Topic: Mortgage Loans
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We have a borrower with a contract to purchase a modular home from a manufacturer. The Loan Estimate indicated that the purpose of the loan was for a purchase. However, we recently learned that the borrower has already acquired title to the land where the modular home will be located from their parents by quitclaim deed. Both the modular home and the land will be collateral for the loan. No funds will be disbursed at the closing. The manufacturer will be paid as the units of the modular home are delivered. Can we change the stated purpose of the loan on the Closing Disclosure to “construction,” since the borrower is not purchasing the land?
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In our view, the loan purpose should be identified as a purchase on the Closing Disclosure (CD). The TRID rules require lenders to identify one of four possible loan purposes in the Loan Estimate (LE) and CD: (1) purchase, (2) refinance, (3) construction, or (4) home equity. A purchase loan is one made to finance…
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Is it true that a seller credit for property taxes should be shown on only the Closing Disclosure (CD) and not the Loan Estimate (LE)? Or should a tax credit be reflected in the “Adjustments and Other Credits” section of the LE?
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You may choose whether to disclose a property tax credit on the LE if the credit is for taxes that will be due before the first scheduled loan payment or within sixty days after the closing date. However, if the credit is for taxes that will not be due until more than sixty days after…
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In Illinois, is there a time requirement for filing a release of mortgage after a loan is paid off? If so, does this still apply if the mortgage has a cross-collateralization clause and the bank has additional loans with the borrower? Also, are we required to file the release of mortgage with the recorder of deeds, or may we provide an unrecorded release of mortgage to the mortgagor for recording?
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The Illinois Mortgage Act requires that mortgagees take one of three alternative actions within thirty days after “full satisfaction and payment of all . . . sum or sums of money as are really due . . . from the mortgagor”: Deliver the release to the county recorder. Deliver the release to the mortgagor,…
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For closed-end mortgage transactions, we use a company to verify a borrower’s employment using their work phone number. The company charges a fee for this verification service, which we pass on to the borrower. We have been listing this fee in “Section B” of the Loan Estimate (LE) and Closing Disclosure (CD), since the borrower cannot shop for these services. Would this fee be considered a prepaid finance charge or is it just a finance charge?
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First, we agree that an employment verification fee would be considered a finance charge, since it would not be charged in a comparable cash transaction and does not fall into any of the categories that are exempted from the definition of finance charge. Whether it is a prepaid finance charge depends on how it is…
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We are updating the fields in our LaserPro system for end-of-year HOEPA triggers, and there are fields to enter the HOEPA triggers for first lien non-real estate loans less than $20,000 and greater than or equal to $20,000. Where can I find these thresholds?
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The HOEPA (i.e., high-cost mortgage loan) points and fees trigger is based on whether the loan amount is less than an inflation-adjusted threshold of $20,000, or greater than or equal to the inflation-adjusted threshold of $20,000. For 2019, that threshold was $21,549. For 2020, that threshold is $21,980. Additionally, for transactions that are less than…
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Are we still required to provide a Civil Union and Same-Sex Marriage Addendum to our Uniform Residential Loan Applications? The Addendum notifies a borrower that we may require their partner or spouse to sign the security instrument and other documentation that secures the repayment of the loan.
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No, you are not required to provide the Civil Union and Same-Sex Marriage Addendum to your Uniform Residential Loan Applications. However, using this addendum may be helpful in residential real estate transactions to identify individuals who may have relevant property rights and interests (such as the homestead rights of an individual who has entered into…
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Is there a restriction on the maximum lien amount that may be listed in a mortgage — for example, “twice the loan amount?” Have there been any cases where listing more than twice the loan amount has been challenged?
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We are not aware of any restrictions on the maximum lien amount that may be listed in a mortgage, nor of any restrictions that would limit the maximum lien amount to twice the loan amount. Illinois courts generally have upheld “cross-collateralization” clauses in security agreements to secure future debts, provided the clauses are “clear and…
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Is there an escrow requirement when a small lender refinances a higher-priced mortgage loan (HPML)? We have a loan for which an escrow was not established at origination that now qualifies as an HPML. Also, would the HPML escrow requirement apply to the refinancing of a business purpose loan secured by a principal dwelling?
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We believe that a small creditor would be subject to Regulation Z’s escrow requirement when refinancing an HPML, unless an exception applies, as discussed below. However, the HPML escrow requirement would not apply to the refinancing of a commercial purpose loan, since the HPML regulations apply only to consumer loans. Regulation Z defines an HPML,…
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Can a small lender extending a higher-priced mortgage loan (HPML) under $250,000 use a broker price opinion or in-house valuation, or is an appraisal required?
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Appraisals are required for HPMLs unless an exception applies, as discussed below. Regulation Z generally requires lenders to obtain written appraisals for HPMLs, but it contains eight exceptions to the HPML appraisal requirement. Exceptions include loans that meet the criteria for a qualified mortgage (QM) loan, loans that do not exceed $27,200, loans secured by…
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Do the escrow requirements for higher-priced mortgage loans (HPML) apply to both property taxes and insurance? Or can a borrower with an HPML escrow only for taxes?
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Regulation Z’s escrow requirements for HPMLs generally apply to both property taxes and insurance, subject to the exceptions below. Regulation Z provides that a creditor may not extend an HPML “secured by a first lien on a consumer’s principal dwelling unless an escrow account is established before consummation for payment of property taxes and premiums…