Topic: Home Equity Line of Credit (HELOC)
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We assess a “fax/email” fee when sending payoff statements for home equity lines of credit (HELOCs). When disclosing this fee at origination, is it sufficient to state that the fee will be charged, or do we need to provide the amount of the fee in the disclosure? We will ensure that the fee we assess is reasonable given the CFPB’s scrutiny of “junk fees.”
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We recommend disclosing the amount of the fax/email fee at origination if it is known. Although Regulation Z does not expressly require creditors to disclose the amount of fees associated with payoff statements, it does require you to explain how the fee amount will be determined. For HELOCs, Regulation Z requires creditors to disclose an…
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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?
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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…
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In the past, we have not disclosed lien release fees for a HELOC at origination as required by Regulation Z. We sometimes offer a change in terms agreement at the maturity of an account, for example after five years, instead of a rewrite of the loan. In the change in terms agreement, can we add language related to the future release fee and meet the disclosure requirement in Regulation Z, or should this have been included in the original disclosures and loan agreement?
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No, we do not believe that adding language to a change in terms agreement allowing you to charge a lien release fee would satisfy Regulation Z’s requirement to disclose such fees at account opening. For home-equity plans, Regulation Z states that creditors must disclose at account opening “the circumstances under which a finance charge will…
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How can we properly disclose at the origination of a home equity line of credit (HELOC) what the release fee will be when the loan is terminated? We are aware that such fees are allowable in Illinois, but we can’t say with certainty what the amount will be, and the fees vary by county.
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We do not believe you are required to disclose the exact amount of the release fee at the HELOC’s origination. Rather, you can disclose the existence of the release fee and explain how it will be determined. For home-equity plans, Regulation Z states that creditors must disclose at account opening “the circumstances under which a…
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How can we properly disclose at the origination of a home equity line of credit (HELOC) what the release fee will be when the loan is terminated? We are aware that such fees are allowable in Illinois, but we can’t say with certainty what the amount will be, and the fees vary by county.
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We do not believe you are required to disclose the exact amount of the release fee at the HELOC’s origination. Rather, you can disclose the existence of the release fee and explain how it will be determined. For home-equity plans, Regulation Z states that creditors must disclose at account opening “the circumstances under which a…
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A borrower has asked if we can increase the maximum loan limit on a maturing HELOC to save them the time and fees associated with obtaining a new loan. The borrower also would like to extend the maturity date and change the interest rate from variable to fixed. Is this possible?
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Yes, we believe it is possible to modify the terms of an existing HELOC before maturity to increase the loan limit, extend the maturity date, and change the interest rate from a variable rate to a fixed rate — provided the borrower signs a modification agreement reflecting these terms and they receive a notice of…
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Must a flood certificate always be pulled ten days before a loan closing? The OCC’s Comptroller’s Handbook states that “the agencies generally regard 10 days as a reasonable time interval.” Are there any exceptions to this rule for refinances or HELOCS when a flood certificate has already been pulled for a different loan? What about commercial loans that must generally close more quickly than other loans?
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No, we do not believe a flood certificate must always be pulled ten days before a loan closing. However, we are unaware of any specific exceptions to Regulation H’s requirement to deliver special flood hazard notices within a reasonable time. Regulation H requires that delivery of notice of special flood hazards be provided to borrowers…
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When extending a home equity line of credit (HELOC) secured by property held in a land trust for which our bank is the trustee, must our bank sign the loan documents as trustee for the land trust? LaserPro creates loan documents (such as the HELOC agreement and disbursement request) with signature lines for the borrower individually and for our bank as trustee. While we require borrowers sign these documents, our loan department would like to leave the trustee signature lines blank.
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Since the land trustee is the legal titleholder of the property being mortgaged, we believe your bank should sign the mortgage as trustee of the land trust. However, we do not believe it is necessary for your bank to sign the note or other HELOC documentation that does not affect title to the property. In…
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Are we required to provide a list of homeownership counseling organizations to applicants for Home Equity Lines of Credit (HELOCs)?
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Yes, Regulation X’s requirement to deliver a list of homeownership counseling organizations to loan applicants applies to HELOCs. For HELOCs that are federally related mortgage loans subject to both Regulation X and Regulation Z, you may comply with the Regulation X requirement to deliver the list no later than three business days after you receive…
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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?
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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…