Topic: Mortgage Loans
-
Is there a new law or regulation in Illinois that requires homes to be certified as energy efficient? We are trying to determine whether a new construction home will need to be inspected and certified.
—
by
Yes, construction of a new residence generally must be certified to be in compliance with the Illinois Energy Conservation Code, unless an exemption applies. The Illinois Energy Efficient Building Act and its administrative rules require residential construction projects that require building permits to adhere to a comprehensive statewide energy conservation code. The local unit of…
-
Is there a restriction on charging a “payoff processing fee,” such as when providing a payoff statement to an outside entity like a title company, for a loan that is not a high-cost mortgage loan? If so, should the payoff processing fee be disclosed in the loan documents?
—
by
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 a payoff processing fee, provided the borrower has agreed to the fee in the loan documents. The Illinois Banking Act permits banks to charge any fees, interest and other charges based…
-
Can our bank receive a fee for referring commercial loan customers that our bank cannot accommodate to a lending network? We do not pass on the customers’ information to the network. When we know that we cannot accommodate a customer with a commercial loan, we provide the customer with contact information for the lending network. If the customer can find financing through the network, we receive a referral fee.
—
by
Yes, we believe that your bank may accept a fee for referring commercial customers to a lending network. We are not aware of any Illinois or federal laws that would prohibit such an arrangement, and because these are commercial loans, RESPA’s limitations on referrals do not apply. In addition, because your bank does not disclose…
-
Is a short-term bridge loan to purchase a primary residence that will be secured by the borrower’s current and new residence subject to the TILA-RESPA Integrated Disclosure (TRID) requirements?
—
by
Yes, the TRID requirements apply to all closed-end consumer credit transaction secured by real property (other than a reverse mortgage). There is no exception to the TRID requirements for a short-term, temporary bridge loan. Certain bridge loans are exempt from certain other Regulation Z requirements (including some of the ability-to-repay (ATR) and qualified mortgage (QM)…
-
Do we have to disclose an owner’s title insurance premium on the Loan Estimate and Closing Disclosure when we know that this will be paid by the seller? We require owner’s title insurance and allow the borrower to shop for it, but typically the seller pays for the premium. If we do not disclose the premium on a Loan Estimate, wouldn’t this create a tolerance issue when including it on the Closing Disclosure?
—
by
Disclosing a seller-paid premium for owner’s title insurance on the Loan Estimate is optional, but you must disclose this fee on the Closing Disclosure. With respect to the Loan Estimate, Regulation Z’s Official Interpretations provide lenders two options for disclosing the seller-paid premium for an owner’s title insurance policy. If the lender knows that the…
-
If a closed-end loan has a combined purpose to purchase a manufactured home and to construct a basement for the home, what should we list as the loan’s purpose on the Loan Estimate? Does it matter if the loan will be structured as a short-term loan with three separate advances? The manufactured home will secure the loan.
—
by
In our view, you should identify the loan as a purchase loan, regardless of how it is structured. The TRID rules require lenders to identify just one of four possible loan purposes in the Loan Estimate: (1) purchase, (2) refinance, (3) construction, or (4) home equity. A purchase loan is one made to finance the acquisition…
-
What should we list as the loan purpose on the Loan Estimate under the TILA-RESPA Integrated Disclosure (TRID) rules for a closed-end loan to purchase a manufactured home that will be attached to land? The borrower already owns the land, and the loan proceeds will be used to purchase a modular manufactured home to be placed on the land, but a portion of the loan also will be used to build a basement, porch and garage for the manufactured home. The loan will be secured by both the manufactured home and the land it will sit on. Is this a purchase loan or a construction loan?
—
by
In our view, the purpose of this loan should be identified as a purchase. The TRID rules require lenders to identify just one of four possible loan purposes in the Loan Estimate: (1) purchase, (2) refinance, (3) construction, or (4) home equity. We believe that “construction” is inapplicable for two reasons. First, the purpose of construction is…
-
When we make payments for taxes or insurance from a borrower’s escrow account, we are charged a fee for making the payments electronically. Can we pass the electronic payment fees on to the borrower? Or should our bank absorb that cost because we choose to make the payments electronically instead of mailing a check?
—
by
Yes, we believe your bank may pass on the costs of these electronic payment fees to your borrowers, although to receive maximal protection under Illinois law, you should ensure that your customer agreements contain language that encompasses such passed on charges. Neither federal nor Illinois law prohibits charging borrowers any fees imposed on the bank…
-
We have a higher-priced mortgage loan that is in foreclosure. There are not enough funds in the escrow account to pay the hazard insurance policy premiums. Do we have to keep paying the premiums? The borrower has not responded to our notices about the escrow account shortage or a request to discuss the possibility of finding a cheaper insurance policy. We qualify as a small servicer, but we typically do not force place hazard insurance because we have a blanket insurance policy to protect our collateral interest whenever a borrower’s hazard insurance policy lapses.
—
by
No, neither federal nor state law requires your bank to continue paying the premiums or to force-place the insurance. However, you should review the terms of both your loan documents and your blanket policy to ensure that you haven’t committed to force-place insurance before making a claim against the blanket policy. Regulation X requires your…
-
We are planning an advertisement for closed-end residential mortgage loans that will include the phrase “low downpayment.” Does that phrase trigger additional disclosures under Regulation Z?
—
by
No, we do not believe that the phrase “low downpayment” in an advertisement for mortgage loans would trigger the additional advertising disclosures required under Regulation Z. Regulation Z requires additional disclosures to be provided with advertisements that include trigger terms such as “the amount or percentage of any downpayment.” However, the definition of “downpayment” is…