1. Changes to Regulation Z Loan Officer Compensation The content of this communication is not intended for consumer use or for distribution to any third party. This information is being provided as a service and reflects information U.S. Bank Home Mortgage compiled from various sources. This information is not intended to be legal advice and U.S. Bank will not accept any liability for reliance on the content of this summary. Please consult with your own legal counsel about how this communication may affect you and your business.

2. Changes to Regulation Z – Overview The Federal Reserve has amended Regulation Z, the implementing regulation of the Truth in Lending Act (TILA). The new rules are effective on all loan files received on or after April 1, 2011. Two of the primary elements of the new rules are:  Prohibits payments to the loan originator that are based on the loan’s interest rate or other terms and conditions. Compensation based on a fixed percentage of the loan amount is permitted.  Prohibits a loan officer from receiving compensation directly from a consumer while also receiving compensation from the creditor or other person.

3. Changes to Regulation Z – Overview  Loan originators must be paid on the basis of wage/salary, or wage/salary plus bonus, for these transactions.  The lender may negotiate their compensation with the borrower for each transaction.  Compensation must come from the borrower’s own funds, or from the loan proceeds; it cannot be paid with the proceeds from premium pricing.  The lender may charge additional fees, e.g., processing or application. Any additional lender fees are considered financed charges for purposes of TILA and high-cost testing.

4. Changes to Regulation Z Anti-Steering and Safe Harbor The rule also prohibits “steering” the customer to less favorable terms in order to increase a lender’s or loan originator’s compensation. The rule provides a Safe Harbor to facilitate compliance; and is met if:  The consumer is presented with loan offers for each type of loan in which they have an interest and likely qualify.  The loan options include the following: –The lowest interest rate for which the customer qualifies –The lowest points and origination fees (excludes third-party fees) –The lowest rate for which the customer qualifies for a loan with no risky features, e.g., interest-only, negative amortization, pre-payment penalty

5. Changes to Regulation Z Anti-Steering and Safe Harbor USBHM MRBP Policy: USBHM will require an Anti-Steering disclosure, signed by the borrower, for every loan file submitted.

6.  Issue: LO Compensation has varied based on product, interest rate, loan amount and servicing options. As a result a small percentage of lenders have temporarily stopped originating HFA loans.  Possible Solution: Modify the lender paid SRP and or the fees allowed to be charged to the borrower. Changes to Regulation Z Impact on HFA Business