Topic: High Risk and High-Cost Mortgage Loans
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The 2015 legislation amending the High Risk Home Loan Act (P.A. 99-288) states that it takes effect upon becoming law, and it became law on August 5, 2015. Does it apply only to loan applications received on or after August 5, 2015, or does it also apply to loans closed on or after August 5, 2015, for which applications were received before August 5, 2015?
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Changes made by Public Act 99-288 to the High Risk Home Loan Act apply to all “high risk home loans” closed on or after August 5th. The definition of “high risk home loan” in Section 10, which is what the legislation amended, is tied to the qualifying clause “at the time of origination.” For resources…
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Does Illinois law prohibit interest-only residential mortgage loans?
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No, we are not aware of any Illinois law that generally prohibits interest-only residential mortgage loans, although there is a state requirement that operates to sometimes prohibit such loans. If the mortgage loan triggers the definition of “high risk” in the High Risk Home Loan Act, that law prohibits an interest-only feature that results in…
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Can our loan documents provide for an increased interest rate after a late payment on a commercial real estate loan that is secured by the borrower’s primary residence?
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We cannot give you a definitive answer, as we do not have all of the relevant facts. There are very few limitations on interest rates and fees charged by banks under Illinois law for commercial loans. Any default rates (charged after a late payment or other default) must be agreed to by your customers in…
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The Illinois High Risk Home Loan Act requires us to compare a loanâÂÂs interest rate to the yield on U.S. Treasury securities, but Regulation Z requires us to use the average prime offer rate. Should we be running two tests for HOEPA?
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The Illinois High Risk Home Loan Act has been amended to adopt the federal standard of the average prime offer rate (APOR). 815 ILCS 137/10 (scroll down to view the section “after P.A. 97-849 takes effect,” since that law took effect on January 10, 2014). However, we do recommend running separate interest rate tests under…
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We want to implement three new fees for all of our loan customers: an NSF fee, an expedited payoff fee (for sending payoff statements via fax or courier), and a check-by-phone payment fee. How should we disclose these new fees? We are considering doing this for all of the types of consumer loans that we make.
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In general, if you charge any new types of fees, your customers must agree to them. First, you should check your controlling loan agreements for provisions that might apply to the unilateral imposition of these new fees, as well as for any terms regarding the disclosure of new fees. It may be that there are…
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If we have a loan closing on Friday, April 4, the new ECOA appraisal rules require us to provide a copy of the appraisal by Tuesday, April 1 (per the example in the CFPB’s Small Entity Compliance Guide). If we are mailing the appraisal, does that mean we have to mail the appraisal by March 28 so that it arrives by April 1?
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We agree with your analysis, but with the proviso that for higher-priced mortgage loans, a different definition of “business day” will apply which may require a different mailing date. Based on the ECOA appraisal regulation and staff commentary, if you are mailing an appraisal to a borrower, it must be placed in the mail six…
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For HMDA reporting purposes, do we need to consider the Illinois High Risk Home Loan Act when reporting whether a loan is a HOEPA loan?
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No, you do not need to consider the Illinois High Risk Home Loan Act’s requirements when reporting for HMDA purposes. The HMDA reporting instructions require you to report whether a loan is subject to the federal Home Ownership and Equity Protection Act of 1994, without reference to state law.
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Under the HOEPA points and fees test, do we need to include title company fees if we have a title company affiliate, even if we use that company only for our commercial closings?
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No. We believe you would have to include affiliate title company charges in the points and fees calculation only if you used your affiliate for that particular loan. The HOEPA regulations permit you to exclude any “bona fide third-party charge not retained by the creditor, loan originator, or an affiliate of either.” 12 CFR 1026.32(b)(1)(i)(D).…
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Under the recent revisions to the Illinois High Risk Home Loan Act, are we correct that the points and fees trigger is now 5% of the loan amount, and that the points and fees calculation now includes everything paid in connection with the transaction?
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We agree that the Illinois expanded the points and fee calculation to include all points and fees “payable in connection with the transaction, other than bona fide third-party charges not retained by the mortgage originator, creditor, or an affiliate of the mortgage originator or creditor.” 815 ILCS 137/10. This expands the points and fees calculation,…
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Are lender paid closing costs excluded from the IHRHLA points and fees test?
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Provided that you are not retaining any portion of the closing costs, we believe that lender paid closings costs would be excluded from the “points and fees” calculation. The Illinois High Risk Home Loan Act (IHRHLA) exempts “bona fide third-party charges not retained by the mortgage originator, creditor, or an affiliate of the mortgage originator…