Topic: Loan Documentation
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Is it permissible to include the loan number on recordable documents such as the mortgage? Is there a reason why we should or should not include the loan number on recorded documents?
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Yes, it is permissible to display your bank’s internal loan number on recorded documents such as mortgages. An interagency interpretive letter confirms that placing a borrower’s account number on recorded documents does not violate the privacy provisions in the Gramm-Leach-Bliley Act and Regulation P, under an exception for actions “necessary to effect, administer, or enforce…
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What are the Illinois usury rates that apply to banks for commercial loans, agricultural loans, and consumer loans (whether unsecured or secured by a home or vehicle)? We believe that the Illinois Interest Act sets a 9% maximum interest rate.
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There are very few limitations on interest rates charged by banks under Illinois law, whether for consumer or commercial loans, and whether secured or unsecured. Of course, any interest rates and fees must be agreed to by your customers in your loan agreements, and some other limitations will apply only in certain situations, such as…
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Do we have to send the Illinois Civil Union and Same-Sex Marriage Addendum to the Uniform Residential Loan Application (URLA) form to every applicant, or only those who mark “single” on the URLA? Is there any particular disclosure that we must provide at closing for members of a civil union?
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The Illinois Civil Union and Same-Sex Marriage Addendum is not required for any applicant, but we believe using such a form is helpful in all residential real estate transactions in order to identify individuals who may have relevant property rights and interests. Whether your bank wishes to send the form to applicants who have indicated…
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We purchase loans from third-party correspondent banks. These banks receive and complete residential mortgage loan applications and send them to us for review. We make the credit decision and then purchase the loans. In the past, we have reported these loans as “originated” under the Home Mortgage Disclosures Act (HMDA). Does that change under the new HMDA final rule that took effect this year? Do we report that these applications were submitted directly to our bank?
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We believe that your bank should continue to report such loans as “originated” under the 2015 HMDA Final Rule that took effect January 1, 2018. The 2015 HMDA Final Rule added new Official Interpretations to clarify a bank’s reporting responsibilities in transactions involving more than one financial institution: “[T]he financial institution that made the…
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What do we use to determine the “Loan Term” on a Loan Estimate and Closing Disclosure, the date of loan or the date the first payment is due?
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The “loan term” is the term of the debt obligation. The borrower typically incurs the debt obligation on the date the loan is made, regardless of when the first payment is due. Consequently, we believe that you should use the date the loan is made — not the date of the first payment — to…
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We required a borrower to pay off existing credit card balances as a condition of receiving a loan to purchase a new home. The payoff will not be deducted from the loan proceeds; the borrower will pay off the debt out of pocket at the closing. Where should we list the credit card payments on the Closing Disclosure?
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We believe the appropriate place would be Section K, Line 04 — Due from Borrower at Closing. In our view, there are no provisions in Regulation Z that directly address whether and where to disclose the payoff of a borrower’s credit card balance prior to their receipt of a loan on a Closing Disclosure. However,…
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A customer would like a loan to purchase a mobile home that will be affixed to his land and to pay off an existing loan secured by the land. The loan amount will be the purchase price of the mobile home plus the payoff amount of mortgage, which is held by another bank. Where do we list the land mortgage payoff amount on the Calculating Cash to Close table on the Loan Estimate?
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For a purchase transaction, we believe that the payoff amount for the land mortgage loan is part of the calculation used to determine the amount that should be placed on the “Closing Costs Financed” line of the Loan Estimate’s Calculating Cash to Close Table. To calculate “Closing Costs Financed” for a purchase transaction (other than…
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We are looking into providing a financial incentive for borrowers to timely provide us with their loan documentation (financial statements, tax returns, etc.). For example, a borrower would receive $500 (or a $500 reduction in the loan principal) for providing their rent roll by a certain date. If a borrower fails to meet this deadline, then no incentive would be provided. Are there any regulations that we should consider?
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We are not aware of any statutory or regulatory limitations on paying incentives to borrowers who provide certain loan documents by timelines set by the bank, assuming that this program is applied equally to all customers for a particular loan product. We do recommend providing the terms of this program in writing and reviewing those terms…
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If a bank advertises in Spanish, does it have to provide loan documents in Spanish?
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No, we do not believe that advertising in Spanish obligates a bank to provide loan documents in Spanish. However, you should be aware of two statutory notice requirements in Illinois relating to residential mortgage foreclosures. One requirement applies to all foreclosure filings, and one requirement applies to foreclosures of residential rental properties located in the…
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We understand that Fannie Mae and Freddie Mac have redesigned their Uniform Residential Loan Application (URLA). Is their revised URLA available for use yet?
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The revised Uniform Residential Loan Application (URLA) has been published, but banks may not begin using the revised ULRA until July 2019. The government sponsored enterprises will require the use of the revised ULRA for all new loan applications in February 2020. For resources related to our guidance, please see: Uniform Residential Loan Application (URLA)…