Federal Mortgage Compliance Checklist

Validate a mortgage workflow or operation against the major federal consumer mortgage regulations. For each regulation, the checklist identifies specific operational requirements, documentation standards, and common failure points.

Section 1: RESPA (Real Estate Settlement Procedures Act)

Regulation: 12 CFR Part 1024 (Regulation X) — administered by CFPB

Applicability: Federally related mortgage loans — virtually all 1-4 family residential mortgage loans made by federally insured lenders or loans intended for sale to Fannie/Freddie

Section 8 — Kickback/Fee-Splitting Prohibition

No referral fees paid to any person for referring settlement service business
No fee splitting where no services are actually performed (e.g., "desk fees," "access fees")
AfBA (Affiliated Business Arrangement) disclosure provided when referring borrowers to an affiliated settlement service provider (title company under common ownership, etc.)
AfBA disclosure is provided at or before time of referral (not at closing)
AfBA disclosure meets required format: describes the arrangement, states the estimated charge, states borrower is not required to use the affiliated provider (with narrow exceptions)
Marketing services agreements (MSA) reviewed by legal counsel: many are viewed as unlawful kickback arrangements by CFPB

Common Section 8 violations to flag in workflow review:

Real estate agents receiving "marketing fees" from title companies, lenders, or other settlement service providers in exchange for referrals
Builder or developer requiring use of affiliated settlement service providers as condition of purchase

Section 9 — Seller-Required Title Insurance

Seller is not requiring buyer to purchase title insurance from a specific company as a condition of the sale
Buyer is free to shop for title insurance and settlement services

Section 10 — Escrow Account Requirements

Initial escrow deposit at closing does not exceed 2 months of escrow payments for any category
Annual escrow analysis performed
Annual escrow account statement provided to borrower within 30 days of analysis
Escrow surplus refunded or credited if balance exceeds 2 months cushion
Escrow shortage paid in 12-month catch-up if balance is deficient

Citation: 12 CFR 1024.17

Servicing Transfer Notice

Borrower notified of transfer of servicing at least 15 days before effective date (exception: RESPA allows 3 days for FHA)
Notice includes: new servicer name, address, phone; effective date; statement that transfer does not affect loan terms; 60-day grace period for payments to wrong servicer

Section 2: TRID (TILA-RESPA Integrated Disclosure)

Regulation: 12 CFR 1026.37-38 (Regulation Z) and 12 CFR 1024 (Regulation X) — CFPB

See the disclosure-generator skill for complete TRID workflow specification. Summary checklist:

Loan Estimate issued within 3 business days of receiving 6-piece application
No fees collected before LE issuance except bona fide credit report fee
Zero-tolerance fees on LE do not increase on CD (unless valid changed circumstance)
10% tolerance bucket not exceeded in aggregate on CD vs. LE
Changed circumstances documented within 3 business days of discovery; revised LE issued within 3 business days
CD received by borrower at least 3 business days before consummation
Any re-disclosure triggers (APR change, product change, prepayment penalty addition) result in new 3-business-day wait
Tolerance cures paid within required timeframe if violations identified
LE retained 3 years; CD retained 5 years post-consummation

Section 3: HMDA (Home Mortgage Disclosure Act)

Regulation: 12 CFR 1003 (Regulation C) — administered by CFPB

Applicability (2018 and later thresholds):

Depository institutions: ≥100 closed-end originations OR ≥200 open-end originations in each of 2 prior years
Non-depository institutions: ≥100 closed-end originations OR ≥200 open-end originations in prior year

Data Collection

HMDA data fields collected for every covered transaction (see LAR field list below)
Monitoring information collected: ethnicity, race, sex of borrower (using standard GMI form or equivalent)
Monitoring information collection occurs at application (not at closing)
Borrowers informed of right not to provide GMI; if not provided, note method of visual observation or surname
HMDA data entered in LOS at point of collection; not reconstructed post-close

Required LAR data points (key fields):

Category	Fields
Loan identifiers	ULI (Universal Loan Identifier), application date, action taken, action taken date
Property	Property type, occupancy type, manufactured home indicators, property address (census tract)
Applicant	Ethnicity, race, sex, age, credit score type, credit score
Income	Gross annual income
Loan terms	Loan amount, loan purpose, loan type, lien status, interest rate, rate spread, HOEPA status, QM status
Costs	Total origination charges, points, lender credits, total loan costs
Underwriting	DTI ratio, combined LTV, property value, AUS name and result
Denial reasons	If denied: up to 4 denial reasons

LAR Submission

LAR submitted to CFPB HMDA filing platform by March 1 following the calendar year
LAR tested for validity errors before submission
Resubmission process defined if CFPB identifies errors after submission
LAR publicly available upon request after submission

Citation: 12 CFR 1003.5

Section 4: QM/ATR (Qualified Mortgage / Ability to Repay)

Regulation: 12 CFR 1026.43 (Regulation Z) — Dodd-Frank § 1412-1413 — CFPB

Applicability: All closed-end consumer mortgage loans; excludes open-end credit (HELOCs), reverse mortgages, timeshare loans, certain temporary bridge loans

Ability to Repay (General Standard)

For any mortgage loan, creditor must make a reasonable, good-faith determination that the borrower can repay:

Income or assets verified and documented (pay stubs, W-2s, tax returns, bank statements)
Employment status verified
Monthly mortgage payment calculated using fully-amortizing rate (not teaser rate)
All monthly mortgage payments considered (all loans on the property)
All non-mortgage debt obligations considered (from credit report)
Debt-to-income ratio calculated and documented
Credit history reviewed
Simultaneous loan (if any) considered in repayment analysis

Documentation retained: All ATR documentation retained for 3 years post-consummation

Qualified Mortgage Safe Harbor / Rebuttable Presumption

A QM provides a legal safe harbor (or rebuttable presumption for higher-priced QMs) that ATR has been met.

