A look at the Financial Reform Title XIV rules

Durrnq the past few years. Wells Fargo Horne Mortgage hasfrequently provided you with information about the FinancialRdorm Act and the expected changes. Now, we want to helpvou understand the new regulations and requirements that willbe taking effect in June 2013 and January 201.tt because ofTille XIV of the Financial Reform Act,

Om' goal is to keep consumers and our clients informed as themany changes impact the mortgage industry. And we arededicated to working with our industry colleaques to ensure thatindividuals and families who turn to us for their horne hnancinqneeds and sustainable horneownership enjoy a supportive and",'w'arding customer experience.

In January 20l3, the Consumer Financial Protection Bureau (CFPB) issuedseven regulations implementing many elements of the Dodd-Frank Wall StreetReform and Consumer Protection Act, the official name of the Financial ReformAct. These rules impact a broad range of mortgage banking activities, fromorigination to servicing to the secondary market.

We are thoroughly analyzing the rules to fully understand all the impacts toour customers and clients. We will take all necessary measures to ensure weare compliant with these rules and implement these changes on schedule.Most of the rules will become effective in .Ianuary 2014.

For more information about the final rules, go to: consumerfmance.gov.

Together we'll go far

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Ability-to-repay /QuaImed mortgage final rule

Lenders are required to document additional evidence of all consumers' ability torepay their mortgage and/or home equity loans.

A new classification - known as qualified mortgage (QM) - will be established toprovide lenders with additional legal protection in the event of a lawsuit.

Only loans that meet specific product, documentation, points/fees and underwritingrequirements will be classified as QMs.

The consistent standards provided by the Ability-to-repay rule should ensurethat these concepts are applied uniformly across the mortgage industry to helpassure sustainable homeownership. Combined with the QM definition, the ruleappears to balance consumer protection and availability of credit while broadlycovering the market.

With both sets of requirements, a consistent standard of responsible lendingacross the mortgage industry should be accomplished.

Wells Fargo Home Mortgage plans to comply with the requirements within thisfinal rule by the January 10, 2014 effective date.

High-cost mortgage andhomeownership counselingfmal rule

This rule amends Reg Z (Truth in Lending Act) and Reg X (Real Estate SettlementProcedures Act). With this rule, more mortgages - including all purchase transactionsand home equity lines of credit - will be required to meet the requirements of theHome Ownership and Equity Protection Act (HOEPA).

The definition of a high-cost mortgage will change:

The maximum annual percentage rate (APR threshold) for fust liens will equalthe average prime offer rate (APOR) + 6.5%. Currently, the APR threshold is theu.s. Treasury rate + 8%.)

The maximum annual percentage rate (APR threshold) for junior liens will equalthe APOR + 8.5%. (Currently, the APR threshold is the u.s. Treasury rate + 10%.)

The points and fees as den ned by HOEPA will change to a maximum of 5%.(Currently, the maximum is 8%.) Points and fees for low loan amounts will beslightly different. Reg X will require a new disclosure be provided to all customersthat includes information about homeownership counseling providers.

Wells Fargo Home Mortgage plans to comply with the requirements within thisfinal rule by the by the January 10, 2014 effective date.

Escrow final rule This rule implements certain Dodd-Frank escrow amendments to Reg Z for higher-priced mortgage loans (HPMLs).

Any escrow accounts required (in connection with an HPML) must remain availablefor five years.

Wells Fargo Home Mortgage plans to comply with the requirements within thisfinal rule by the effective date of June 1, 2013.

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CFPB servicing {mal rule This rule amends mortgage servicing requirements under Reg X and Reg Z.It establishes consistent standards for all lenders to ensure customers receivedear information about their mortgages and requires mortgage servicers to:

Provide periodic billing statements containing specific and accurate information,as well as timely payoff statements.

Promptly credit all payments.

Meet specific requirements for responding to written information requests orcomplaints of errors.

Meet new requirements regarding early intervention with delinquent customersand assigning a single point of contact.

Meet new requirements on providing information about loss mitigation options/procedures and the foreclosure process.

Provide notice to adjustable-rate mortgage (ARM) customers about rate andpayment adjustments to their loan.

