Topic: Loan Documentation
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How should we classify a rate-lock extension fee on a revised Loan Estimate? Is it considered an “origination charge”? We charge this fee when we extend the time period for a rate-lock.
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Yes, a rate-lock extension fee is an origination charge. Under Regulation Z, “origination charges” include each amount that the consumer will pay to the creditor for originating and extending the credit. Such items may include, for example, “application fee, origination fee, underwriting fee, processing fee, verification fee, and rate-lock fee.” As an extension of the…
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For an auto loan, we charge a document preparation fee and a lien recording fee. Both fees are added to the loan amount requested and then withheld from the amount given to the borrower. Are either of these fees considered a finance charge or a prepaid finance charge? Should we include the fees in the amount financed?
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We believe that a document preparation fee would be considered a finance charge, as it would not be charged in a comparable cash transaction and is not otherwise exempted from the definition of a finance charge (because the loan is not secured by residential real estate). In addition, the document preparation fee is a prepaid…
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Does a non-borrowing spouse need to sign the Closing Disclosure for a purchase mortgage loan if the spouse is listed on the title to the property securing the loan? We would have the spouse sign the mortgage.
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No, Regulation Z does not require a non-borrowing spouse to sign a Closing Disclosure. In fact, Regulation Z does not require any signatures on the Closing Disclosure — obtaining signatures on the Closing Disclosure form is optional. In addition, because the non-borrowing spouse is not entitled to the right of rescission on a purchase transaction,…
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Can we modify a matured loan? In some cases, a loan matures and then we perform a collateral review and pull credit and wish to modify the loan. Is that permissible?
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Yes, you may modify a matured loan (unless some provision in the loan agreement prevents you from modifying the loan’s terms). In addition, if you structure the loan modification documents correctly, it may fall outside of Regulation Z’s definition of a “refinancing,” eliminating the need to provide new loan disclosures. The Seventh Circuit has considered…
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A compliance firm told us that we are required to disclose the name and license number for the settlement agent and a contact person on page five of the Closing Disclosure. But our title company told us that they do not obtain NMLS numbers for individual agents. Are we required to list NMLS numbers for a title agent if the agent has not obtained one?
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No, we do not believe that you need to include an NMLS number for title agents who have not obtained a license from the state of Illinois. The Official Interpretations of the Closing Disclosure rules state that if a person does not have an NMLS ID, then that space in the Closing Disclosure simply is…
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We had a residential mortgage closing scheduled for Saturday, but the borrowers did not show up. They plan to come in tomorrow for the closing, instead. All of the loan documents, including the closing disclosures, have Saturday’s date. Can we simply change the date on all the loan documents? Do we need to re-issue the closing disclosures to reflect the new closing date? If so, do we have to wait three days for the closing?
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You must provide the customer with a new closing disclosure reflecting the revised closing date. However, you do not need to wait three days to hold the closing. In general, creditors must provide consumers with closing disclosures no later than three business days before closing. It is only necessary to restart the three-day waiting period…
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A mortgage loan applicant has not signed the intent to proceed document that we provided with the early loan disclosures. Our policy and procedures state that we will not order an appraisal or obtain other documentation until we receive the signed intent to proceed. How should we proceed? Should we provide an adverse action notice?
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Regulation B requires you to provide either a notice of incompleteness or an adverse action notice (a “denial for incompleteness”). Because the applicant has not provided a signed intent to proceed, which is required by your policy and procedures, we believe that you should treat the application as incomplete for Regulation B purposes (a different…
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What is the record retention requirement regarding loan documents with original signatures from the borrower? Does the original document need to be retained, or can it be scanned and retained electronically?
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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. The general rule under Illinois law is that electronic versions of documents have “the same…
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We have a customer with an existing balloon mortgage loan that was originated in 2008 and is coming up for renewal soon. If we renew this loan, will it fall under the TRID requirements?
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We believe that you may renew a balloon loan before its maturity date without it falling within Regulation Z’s definition of a “refinancing” (which would require new disclosures under the TRID requirements). However, the language that you use in the loan modification documents is important in order to achieve this result. The general rule is…
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If the US Department of Agriculture (USDA) loan guarantee fee for a consumer mortgage decreased by one penny after we issued our Loan Estimate, do we need to issue a revised Loan Estimate to reflect that change? We do not know why there is now a one-cent difference, but we believe it was a software rounding issue. There are no other changes to the closing fees and costs.
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No, the TILA-RESPA Integrated Disclosure (TRID) rules do not require you to issue a revised Loan Estimate simply due to a one-cent decrease in a USDA loan guarantee fee. Regulation Z permits creditors to issue revised Loan Estimates only in certain situations such as when changed circumstances result in increased charges. In this case, you…