Topic: CFPB TILA-RESPA Integrated Disclosure (TRID) Rule
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Our bank offers a three-year, interest only home equity line of credit (HELOC) with a balloon feature, and a ten-year HELOC with a monthly payment of 1% of the balance and a balloon feature. Can we modify these loans to extend their maturity date another three or ten years and add an amortization schedule? Or would that be considered a refinancing? Does it matter if the modification occurs before or after maturity?
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We believe that you may modify the HELOCS in the way that you described before or after maturity without treating the changes as a “refinancing.” However, the language that you use in the loan modification documents will determine whether you achieve this result. The Seventh Circuit has considered a similar issue, albeit in the context…
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If we do not identify the date on which a loan application is “completed” under Regulation B, what date should we use as the application date on an adverse action notice? Would it be acceptable to use the application date under either HMDA or the TRID rule?
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We believe that either the HMDA or the TRID application date may serve as an acceptable substitute for the purpose of sending adverse action notices under Regulation B, depending on what your internal policies require for an application to be considered “complete.” Regulation B requires you to send out adverse action notices within 30 days…
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We made an error in disclosing the initial interest rate for an adjustable rate mortgage (ARM) on the Closing Disclosure. This was a simple, one-time clerical error, but it does exceed tolerances (we think the error resulted in understating the finance charge by several thousand dollars). We know we owe the customer restitution and a new closing disclosure. Is it defensible to leave it at that? Also, if we provide restitution, do we have to pay it as a lump sum?
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It may be possible to argue that the disclosure issue was an isolated incident, requiring only restitution and new disclosures, but that depends on the circumstances, and we do recommend consulting with bank counsel about the error and the best response for your bank. The Truth in Lending Act (TILA) generally requires examiners to order…
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For a home purchase loan, are we required to provide separate closing disclosures to the buyer and the seller? In the past, we provided both parties with the same HUD. Is that a best practice? Are there any privacy concerns? Can we also provide the Closing Disclosure to the realtor?
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No, we believe it would violate your customer’s privacy rights if your bank were to provide a full Closing Disclosure to the seller, unless your customer has consented to the disclosure. Alternatively, the TRID rules provide a modified Closing Disclosure form that redacts certain personal financial information of the buyer for purposes of providing to…
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We have a mortgage borrower who is in the process of divorcing her husband. The wife is purchasing a residence, and she is signing the note and title alone. Does her husband need to sign the Closing Disclosure?
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No, Regulation Z does not require a non-borrowing spouse to sign a Closing Disclosure. In fact, Regulation Z does not require any signatures on the Closing Disclosure — obtaining signatures on the Closing Disclosure form is optional. In addition, because the spouse is not entitled to the right of rescission, both because the transaction is…
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When we reach the permanent financing phase on a construction loan, we have borrowers execute a change in terms modifying the loan. Are we required to treat these transactions as refinancings, requiring new sets of disclosures under the TILA-RESPA Integrated Disclosure (TRID) requirements?
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We believe that you may modify a construction loan without it falling within Regulation Z’s definition of a “refinancing” (which would require new disclosures under the TRID requirements). However, the language that you use in the loan modification documents will determine whether you achieve this result. The general rule is that a refinancing occurs only…
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When providing settlement services, does a title company or its individual employees need a Nationwide Mortgaging Licensing System (NMLS) number in Illinois? Our title company said they don’t need an NMLS number, but our auditor said that we can’t leave the title company’s NMLS number blank on our closing disclosures.
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In Illinois, title companies and their employees are not required to obtain an NMLS identification number when they are acting as settlement agents, provided they are not receiving compensation for “brokering, funding, originating, servicing or purchasing of residential mortgage loans.” The CFPB’s Closing Disclosure includes a table on page five entitled “Contact Information” that contains…
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In Illinois, is a title company or title agent required to obtain a Nationwide Mortgage Licensing System (NMLS) registration when they are acting as closing agents? If so, should we list it in the Closing Disclosure?
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In Illinois, title companies and their employees are not required to obtain an NMLS identification number when they are acting as closing agents, provided they are not receiving compensation for “brokering, funding, originating, servicing or purchasing of residential mortgage loans.” The CFPB’s Closing Disclosure includes a table on page five entitled “Contact Information” that contains…
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Are we allowed to charge credit report, appraisal or application fees upfront for consumer mortgage loan applications?
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You may charge a credit report fee up front, but not application or appraisal fees. Under the TILA-RESPA Integrated Mortgage Disclosure (TRID) rules, a creditor may charge a credit report fee before preparing the Loan Estimate and documenting the consumer’s intent to proceed with the transaction. However, a creditor may not charge other fees, such…
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For an upcoming compliance examination, the FDIC has requested a list of all loans secured by deposit accounts where the yield on the account is under 5% per year. Are you aware of any laws that would prohibit us from taking deposit accounts as collateral where the yield is less than 5% per year?
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No, we are not aware of any prohibition on taking deposit accounts as collateral for loans based on the deposit account’s yield. Regulation Z does impose several additional requirements when a deposit account will be securing a consumer credit card account (requiring disclosures and specific language in the credit card agreement), but it does not…