provide consumers with information on the incremental additional cost associated with obtaining an owners title insurance policy, and the cost they would be required to pay for the lenders policy if they did not purchase an owners policy. Examiners found that some creditors violated Regulation Z by disclosing the lenders title insurance premium at the discounted rate and the owners title insurance at the full premium on the Loan Estimate.
Supervision requested that the creditors revise their policies and procedures to ensure correct disclosure of title insurance premiums where there is a simultaneous issuance rate for lenders and owners title policies.
2.6.3 Deceptive Waivers of Borrowers Rights in Security Deed Riders and Loan Security Agreements Regulation Z states that a contract or other agreement relating to a consumer credit transaction secured by a dwelling . . . may not be applied or interpreted to bar a consumer from bringing a claim in court pursuant to any provision of law for damages or other relief in connection with any alleged violation of Federal law. 86 In light of this provision, examiners previously 84 12 CFR 1026.37f2; 12 CFR part 1026, supp.
I, comment 37f24.
85 12 CFR 1026.37g4; 12 CFR part 1026, supp.
I, comment 37g42.
86 12 CFR 1026.36h2.

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concluded that certain waiver provisions are deceptive where reasonable consumers could construe the waivers to bar them from bringing Federal claims in court related to their mortgages. For example, examiners previously identified waiver provisions in home equity installment loan agreements that provided that consumers who signed the agreements waived all other notices or demands in connection with the delivery, acceptance, performance, default or enforcement of the agreement and concluded that those provisions violated the CFPAs prohibition on deceptive acts or practices.87 Similarly, in the mortgage servicing context, examiners previously identified broad waiver of rights clauses in forbearance, loan modification, and other loss mitigation options and concluded that they violated the CFPAs prohibition against unfair or deceptive acts or practices.88
Examiners identified a waiver provision in a rider to a security deed that is in use in one state.89 The waiver provided that borrowers who signed the agreement waived all of their rights to notice or to judicial hearing before the lender exercises its right to nonjudicially foreclose on the property.
Examiners concluded that the use of this provision by mortgage lenders violated the CFPAs prohibition on deceptive acts or practices. Regulation X, 12 CFR 1024.41, implementing the Real Estate Settlement Procedures Act RESPA, requires mortgage servicers to provide borrowers with certain notices in the loss mitigation context and borrowers may bring suit to enforce those provisions. A reasonable consumer could understand the provision to waive the consumers right to sue over a loss mitigation notice violation in the nonjudicial foreclosure context. This misrepresentation is material because it could dissuade consumers from consulting a lawyer or otherwise bringing Federal claims in court related to the transaction. Thus, examiners concluded that the waiver provision was deceptive. In response to the examination findings, the entities committed to discontinuing use of the form containing the waiver.
Examiners also found that entities required borrowers in another State to agree to a waiver, in the event of default, of any equity or right of redemption in the loan security agreement for cooperative units. Specifically, the
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waiver stated that in the event of default, lenders may sell the security at public or private sale and thereafter hold the security free from any claim or right whatsoever of the borrower, who waives all rights of redemption, stay or appraisal which the borrower has or may have under any rule or statute.
Examiners determined that the waiver language would likely mislead a consumer into believing that by signing the agreement they waived their right to bring any claim in court, including Federal claims.90 This interpretation could appear reasonable to a consumer.
The misrepresentation was material because it was likely to affect whether a consumer would choose to retain counsel or pursue claims against the entity in the future. As a result, the entities implemented an agreement resolving the issue and committed to providing clarification to all affected borrowers.
2.7 Mortgage Servicing Bureau examinations continue to review for violations of mortgage servicing requirements. Examiners determined that servicers violated Regulation X by making the first notice or filing for foreclosure when it was prohibited.91 Examiners also determined that servicers engaged in a deceptive act or practice when they represented to borrowers that they would not initiate a foreclosure action until a specified date, but nevertheless initiated foreclosures prior to that date.
Examiners also found that servicers failed to maintain policies and procedures, as required by Regulation X, reasonably designed to achieve specific objectives described in Regulation X.92
Additionally, examiners found that servicers violated Regulation X by conducting an annual escrow analysis that assumed that private mortgage insurance PMI payments would continue for the entire escrow analysis period, despite the servicers knowledge that PMI would be automatically terminated before the end of the escrow analysis period.93
2.7.1 Dual Tracking Violations Regulation X generally prohibits a servicer from making the first notice or filing required for foreclosure if the consumer submits a complete loss mitigation application unless the servicer has completed the review of the application, considered any appeals, the borrower rejects all loss mitigation
87 Supervisory
90 15

88 Supervisory
91 12

Highlights, Summer 2015, at 15.
Highlights, Summer 2017, at 22.
89 This examination work was completed after the review period for this report.

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U.S.C. 602dd5, w.
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92 12 CFR 1024.38a, b.
93 12 CFR 1024.17c7.

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