Topic: High Risk and High-Cost Mortgage Loans
-
We are currently assessing a “fax/email” fee when we send payoff statements for home equity lines of credit (HELOCs). Are there any prohibitions against this practice under state law?
—
by
No, other than Regulation Z’s prohibition against charging fees for payoff statements for high-cost mortgage loans, we are not aware of any law prohibiting charging fees for sending payoff statements, provided the borrower has agreed to the fee in the loan documents. Regulation Z requires that for consumer loans secured by a consumer’s dwelling, the…
-
An examiner told us we had violated the Home Ownership and Equity Protection Act (HOEPA) by treating certain mobile home loans as auto loans. When a loan secured by a mobile home that has not been permanently affixed to the ground but rather rests on a slab and can have its wheels reattached, we treat the loan as a vehicle loan. Are these types of loans subject to HOEPA?
—
by
Yes, we believe that mortgages secured by mobile homes — whether or not they are permanently affixed to real property — are subject to HOEPA coverage if the mobile home is the consumers’ primary residence. Mortgage loans classified as “high cost” under the HOEPA regulations may include any consumer credit transaction secured by a consumer’s…
-
Due to a change in vendor, we may have to change our 5/1 adjustable-rate mortgage (ARM) to a 5/5 ARM. Our 5/1 ARMs set maximum percentage amounts for the initial rate change and rate change over the life of loan. If we switch to a 5/5 ARM, can we raise the initial rate change and life of loan rate change caps for future loans?
—
by
We believe that your bank may charge a higher initial rate and raise the life of loan cap on the interest rate of your adjustable-rate mortgages. Of course, if the rate is raised too high, it may be considered a high risk home loan or a high-cost or higher-priced mortgage, subject to additional requirements and…
-
We are updating the fields in our Laser Pro system for end-of-year HOEPA triggers. Where can we find the state of Illinois high cost mortgage interest rate triggers for first and second liens? Also, where can we find the HOEPA triggers for first lien non-real estate loans less than $20,000 and greater than or equal to $20,000?
—
by
The Illinois High Risk Home Loan Act contains similar restrictions as the federal HOEPA high-cost mortgage regulations. Under this law, the interest rate trigger for a “high risk home loan” is an annual percentage rate that exceeds the average prime offer rate (APOR) by more than six percentage points for first lien mortgages or by…
-
We are an Illinois-chartered savings bank, and we are considering changing the fee we charge consumer borrowers for a mortgage loan modification. Typically, borrowers request these modifications to reduce the interest rate or change the term of their loan instead of doing a full refinance. These modifications are not for loss mitigation purposes. Are there any restrictions on the method we use to calculate these modification fees, and are there any regulatory issues (such as fair lending concerns) that we need to consider? We would use the same method to calculate the modification fees for all borrowers.
—
by
Generally, a savings bank may charge a mortgage loan modification fee agreed to by the borrower, and we are not aware of any restrictions on the calculation method. We are not aware of fair lending concerns if you use the same method to calculate all borrowers’ modification fees. The Illinois Savings Bank Act permits a…
-
We are looking for guidance on loan modification fees. Is there a cap on how much we can charge a borrower for a modification of a home equity line of credit (HELOC) or an in-house mortgage loan modification?
—
by
Generally, banks in Illinois may charge mortgage modification fees that are agreed to by the borrower, and we are not aware of a cap on such fees. Further, OCC regulations state that national banks may charge customers non-interest fees, and the amount of such fees is a business decision to be determined “according to sound…
-
Can we waive a bona fide third-party fee on a home equity loan (that is not a line of credit) and then recoup the fee if the borrower pays off the loan in thirty-six months or less? Is this something we would indicate in the note? We do not believe this would be a prepayment penalty. However, when Regulation Z states that “[a] creditor must not offer a consumer a covered transaction with a prepayment penalty unless the creditor also offers the consumer an alternative covered transaction without a prepayment penalty” — what does that mean? Would an alternative covered transaction be the same loan product with a higher price?
—
by
We believe you may recoup bona fide third-party charges that were waived at consummation if the borrower repays the loan within thirty-six months — provided such terms are included in your note — and this recoupment would not be a prepayment penalty. Additionally, if you were to impose a prepayment penalty, we believe you would…
-
We are updating the fields in our LaserPro system for end-of-year HOEPA triggers, and there are fields to enter the HOEPA triggers for first lien non-real estate loans less than $20,000 and greater than or equal to $20,000. Where can I find these thresholds?
—
by
The HOEPA (i.e., high-cost mortgage loan) points and fees trigger is based on whether the loan amount is less than an inflation-adjusted threshold of $20,000, or greater than or equal to the inflation-adjusted threshold of $20,000. For 2019, that threshold was $21,549. For 2020, that threshold is $21,980. Additionally, for transactions that are less than…
-
We are updating the fields in our Laser Pro system for end-of-year HOEPA triggers. Where can I find the state of Illinois high-cost mortgage interest rate triggers for first and second liens?
—
by
Illinois’ equivalent of the federal HOEPA regulations for “high-cost” mortgage loans is the Illinois High Risk Home Loan Act (Act). Under the Act, the interest rate trigger for a “high risk home loan” is an annual percentage rate that exceeds the average prime offer rate (APOR) by more than six percentage points for first lien…
-
We are an Illinois-chartered savings bank, and we are considering offering a loan modification program for owner-occupied, single-family residential properties that would allow a borrower to pay a fee to lower the interest rate on the remaining loan balance. The borrower would execute a modification agreement on the original note, and the loan would be kept in our portfolio. Are there any compliance concerns related to this program, and would any additional regulatory paperwork be required?
—
by
We believe your proposed modification program would be permissible and, aside from the caveats noted below, would not require additional disclosures — but the documentation for the modifications must demonstrate that the existing loans are not being satisfied or released. It is possible to lower the interest rate on a mortgage loan and charge a…