General QM requirements (effective March 2021 rule):

No negative amortization
No interest-only period
No balloon payment (exceptions: small creditor balloon QM)
Loan term does not exceed 30 years
Points and fees do not exceed 3% for loans ≥$114,847 (2023 threshold; adjust annually)
For rate-spread QM: APR does not exceed APOR by more than 2.25% (first lien, loan ≥$114,847)

GSE/Agency QM (temporary patch expired October 1, 2022):

As of October 2022, GSE eligible loans no longer automatically qualify as QM under the GSE patch. Loans must meet General QM criteria.

FHA QM: FHA loans meeting FHA guidelines generally qualify as QM per HUD rule.

VA QM: VA loans meeting VA guidelines generally qualify under CFPB rule.

USDA QM: USDA guaranteed loans generally qualify under CFPB rule.

Section 5: ECOA (Equal Credit Opportunity Act)

Regulation: 12 CFR 1002 (Regulation B) — administered by CFPB and DOJ

Applicability: All creditors who regularly extend credit

Fair Lending (Anti-Discrimination)

No discrimination based on: race, color, religion, national origin, sex, marital status, age (provided applicant has capacity to contract), receipt of public assistance income, or exercise of any right under the Consumer Credit Protection Act
Pricing policies applied consistently across all borrowers (no steering to higher-cost products based on protected class)
Fair lending monitoring program in place (pricing analysis, denial rate analysis by protected class)

Adverse Action Notices

Written notice of adverse action provided within 30 days of receiving completed application (for denial, counteroffers not accepted, withdrawal after file was complete)
Notice content:
- Statement that credit was denied, or specific action taken
- Name and address of creditor
- Statement of ECOA provisions (right not to be discriminated against)
- Name and address of federal agency that administers compliance
- Principal reason(s) for adverse action — specific to the applicant (not generic)
If credit score was a factor: FCRA credit score disclosure included (see Section 6)
Notice delivered within required timeframe (30 days from completed application; 30 days from withdrawal if file was complete)

Citation: 12 CFR 1002.9

Appraisal Copy Delivery

Copy of appraisal, other written valuations, and AVM reports provided to applicant promptly upon completion (or at least 3 business days before consummation, whichever is earlier)
This right applies even if application is denied or withdrawn
Applicant waiver: applicant may waive the timing requirement (but still must receive the appraisal before consummation)
Waiver form used and retained if applicable

Citation: 12 CFR 1002.14

GMI Collection

Ethnicity, race, and sex of applicant collected on applications for purchase/refi of 1-4 family dwellings
Applicant informed of right not to provide this information
Information obtained from visual observation or surname if not provided voluntarily
GMI used only for fair lending monitoring; not used in credit decision

Section 6: FCRA (Fair Credit Reporting Act)

Regulation: 15 USC § 1681 et seq. — administered by FTC and CFPB

Applicability: Any creditor who uses a consumer report in connection with a credit decision

Permissible Purpose

Credit report pulled only for a permissible purpose: credit transaction initiated by consumer (application for mortgage)
Credit report not pulled without borrower's written authorization
Authorization obtained before or at time of application (typically included in loan application signature page)
Re-pull authorization: if credit is re-pulled later in the process (e.g., refresh before closing), authorization covers this or new authorization obtained

Adverse Action — FCRA Credit Score Disclosure

When credit report or credit score is a factor in an adverse action:

Credit score disclosure notice provided as part of or with the adverse action notice
Disclosure includes:
- Credit score obtained
- Range of possible scores under the model used
- Key factors that adversely affected the score (up to 4)
- Date the score was obtained
- Name and address of CRA that provided the report

FACTA Red Flags Rule (Identity Theft)

Written Identity Theft Prevention Program (ITPP) in place
ITPP identifies red flags applicable to mortgage origination (e.g., alerts on credit report, suspicious activity on accounts, suspicious documents, suspicious personal information)
Staff trained to identify and respond to red flags
Program reviewed and updated periodically
Oversight by senior management or board

Citation: 16 CFR Part 681 (Red Flags Rule)

Output Format

Produce a Federal Mortgage Compliance Checklist organized by regulation, with:

Each requirement as a binary checklist item (compliant / not compliant / N/A)
Regulatory citation for each requirement
Risk rating for each gap (Critical = enforcement risk; High = examination finding likely; Medium = likely cited; Low = best practice)
Remediation action for each gap
Evidence required to demonstrate compliance

Accompany with:

Priority Gap List — Top 10 compliance gaps by risk rating, with owner and target remediation date
Open Items — Items requiring client clarification to complete the assessment