Topic: Mortgage Loans
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An individual has applied for a loan to purchase a two-unit mixed purpose building, which will secure the loan. He plans to make one unit his primary dwelling and rent out the other unit (a store front with a workshop and back office). We will not be using any commercial income in the underwriting. Does this loan require the TILA-RESPA Integrated Disclosures (TRID)?
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We believe that in most cases, a loan secured by a two-unit building that will be owner-occupied should be treated as a consumer-purpose loan subject to the TRID requirements. The TRID requirements apply to most closed-end consumer credit transactions that will be secured by real property. This loan will be secured by real property, and…
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On a consumer construction loan that closed nearly a year ago, we disclosed fees for six inspections related to an estimated six draws. These six fees were disclosed on the closing disclosure as “services the borrower did not shop for” and were collected at the loan closing. The borrower now has taken more than the estimated six draws, incurring additional, undisclosed inspection fees. Under Regulation Z, can we collect those fees?
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In our view, the new fees do not create a tolerance violation under Regulation Z, and you may charge the borrower for the fees, provided that such charges do not violate your loan agreement. In general, construction inspection fees are loan costs subject to the good faith tolerances for the category in which they fall.…
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Can we disburse new funds on a closed-end commercial loan through a loan modification? For example, if a commercial customer has secured a $100,000 loan and pays down $20,000, can that customer later receive another $10,000 disbursement on the same loan through a modification?
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We are not aware of any laws that would prohibit modifying a commercial loan to allow for additional disbursements, but we recommend consulting with bank counsel to address certain risks created by this type of modification. At the outset, it would be prudent to ensure that either your original security agreement or your modification documents…
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An individual from Argentina would like a business loan to purchase an office building here in the U.S. The loan would be secured by a mortgage on the building, as well as by some funds that will be wired to us from Argentina. Are there any BSA concerns with making a loan to such a customer?
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Before engaging in a transaction with a foreign national, your bank should first check the Office of Foreign Assets Control (OFAC) database to ensure that the individual and his business are not specially designated nationals that your bank would be prohibited from dealing with. In addition, the FFIEC’s BSA/AML Examination Manual includes a concise description…
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We have a business purpose loan that we are going to refinance, with cash out to improve the business (a restaurant). The collateral for the existing loan and the refinance is an assignment of beneficial interest in a land trust, which contains two restaurants and a single-family dwelling. Is this reportable under the Home Mortgage Disclosure Act (HMDA) in 2018?
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Yes, we believe that this dwelling-secured loan is reportable under the new HMDA rules that became effective in 2018. We believe that a loan secured by an assignment of a beneficial interest in a land trust should be treated as secured by a dwelling, provided that the land trust holds a dwelling. Under the new…
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We understand that the Mortgage Escrow Account Act applies only to single-family, owner occupied residential properties. Does the law include any criteria to help determine when a residential property is “owner occupied”? For example, would a vacation home be covered by the Act?
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No, there are no provisions in the MEAA that outline the criteria for a property to be considered “owner occupied,” and we are not aware of any court cases that have clarified MEAA’s “owner occupied” requirement. In order to comply with MEAA, then, your bank will have to establish its own method to determine the…
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We are extending a residential mortgage to a customer who also has obtained down payment assistance loan from the Illinois Housing Development Authority (IHDA), which has told us that we are responsible for preparing their Loan Estimate (LE) and Closing Disclosure (CD). The IHDA loan is junior to our loan and is subject to 0% interest. How should we fill out the LE and CD? Our forms vendor will not prepare an LE and CD with a $0 payment and 0% interest.
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Under a recent Regulation Z amendment, we believe that this down payment assistance loan may qualify for an exemption from the LE and CD requirements. Regulation Z includes an exemption from the LE and CD requirements for certain housing and down payment assistance loans, allowing the use of a more streamlined disclosure (the “TIL disclosure”)…
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We made a loan to a business entity to purchase a 35-unit apartment complex. The loan is secured by all 35 units. The loan is a covered purchase loan under the 2017 HMDA Final rule. Do we report this as secured by 1 unit or 35 units? Also, should we report the interest rate, combined loan-to-value (CLTV) ratio, and property value for this loan?
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For loans secured by multi-unit dwellings, the 2017 HMDA Final Rule and its Official Interpretations provide that lenders should report the total number of individual dwelling units securing the loan, which in this case would be 35. The 2017 HMDA Final Rule also requires lenders to report the value of the property and the…
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Can we establish a 3:00 p.m. cut-off time to receive residential loan payments, even if we are open until 4:00 p.m.? When do we have to post home loan payments that we receive on days that we do not process payments?
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We believe that you may establish a 3:00 p.m. cut-off time for receiving (and crediting) payments on closed-end residential loans, but not for receiving (and crediting) payments on open-end residential loans. When you establish a cut-off time for when loan payments are considered received, the cut-off time must be “reasonable.” For open-end loans secured…
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Does Illinois law require us to include an NMLS number on our residential mortgage loan advertisements?
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No, Illinois law does not require banks to include NMLS numbers in residential mortgage loan advertisements. The Illinois Residential Mortgage License Act of 1987 requires mortgage loan originators who do not work for financial institutions to display their NMLS numbers on “all residential mortgage loan application forms, solicitations, and advertisements, including business cards and websites.”…