Establish reasonable information management policies and procedures to provideaccurate/timely information to customers and the courts.

Not charge for force-placed insurance unless there is reason to believe thecustomer has failed to maintain hazard insurance.

Not prepare to foreclose on the property while evaluating a customer for a loanmodification at the same time (known as "dual tracking").

Note: Servicers of 5,000 or fewer mortgage loans will receive some exemptions fromthe requirements.

These requirements should establish consistent servicing standards throughoutthe mortgage industry and ensure that customers receive clear and transparentinformation about their mortgage account.

The final rule for servicing appears to be generally consistent with Wells FargoHome Mortgage's long-standing practices and priorities.

Wells Fargo Home Mortgage plans to comply with the requirements within thisfinal rule by the by the January 10,2014 effective date.

Appraisal delivery final rule This rule amends Reg B.

Within three business days of the application date of first-lien transactions,lenders must notify customers of their right to receive a copy of all writtenappraisals or automated valuations.

Without being requested by the customer, lenders must provide the copiesfree-of-charge and at least three days prior to closing the loan.

Wells Fargo Home Mortgage plans to comply with the requirements withinthis final rule by the January 18, 2014 effective date.

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Appraisal standards forhighel'-priced mortgageloans fmalrule

These appraisal standards will apply when a lender originates a higher-pricedmortgage loan (HPML),which is also a non-qualified mortgage.

If a creditor originates an HPML which is also a non-qualified mortgage, thefollowing conditions must be met:

Creditors must obtain a written appraisal from a certified or licensed appraiser.

The appraiser must conduct a physical property inspection of the interiorof the property.

The applicant must be provided a disclosure outlining the purpose of theappraisal, the fact that they can order their own appraisal, and that they willreceive a copy of any written appraisal ordered by the creditor.

Creditors must obtain an additional appraisal, at no cost to the borrower,from a different appraiser if the higher-priced mortgage fmances the purchaseor acquisition of a property from a seller at a higher price than the .seller paid,within 180 days of the seller's purchase or acquisition. The additional appraisalmust include an analysis of the difference in sale prices, changes in marketconditions, and any improvements made to the property between the date of theprevious sale and the current sale.

A loan is defined as a HPML if the Annual Percentage Rate (APR) of that loanexceeds the Average Prime Offer Rate (APOR) by 1.5%for hrst liens, 2.5%for firstjumbo liens, or 3.5%for subordinate liens.

Wells Fargo Home Mortgage plans to comply with the requirements within thisfmal rule by the January 18,2014 effective date.

Loan originations final rule This rule amends loan originator qualifications under Reg Z.

Several requirements are clarified regarding the existing rule against basing a loanoriginator's compensation on the transaction's terms or conditions.

Loan originators are subject to additional character, financial responsibility andcriminal background check standards.

Loan originators are subject to annual training requirements.

Note: The previously proposed requirement to offer consumers a no-upfront-discount point/no-oriqination-fee interest rate option (zero/zero option) is notbeing fi.nalizedat this time.

Wells Fargo Home Mortgage plans to comply with the requirements within thisfinal rule by the January 10, 2014 effective date.

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What can you expect from Wells Fargo?

While the morlgage process and products we provide may change,our commitment to helping people achieve their home fmancing goalswill not.

We intend to lead the mortgage industry, implementing Financial ReformAct-related changes in ways that deliver positive experiences for ourcustomers and clients.

Formore information, contact your Wells Fargo HomeMortgage consultant today.

ALLYSON RIGGSHome Mortgage ConsultantPhone: 410-893-6244Cell: 443-528-1637Toll Free: 866-289-6256Fax: 866-617-3218139 N. Main St, Suite 102Bel Air, MD 21014a.riggs@wellsfargo.comNMLSR ID 455121

Wells Fargo remains focused

on helping all our customers

succeed financially whilecomplying with the changesthat affect the home lendinqbusiness.

This information is for real estate and building professionals only and is not intended for consumer distribution.Information is accurate as of date of printing and is subject to change without notice. Wells Fargo Home Mongage is A division of Wells Fargo BankN.A. ©2013 Wells Fargo Bank. N.A. All rights reserved. NMLSR ID 399801. '1U7UUJ· 12/13 ~rv 1:1,

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