Mortgage Lending Bulletin

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MAY 11, 2010 l Vol. 2, No. 7
ABA RESOURCES
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Resources &
ABA Posts Update to ABAWorks on RESPA Upcoming Events
The ABAWorks on RESPA has been updated to reflect certain additions from ABAWorks - RESPA
the April FAQs issued by HUD, and to incorporate various elements of Original Publication Date:
clarification. This RESPA Guide is free for members and can be downloaded at April 14, 2010
http://www.aba.com/Members+Only/ABAWorks_RESPA.htm. The implementation of these
new regulations is ongoing, so
ABA will continue to issue updates to this Guide as HUD issues new guidance ABA will update this ABAWorks
and interpretations. ABA welcomes your views and critiques on the Guide's frequently as new guidelines
become available.
contents.
To get updates on the most
For more information, contact ABA’s Rod Alba. recent version of the
ABAWorks on RESPA, click
Supreme Court Declines Review of FLSA Case here and you will receive an e-
mail as the updates become
available.
This week, the Supreme Court of the United States declined to review a
decision by the United States Court of Appeals for the Second Circuit that may The most updated version of
have a significant impact upon the classification of bank personnel under the the ABAWorks on RESPA
Fair Labor Standards Act (FLSA). The case, J.P. Morgan Chase v. Whalen, can be downloaded here.
challenged the classification of mortgage loan underwriters as “administrative”
employees, making them exempt from the FLSA’s overtime requirements. To
ABAWorks – Regulation Z
qualify for the FLSA’s “administrative” exemption, an employee must: 1) perform
The ABAWorks on Regulation
work that is “directly related to management policies or general business Z is designed to help you better
operations” and 2) they must “customarily and regularly exercise discretion and understand and make
independent judgment.” The Second Circuit found that the position of loan decisions about whether and
underwriter was essentially a “production” position because they “produce” one how to offer "higher-priced
of the bank’s product – loans – and have limited discretion in carrying out their mortgage loans" and to help
duties. The Second Circuit emphasized that “production” work need not lead to you reorganize your
the creation of a tangible item, and that a position that is engaged in the compliance framework to take
creation of an intangible product such as a loan could be non-exempt. into account the new
requirements that apply to all
mortgages. Click here.
J.P. Morgan Chase (with amicus support from the ABA) petitioned the Supreme
Court of the United States to review the decision. The petition for review was
denied by the Court on May 3. RESPA and TILA Briefing CD
now available.
In a separate but related track, the Department of Labor issued an Learn More
“Administrator’s Interpretation” regarding the “exempt” status of mortgage loan
officers. This opinion was reported in the March 24th edition of this Bulletin. The
Department of Labor now takes the position that mortgage loan officers “do not ABA Mortgage Markets
qualify as bona fide administrative employees” who are exempt from the Committee Discussion on
overtime compensation requirements of the FLSA. RESPA Compliance and
more. Listen now
For more information, contact ABA’s Rod Alba or Cris Naser.
Fannie to Tighten ARMS, Interest-Only Qualifications June is National
Homeownership Month.

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On April 30th, Fannie Mae announced that it will tighten lending standards for To help celebrate, here are
adjustable rate mortgages and interest-only loans it backs. Under the new communications tools that you
guidelines, eligibility for an interest-only mortgage backed by Fannie Mae will can use to call attention to the
require that borrowers now make at least a 30 percent down payment, carry a contributions to
homeownership made by
credit score of at least 720 and have a 24-month reserve that would cover banks and thrifts. Click here.
mortgage payments and other housing expenses in the event of financial
adversity. For adjustable rate mortgages, Fannie announced that applicants
must qualify for the loan’s initial interest rate plus two percentage points or the
maximum interest rate of the ARM. Fannie says it will no longer fund balloon
mortgages, except with certain special approvals.
Fannie states that their goal is to make sure consumers can sustain their
mortgages and remain in their homes over the long term, while still allowing
lender partners to offer a range of mortgage products for qualified borrowers.
All loans not meeting the new guidelines must be purchased as whole loans on
or before August 31, 2010, or delivered into MBS pools with issue dates on or
before August 1, 2010.
For more information, click here.
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For other inquiries, please
contact: Rod J. Alba, Vice
President, Mortgage
Finance & Senior
Regulatory Counsel, at
ralba@aba.com.
American Bankers
Association
1120 Connecticut Ave. NW
Washington DC 20036