Topic: Loan Documentation
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We ask mortgage loan applicants to fill out a Civil Union Addendum asking applicants whether they are a party to a civil union or same sex marriage in Illinois or in another jurisdiction. Is this still required, or do we need to update the form?
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We recommend revising the form to reflect that Illinois law now recognizes both same-sex marriages and civil unions (the latter still being available for both same-sex and opposite-sex couples). We do not recommend distinguishing between same-sex marriages and opposite-sex marriages (or same-sex civil unions and opposite sex civil unions), or inquiring about the gender of…
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Where should a seller’s closing protection letter fee be listed on a Closing Disclosure? We require closing protection letters, and the borrower was allowed to shop for the title insurance company.
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In our view, the appropriate place to list a seller’s closing protection letter fee is on page 2, section C of the Closing Disclosure, which is titled “Services Borrower Did Shop For.” Section C is the place to list fees for services that the lender requires and that the borrower was allowed to shop for.…
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We are scanning our loan documents while also saving paper copies of everything. Our file room is overflowing, and we would like to start shredding. What needs to be saved in paper form from a loan file (real estate or consumer)?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA. You should retain copies of records that confer title, including negotiable instruments conferring title (such…
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When a title insurance agent is acting as settlement agent for a residential mortgage closing, do we need to show the agent’s Illinois title insurance license number on the Closing Disclosure?
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Yes, we believe that when a settlement or closing agent is a registered title insurance agent, the Closing Disclosure should display the agent’s Illinois title insurance registration number. Regulation Z’s requirements for the Closing Disclosure include the disclosure of “a license number or unique identifier for each person (including natural persons) identified in the table…
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Is it permissible to include a waiver of homestead exemption rights in the mortgage?
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Yes, it is permissible to include the waiver of homestead exemption in the mortgage document. The Illinois Conveyances Act makes clear that any “deed or other instrument” that contains a clause expressly “releasing or waiving the right of homestead” is sufficient, provided that the “other spouse joins in such release or waiver.” For resources related…
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In Illinois, does a mortgage have to be notarized in order to be valid?
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No, a mortgage does not need to be notarized in order to be valid. The Illinois Conveyances Act addresses the form and substance of a valid mortgage. In one provision, the Act states that a mortgage may be acknowledged by a notary using their official seal. In another provision, the Act states that any instrument…
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When an individual personally guarantees a commercial loan, we require written authorization to pull credit information. Does that authorization expire after a set number of days? Or can we pull a credit report months after receiving written authorization?
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We are not aware of a statutory or regulatory expiration date on a consumer’s written authorization to allow your bank to obtain a credit report. However, in order to clarify the authorization, you may wish to add a provision specifying a certain time period during which you may pull a credit report in connection with…
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For how long should we retain charged off loan files when the borrower has gone through the bankruptcy process, leaving no opportunity for collection?
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We recommend retaining documents related to a charged off loan for at least four years, and in some cases, for as long as ten years. The IRS requires you to report debt cancellations over $600 on Form 1099-C (or, for some secured loans, Form 1099-A) and imposes a four-year retention period for the form or…
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When a borrower pays off a note, do we send him the original note stamped “paid” or should we keep the original note and send the borrower a copy?
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In our view, it does not matter whether you send the original or a copy of the note, provided both are clearly marked as having been satisfied (for example, as in “paid”). We are not aware of any law or regulation that requires lenders to retain or relinquish the original note after a loan is…
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We have a home equity line of credit (HELOC) that was taken out jointly by a married couple. The couple is separated (not yet divorced), and the wife would like to refinance the HELOC. The husband is not on the deed to the house securing the HELOC. Does the husband need to sign the mortgage, right of rescission notice, Truth in Lending disclosures, or the homestead waiver? Is Illinois a community property state?
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No, Illinois is not a community property state. In this case, because the husband is not the borrower and is not on the title to the property securing the HELOC, we believe that his signature is required only regarding any waiver of his homestead rights. However, we do recommend checking with the secondary market purchaser…