High Risk and High-Cost Mortgage Loans – Page 3

We would like to know which title fees may be excluded when conducting a HOEPA points and fees test. We understand that fees not paid directly to the bank or its affiliate are excluded, as well as certain title fees for title examinations and title insurance. However, can we also exclude other title company fees for closings, couriers, date down endorsements, closing protection letters, the Illinois Anti-Predatory Lending Database, etc.?

Mar 25, 2019

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Yes, we believe your bank is permitted to exclude the title company’s fees from the HOEPA points and fees calculation — provided that the fees are reasonable and neither your institution, nor an affiliate, receives any direct or indirect compensation in connection with the fees. Regulation Z permits your bank to exclude title-related fees from…

May we charge a fee or higher interest rate on a matured loan that is in between its maturity date and renewal date? We have many customers with matured loans who take quite some time to complete the steps needed to renew their loans.

Jan 25, 2019

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Yes, we believe you may charge a fee for renewing a matured loan if the customer agrees to it as part of a renewal or modification agreement. Likewise, we believe you may impose an increased interest rate (or default rate) on a matured loan if it is agreed to by your customers in your loan…

Our mortgage document provider is going to start including a document called the “Illinois Waiver of Participation in Mortgage Awareness Program.” The document indicates that the customer was provided written notice of their legal right to participate in a counseling and education program through the IDFPR called the “Mortgage Awareness Program,” and that they are waiving their right to participate in the program. I found a few references to the document on the IDFPR website, but one indicated that the form has been repealed. Do we need to use this form and notify a customer of their right to participate in the program?

Nov 16, 2018

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We believe the waiver of participation for the Mortgage Awareness Program is necessary only for “high risk home loans” as defined in the Illinois High Risk Home Loan Act (HRHLA). Under the HRHLA, the Illinois Department of Financial and Professional Regulation (IDFPR) is required to provide the Mortgage Awareness Program — a counseling and education…

Can we set a minimum interest amount required for all loans, which would be charged if a customer pays off a loan without accruing the minimum interest amount? If so, can we set up our system to automatically impose that charge?

Sep 7, 2017

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While minimum interest charges are permitted for many loans, such charges could be considered prepayment penalties, which are prohibited for certain types of loans. Consequently, we do not recommend setting up your loan system to automatically impose this charge on all loans, without distinguishing loan types for which this charge is prohibited. In general, there…

Our core processor notified us that it is updating its standard right to cure notice form fields to include all collateral that secures a loan. Does Illinois require a right to cure notice on delinquent loans? Should we be using this form, along with its upcoming updates?

Aug 25, 2017

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No, we do not believe that your bank should rely on a core processor’s standard right to cure form to comply with Illinois law. Presumably, your core processor’s standard right to cure form is used nationwide, without customization for Illinois. But Illinois does not have a single, standard “right to cure” notice requirement for all…

At what annual percentage rate is a first-lien loan on a principal dwelling considered high cost? And what are the 2017 total loan and statutory fee thresholds for high-cost loans?

Jan 11, 2017

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A loan is considered high-cost if the transaction’s annual percentage rate (APR) exceeds the Average Prime Offer Rate (APOR) for comparable transactions on that date by more than 6.5 percentage points for a first-lien dwelling secured transaction, unless the dwelling is personal property and the loan amount is less than $50,000. In such a case,…

Does the predatory lending database program in Cook County apply to a loan secured by investment real estate? What about the Illinois High Risk Home Loan Act (HRHLA)? Also, does the predatory lending database points and fees test include more charges than the HRHLA? The predatory lending database program test for points and fees sets a threshold at 5%; does that rise to 8% for smaller loans, as under the HRHLA?

Sep 8, 2016

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No, the predatory lending database program would not apply to a mortgage secured by investment property. The Cook County predatory lending database program was established under the Residential Real Property Disclosure Act, which applies only to mortgages secured by residential real properties, defined as one-to-four family properties, units in residential cooperatives and condominium units. It…

Is a temporary bridge loan with a term shorter than one year subject to the higher-priced and high-cost loan provisions? Are there any other issues with the interest rate or escrow requirements?

Jan 28, 2016

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A bridge loan is covered by the high-cost mortgage requirements, but not the higher-priced mortgage requirements, in Regulation Z. A bridge loan secured by the borrower’s principal dwelling may qualify as a “high-cost mortgage” if the interest rate exceeds 6% or 8% over the average prime offer rate, or if it has points and fees…

Are we required to complete a “net tangible benefit/anti-flipping” worksheet, on top of our other tests for compliance with HPML, HOEPA, HRHLA, QM, etc.?

Sep 22, 2015

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While there are no Illinois laws that expressly require you to use a net tangible benefit worksheet, we still would advise that you complete some sort of tangible net benefit analysis when refinancing mortgage loans secured by a borrower’s principal residence, in order to avoid a violation of the Illinois Fairness in Lending Act or…

Our residential construction loan agreements permit us to charge a fee if the customer does not choose to obtain permanent financing with our institution. The loans are secured by the borrower’s principal dwelling. Can we charge this type of fee?