Topic: CFPB TILA-RESPA Integrated Disclosure (TRID) Rule
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Is a short-term bridge loan to purchase a primary residence that will be secured by the borrower’s current and new residence subject to the TILA-RESPA Integrated Disclosure (TRID) requirements?
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Yes, the TRID requirements apply to all closed-end consumer credit transaction secured by real property (other than a reverse mortgage). There is no exception to the TRID requirements for a short-term, temporary bridge loan. Certain bridge loans are exempt from certain other Regulation Z requirements (including some of the ability-to-repay (ATR) and qualified mortgage (QM)…
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Do we have to disclose an owner’s title insurance premium on the Loan Estimate and Closing Disclosure when we know that this will be paid by the seller? We require owner’s title insurance and allow the borrower to shop for it, but typically the seller pays for the premium. If we do not disclose the premium on a Loan Estimate, wouldn’t this create a tolerance issue when including it on the Closing Disclosure?
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Disclosing a seller-paid premium for owner’s title insurance on the Loan Estimate is optional, but you must disclose this fee on the Closing Disclosure. With respect to the Loan Estimate, Regulation Z’s Official Interpretations provide lenders two options for disclosing the seller-paid premium for an owner’s title insurance policy. If the lender knows that the…
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If a closed-end loan has a combined purpose to purchase a manufactured home and to construct a basement for the home, what should we list as the loan’s purpose on the Loan Estimate? Does it matter if the loan will be structured as a short-term loan with three separate advances? The manufactured home will secure the loan.
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In our view, you should identify the loan as a purchase loan, regardless of how it is structured. The TRID rules require lenders to identify just 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 acquisition…
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What should we list as the loan purpose on the Loan Estimate under the TILA-RESPA Integrated Disclosure (TRID) rules for a closed-end loan to purchase a manufactured home that will be attached to land? The borrower already owns the land, and the loan proceeds will be used to purchase a modular manufactured home to be placed on the land, but a portion of the loan also will be used to build a basement, porch and garage for the manufactured home. The loan will be secured by both the manufactured home and the land it will sit on. Is this a purchase loan or a construction loan?
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In our view, the purpose of this loan should be identified as a purchase. The TRID rules require lenders to identify just one of four possible loan purposes in the Loan Estimate: (1) purchase, (2) refinance, (3) construction, or (4) home equity. We believe that “construction” is inapplicable for two reasons. First, the purpose of construction is…
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When preparing a Loan Estimate, what is the best practice for disclosing the estimated property tax and escrow information for a purchase loan? Should we call the county for the most recent assessment, or is the most recent tax bill sufficient? In some instances, a multiplier has been added since the most recent tax bill was printed, resulting in increased taxes.
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We recommend obtaining publicly available tax information directly from the county, when possible. Regulation Z requires that estimated property taxes on a Loan Estimate must reflect the “taxable assessed value of the real property securing the transaction after consummation.” Property tax estimates are not subject to a tolerance — meaning they are treated as having…
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An individual has applied for a loan to purchase a two-unit mixed purpose building, which will secure the loan. He plans to make one unit his primary dwelling and rent out the other unit (a store front with a workshop and back office). We will not be using any commercial income in the underwriting. Does this loan require the TILA-RESPA Integrated Disclosures (TRID)?
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We believe that in most cases, a loan secured by a two-unit building that will be owner-occupied should be treated as a consumer-purpose loan subject to the TRID requirements. The TRID requirements apply to most closed-end consumer credit transactions that will be secured by real property. This loan will be secured by real property, and…
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On a consumer construction loan that closed nearly a year ago, we disclosed fees for six inspections related to an estimated six draws. These six fees were disclosed on the closing disclosure as “services the borrower did not shop for” and were collected at the loan closing. The borrower now has taken more than the estimated six draws, incurring additional, undisclosed inspection fees. Under Regulation Z, can we collect those fees?
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In our view, the new fees do not create a tolerance violation under Regulation Z, and you may charge the borrower for the fees, provided that such charges do not violate your loan agreement. In general, construction inspection fees are loan costs subject to the good faith tolerances for the category in which they fall.…
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We are extending a residential mortgage to a customer who also has obtained down payment assistance loan from the Illinois Housing Development Authority (IHDA), which has told us that we are responsible for preparing their Loan Estimate (LE) and Closing Disclosure (CD). The IHDA loan is junior to our loan and is subject to 0% interest. How should we fill out the LE and CD? Our forms vendor will not prepare an LE and CD with a $0 payment and 0% interest.
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Under a recent Regulation Z amendment, we believe that this down payment assistance loan may qualify for an exemption from the LE and CD requirements. Regulation Z includes an exemption from the LE and CD requirements for certain housing and down payment assistance loans, allowing the use of a more streamlined disclosure (the “TIL disclosure”)…
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What do we use to determine the “Loan Term” on a Loan Estimate and Closing Disclosure, the date of loan or the date the first payment is due?
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The “loan term” is the term of the debt obligation. The borrower typically incurs the debt obligation on the date the loan is made, regardless of when the first payment is due. Consequently, we believe that you should use the date the loan is made — not the date of the first payment — to…
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When a title insurance agent acts as a settlement agent for a residential mortgage closing, we have been tracking down and using their Illinois title insurance registration number in lieu of an NMLS number on the Closing Disclosure. Is this still correct?
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Yes, we believe it is still true that when a settlement or closing agent is a registered title insurance agent, the Closing Disclosure should display the agent’s Illinois title insurance registration number. Regulation Z’s requirements for the Closing Disclosure include the disclosure of “a license number or unique identifier for each person (including natural persons)…