Topic: CFPB TILA-RESPA Integrated Disclosure (TRID) Rule
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We required a borrower to pay off existing credit card balances as a condition of receiving a loan to purchase a new home. The payoff will not be deducted from the loan proceeds; the borrower will pay off the debt out of pocket at the closing. Where should we list the credit card payments on the Closing Disclosure?
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We believe the appropriate place would be Section K, Line 04 — Due from Borrower at Closing. In our view, there are no provisions in Regulation Z that directly address whether and where to disclose the payoff of a borrower’s credit card balance prior to their receipt of a loan on a Closing Disclosure. However,…
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A customer would like a loan to purchase a mobile home that will be affixed to his land and to pay off an existing loan secured by the land. The loan amount will be the purchase price of the mobile home plus the payoff amount of mortgage, which is held by another bank. Where do we list the land mortgage payoff amount on the Calculating Cash to Close table on the Loan Estimate?
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For a purchase transaction, we believe that the payoff amount for the land mortgage loan is part of the calculation used to determine the amount that should be placed on the “Closing Costs Financed” line of the Loan Estimate’s Calculating Cash to Close Table. To calculate “Closing Costs Financed” for a purchase transaction (other than…
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We made a loan secured by rental property to an individual. The rental property did not have any outstanding liens when we made the loan. The loan purpose was to purchase another rental property. We issued a Loan Estimate and Closing Disclosure for the loan, even though Regulation Z did not apply due to the loan’s business purpose. On review, I saw that the Loan Estimate listed the loan purpose as “Home Equity Loan,” but the Closing Disclosure listed the loan purpose of “Refinance.” What was the correct loan purpose?
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We recommend placing a memorandum in the loan file to document that the Loan Estimate and Closing Disclosure were issued in error, as the loan was made for a business purpose and was not subject to the CFPB’s loan disclosure rules. The memorandum should also note that these loan documents misstated the loan purpose as…
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A mortgage loan customer chose an unaffiliated title company from our service provider list. The title company provided a quote for its title services as well as its fee for conducting the loan closing, and we disclosed both charges on our Loan Estimate. But we recently learned of two changes: the bank will be conducting the loan closing in-house, eliminating the closing fee, but the title company underestimated its quote for the title services due to a clerical error. Can we charge the borrower the correct, higher fee? And when calculating our 10% good faith tolerance levels, can we account for the closing fee that has been dropped?
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Yes, you may charge the borrower the correct amount for the title insurance policy — even if it is higher than what you disclosed in your LE — provided that the increase does not cause the total closing costs to exceed the 10% good faith tolerance level for required services that the borrower shopped for.…
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If we are the lender on a mortgage loan subject to the TILA-RESPA Integrated Disclosure (TRID) rules, can we also act as the settlement agent? If so, should we list the bank’s name on the Closing Disclosure as the lender and as the settlement agent? Can we also leave the other “Settlement Agent” fields blank, including the File #?
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Yes, a lender may act as its own settlement agent. We are not aware of any federal or Illinois law that would prevent a financial institution from conducting its own mortgage loan closings, and in fact, this is a common practice at many institutions when closing second lien loans. We do not believe that a…
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A consumer applied for a loan that is subject to the TILA-RESPA Integrated Disclosure (TRID) rules. The consumer indicated an intent to proceed with the loan, but we did not end up originating the loan. The consumer refuses to pay our appraisal fee. Can we pull the fee amount from the consumer’s checking account at our bank?
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Yes, we believe that your bank may exercise a valid right of setoff for the unpaid appraisal fee against the applicant’s checking account, provided that your bank properly disclosed the appraisal fee and that the applicant would be charged the fee to reimburse your bank for the cost of the appraisal (and the applicant had…
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We obtain credit reports from a third party vendor. On the Loan Estimate for consumer mortgage loans, do we have to disclose and charge the exact fees expected to be charged by the vendor, or are we permitted to round up this fee?
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Regulation Z requires lenders to round credit report fees to the nearest whole dollar on the Loan Estimate. Amounts ending in $0.49 or under must be rounded down, and amounts ending in $0.50 or up must be rounded up. Under both Regulation X and Regulation Z, the general rule is that a lender must charge…
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Do the TILA-RESPA Integrated Disclosure (TRID) rules require disclosures for a consumer-purpose, construction-only loan to build a home from the ground up, where the borrower will obtain permanent financing at a later date? What if we extend the maturity date for this loan without extending new money or changing any other terms? Also, would this loan be reportable under the Home Mortgage Disclosure Act (HMDA)? Would the extension be HMDA reportable?
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TILA-RESPA Integrated Disclosure (TRID) Requirements Yes, the TRID disclosures are required for closed-end, consumer-purpose construction loans secured by real property. However, whether they would be required when you extend the term of an existing loan depends on the language you use in the extension agreement. TRID disclosures are required for existing loans only when they…
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We recently received an application for a home purchase loan where the current owner qualifies for senior and veteran property tax exemptions, but the applicant would not. This will be a higher-priced mortgage loan, so we will escrow for property insurance and property tax payments. Due to the current exemptions, the applicant would not have to pay property taxes for a year or more after purchasing the home. Should we state on the initial escrow analysis, Loan Estimate (LE) and Closing Disclosure (CD) that we will require an escrow account for property taxes? Should we list the estimated taxes and amount for prepaid taxes as zero on the LE and CD? We do calculate estimated taxes in order to complete our ability-to-repay analysis, based on a formula provided by our local county assessor’s office.
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Yes, your bank must disclose that an escrow account is required on the CD. Your bank may choose to disclose the estimated future property taxes on page 1 of the LE, but this is not required. Other than that, there is no clear place in the LE, CD or initial escrow analysis to disclose the…
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When refinancing a closed-end mortgage loan, we disclose amounts for property taxes and hazard insurance in the prepaid section of the Loan Estimate. Is that a required disclosure? We will not be collecting amounts for these items at closing; we require them as a condition of the loan, but we know that the borrower has been up to date on them (although we do not escrow for these amounts).
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Based on a conversation we had with a CFPB attorney, we believe that a creditor is not required to disclose property taxes and homeowner’s insurance premiums in this situation. Regulation Z requires the Loan Estimate and Closing Disclosure to itemize “amounts to be paid by the consumer in advance of the first scheduled payment” as…