Topic: CFPB TILA-RESPA Integrated Disclosure (TRID) Rule
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We extended a loan to a borrower who purchased a home with the intention of making it his principal residence. He is unmarried and decided at the time of closing to add his girlfriend to the deed. She signed the mortgage but was not included on the Closing Disclosure (CD). Our loan documentation system included a signature line only for the borrower. Is this correct? Also, if a borrower refinances a loan secured by their primary residence without their spouse on the loan, would the spouse be required to sign the CD? This is assuming the spouse is listed on the deed and would be given a notice of the right of rescission and be required to sign a waiver of homestead rights.
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You were not required to provide a copy of the CD to the customer’s girlfriend or obtain her signature on the CD, since she is not entitled to rescind the purchase loan and therefore is not a “consumer” who must receive a copy of the CD. Regulation Z requires that a CD be provided to…
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We have a borrower with a contract to purchase a modular home from a manufacturer. The Loan Estimate indicated that the purpose of the loan was for a purchase. However, we recently learned that the borrower has already acquired title to the land where the modular home will be located from their parents by quitclaim deed. Both the modular home and the land will be collateral for the loan. No funds will be disbursed at the closing. The manufacturer will be paid as the units of the modular home are delivered. Can we change the stated purpose of the loan on the Closing Disclosure to “construction,” since the borrower is not purchasing the land?
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In our view, the loan purpose should be identified as a purchase on the Closing Disclosure (CD). The TRID rules require lenders to identify one of four possible loan purposes in the Loan Estimate (LE) and CD: (1) purchase, (2) refinance, (3) construction, or (4) home equity. A purchase loan is one made to finance…
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In the “Liability after Foreclosure” section on page 5 of the Closing Disclosure, should we indicate that “state law may protect you from liability for the unpaid balance” or that “state law does not protect you from liability for the unpaid balance”?
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Lenders extending mortgage loans in Illinois should check the box on the Closing Disclosure indicating that “state law does not protect you from liability for the unpaid balance” to reflect that a borrower may remain responsible for any deficiency after foreclosure under Illinois law. The Illinois Mortgage Foreclosure Law states that a foreclosure does not…
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Is it true that a seller credit for property taxes should be shown on only the Closing Disclosure (CD) and not the Loan Estimate (LE)? Or should a tax credit be reflected in the “Adjustments and Other Credits” section of the LE?
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You may choose whether to disclose a property tax credit on the LE if the credit is for taxes that will be due before the first scheduled loan payment or within sixty days after the closing date. However, if the credit is for taxes that will not be due until more than sixty days after…
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For closed-end mortgage transactions, we use a company to verify a borrower’s employment using their work phone number. The company charges a fee for this verification service, which we pass on to the borrower. We have been listing this fee in “Section B” of the Loan Estimate (LE) and Closing Disclosure (CD), since the borrower cannot shop for these services. Would this fee be considered a prepaid finance charge or is it just a finance charge?
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First, we agree that an employment verification fee would be considered a finance charge, since it would not be charged in a comparable cash transaction and does not fall into any of the categories that are exempted from the definition of finance charge. Whether it is a prepaid finance charge depends on how it is…
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For a residential mortgage loan, are we required to provide a non-borrowing, non-title holding spouse with a copy of the Closing Disclosure three days prior to closing? In this case, the spouse has signed the mortgage for the purpose of waiving their homestead rights.
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No, you are not required to provide a Closing Disclosure to an individual who is not a borrower and who has no ownership interest in the property securing the mortgage loan. Regulation Z requires that a Closing Disclosure be provided to a “consumer,” which is defined as a person to whom credit is offered or…
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We are extending a bridge loan that will be secured by the borrowers’ current home and a new home that is being purchased. The borrowers’ current home is owned by three people — two borrowers who reside there and a third individual who does not reside there and is not a borrower on the bridge loan. Our loan documentation system (LaserPro) added the third person to the Closing Disclosure. However, we do not believe the third individual is entitled to receive the Closing Disclosure since they are not a borrower and are not entitled to rescind the transaction. Can you confirm that this is correct, and that Illinois law does not require the third person in this scenario to receive the Closing Disclosure?
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Yes, we agree that the third individual in this scenario should not be included in the Closing Disclosure, since they are not a borrower on the bridge loan and a security interest is not being taken in their principal dwelling. While this individual may need to sign certain documents to perfect your bank’s lien on…
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A customer with a fixed-rate residential mortgage loan would like to modify the loan to lower the fixed interest rate and shorten the loan term, which would result in a higher monthly payment. Can we make these changes through a modification, and are any new disclosures or a new right of rescission notice required?
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Yes, we believe you may modify the terms of the existing loan to decrease the interest rate and shorten the loan term without falling within Regulation Z’s definition of a “refinancing” (which would require new disclosures under the TRID requirements). Also, the right of rescission does not apply to the modification of an existing dwelling-secured…
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We would like to advance additional funds to a borrower and extend the maturity date of their mortgage loan. Based on the payments already made, the new loan balance would not exceed the original loan amount. However, the mortgage contains no future advance language. Can we increase the amount of the mortgage loan without recording a new mortgage? If so, are any disclosures required?
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Based on these facts, your bank may need to enter into a new promissory note and record a new mortgage in order to secure the advance of additional funds; however, if you roll up the existing promissory note into a new note, you could jeopardize your priority lien position with respect to existing creditors and…
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Over a year ago, we made an installment loan contract on other real estate owned (OREO) property owned by our bank. The borrowers now are eligible to obtain a new residential loan with us and pay off the contract. The title to the property currently is in our bank’s name. We are selling the loan to Fannie Mae, which is treating it as a refinancing transaction. For purposes of the TRID disclosures, should we treat this as a refinancing or a purchase?
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We believe that your bank should identify the loan purpose on the TILA-RESPA Integrated Disclosure (TRID) forms as a refinancing. The TRID rules require lenders to identify one of four possible loan purposes in the Loan Estimate: (1) purchase, (2) refinance, (3) construction, or (4) home equity. A purchase loan is one made to finance the…