Topic: CFPB TILA-RESPA Integrated Disclosure (TRID) Rule
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How should we complete the “Rate Lock” section of the Loan Estimate (LE) for our in-house loans? Our files do not include separate rate lock agreements, and our loan committee approves the rates for our in-house loans. Our auditors noted that our LEs for these loans do not show the rate as locked and recommended that we either check the rate lock box “yes” at the time the LE is issued if we will not be changing the interest rate or check the box “no” until a decision has been made and then provide a new LE with the box checked “yes” once the rate is confirmed. However, we don’t believe a rate approved by our loan committee meets the regulatory definition of a “rate lock.” Are we correct in marking the box “no” in such cases?
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Yes, we believe you are correct in marking the rate lock box “no” in all cases where you have not entered into a written rate lock agreement with the customer. Under Regulation Z, marking the rate lock box “yes” on the LE is appropriate only when the customer has signed a written rate lock agreement.…
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We extended a purchase money bridge loan secured by the borrower’s current dwelling and the new dwelling being acquired. The promissory note and mortgage on the current dwelling were signed and dated three days before we disbursed the loan proceeds to allow for the three-business-day right-of-rescission (ROR) period to pass. The mortgage on the new dwelling was signed and dated on the date of disbursement, when the borrower acquired the new dwelling. However, our auditors told us the ROR documents were invalid since the borrower was not provided with the mortgage on the new dwelling to sign and date three days before the closing, as the borrower must review all documents related to the transaction three days before the purchase closing. If the auditors are correct, how can these types of mortgage transactions be properly executed?
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We do not believe the right of rescission requirements in Regulation Z require you to provide and have the borrower sign “all documents related to the transaction” three days before the closing or that the failure to have the borrower sign the mortgage on the new dwelling three days before the closing invalidated your ROR…
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Is a non-borrowing spouse required to sign a Closing Disclosure (CD) on a refinance if the spouse has an ownership interest in the property securing the mortgage loan? I know we must give the spouse a copy of the CD, but I cannot find anything that states we must have them or the borrower sign the bottom. Additionally, our notice of right to cancel states that the customer has the right to cancel within three business days of the latest of three events. One of these events is “[t]he date you receive the Truth in Lending Disclosures.” Is this referencing the loan estimate (LE) or CD?
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We do not believe that the non-borrowing spouse would be required to sign a CD regardless of the circumstances of the transaction, as signatures on CDs are optional under Regulation Z. However, note that Fannie Mae and Freddie Mac recommend obtaining the borrowing spouse’s signature as a “best practice,” and some private secondary market investors…
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Are we allowed to require the customer to pay the pair-off fee if they decide not to go through with a loan after we lock a rate in the fixed rate market? If so, do we need them to sign a lock-in agreement prior to locking? We are currently not requiring this.
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We believe that your bank may charge your customers pair-off fees provided in a lock-in agreement. However, we recommend that any lock-in agreements between you and your customers be signed by your customers and in writing, including any provisions requiring payment of pair-off fees. As a national bank, your bank is permitted by OCC regulations…
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We provide separate Closing Disclosures (CDs) to the buyer and seller for residential mortgage transactions. We list standard seller charges (such as the seller’s attorney’s fee, final water bill, seller’s transfer taxes, seller’s recording fees, and miscellaneous title fees) on the seller’s CD under Loan Costs or Other Costs, as applicable. Do we need to disclose those seller charges on the buyer’s CD? In other words, does page 2 of the seller’s CD need to be identical to page 2 of the buyer’s CD? We have received a finding on this in the past, but our third-party auditors and investors have not required this.
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Yes, we believe that the buyer’s CD must list all loan costs and other costs paid by the seller on page two, as outlined in Regulation Z, even if you issue a separate CD to the seller. However, we do not believe that page two of the seller’s and buyer’s CDs need to be identical,…
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After issuing a Closing Disclosure (CD), if the amount needed to pay off an existing mortgage loan changes — lowering the amount of cash due from the borrower at closing — we would revise the CD at closing to reflect the new payoff amount. When this occurs, should we revise the issue date of the CD to be the same as the closing date?
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Yes, if you revise a CD at closing to reflect an updated payoff amount, you should revise the issue date of the CD to reflect the closing date. Under Regulation Z, if the disclosures provided in the CD become inaccurate before consummation, “the creditor shall provide corrected disclosures reflecting any changed terms to the consumer…
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Approximately two months ago, our commercial loan department made a construction loan to an individual borrower for the purpose of combining two condominium units (one of which the borrower currently resides in) and paying off the mortgage on the borrower’s unit. The construction loan has a nine-month term, payments are interest-only, and the loan will be paid off with a new residential mortgage loan. We treated the loan as a commercial loan and did not provide TILA/RESPA Integrated Disclosures (TRID) to the borrower. The borrower was charged the typical commercial loan fees, including a documentation fee and an origination fee. Can this problem be fixed, and do we owe the borrower restitution? Also, are we correct that this construction loan is not HMDA-reportable because it is temporary?
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We do not believe you can cure your bank’s failure to deliver the TRID disclosures; however, you may wish to reimburse your customer for the undisclosed closing fees charged in connection with the loan (here, because the borrower received no disclosures, this approach would require a refund of all closing fees, including the documentation and…
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How should we disclose property taxes on the Closing Disclosure (CD) that are to be paid at closing if the current tax bill has not yet been issued and the loan has a tax escrow? In many counties, the tax bills may be issued less than two months before the taxes are due. If a loan is scheduled to close before the tax bill has been issued, should we disclose the amount of the prior year’s taxes in the “Prepaids” section of the CD? If the new taxes are higher than what was disclosed on the CD, can we take the additional amount out of the tax escrow? If so, do we have the option of preparing a short-year statement to reanalyze the escrow payment, or should we let the shortage go until the annual analysis and risk payment shock to the customer?
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We believe you should list property taxes that will be due within sixty days after the closing in the “Prepaids” section of the CD, and we recommend obtaining publicly available tax information directly from the county, when possible, rather than relying on the prior year’s property tax bill, which may be out-of-date. In addition, you…
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As interest rates have dropped, many customers have asked for the interest rates on their loans to be lowered. For residential real estate loans, can we lower the interest rate and subsequent payment amounts with just a modification agreement rather than using new loan documents? We do not believe these modifications would be considered “refinancing” under the TRID Rule since we are not replacing the existing note with a new obligation or adding a variable rate feature. Also, are there any state laws that would prohibit us from only using a modification agreement and not providing new disclosures?
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Yes, we believe you can lower the interest rate and subsequent payments for a loan with a modification agreement rather than using new loan documents. We are not aware of any state laws that would prohibit you from using a modification agreement or require you to provide new disclosures if the original loan agreement is…
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When is it necessary to have a customer sign a modification of mortgage? If the interest rate, maturity date or any other loan terms are changed, do we need to provide new disclosures and record a modification of mortgage?
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Depending on the changes being made, we believe it may be possible to modify the terms of a loan without recording a modification of mortgage, but we recommend engaging your bank’s counsel to review the relevant loan documents to ensure that your bank’s lien position will not be affected. Additionally, aside from the caveats noted…