Topic: Mortgage Loans
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In Illinois, if a borrower gets married during a foreclosure, does the bank have to start the foreclosure process over? What about in other states? In this case, we do not know if the new spouse is on the title to the property being foreclosed.
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No, we do not believe that it is necessary under Illinois law to re-start the foreclosure process when the mortgagor gets married. Instead, your bank simply may add the new spouse as a party to the existing foreclosure proceedings. It is difficult to determine what specific interest, if any, the new spouse has in the…
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We have an affiliated law firm that provides title services to our bank. The law firm’s owner is the chairman of our board. On the affiliated business arrangement disclosure required by RESPA, do we need to list the owner’s name in addition to the law firm’s name?
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We believe that the affiliated business arrangement (AfBA) disclosure should include the name of your bank’s chairman. RESPA and Regulation X require the AfBA disclosure to include “the nature of the relationship (explaining the ownership and financial interest) between the provider of settlement services (or business incident thereto) and the person making the referral.” To explain the ownership and…
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We send annual RESPA escrow account statements to our borrowers. Do the RESPA notices fulfill the Illinois Mortgage Escrow Account Act’s notice requirements in Section 15 (which requires more information than that included in the RESPA notice, such as a property’s PIN)?
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It depends. The annual escrow account statement required by RESPA by itself will not satisfy the Illinois Mortgage Escrow Account Act’s notice requirements, but it can if you add language to the notice stating that the bank’s contact information in the notice provides a means for accessing the dates and amounts of the borrower’s property…
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We are a state-chartered bank with one branch located in Wisconsin. We underwrite residential loans for community banks in Illinois and purchase and service the loans after closing. In most cases, the originating bank, borrower, and home are all located in Illinois. Occasionally the borrower is a Wisconsin resident purchasing a second home or investment property in Illinois. Do we “operate in Illinois” such that we are subject to the requirements of the Illinois Mortgage Escrow Account Act?
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In our view, it would be prudent to adhere to the law’s requirements for loans for which a borrower and/or the owner-occupied residential property securing the loan is located in Illinois. The MEAA — which imposes a number of notice and disclosure requirements regarding escrow accounts — applies to “each mortgage lender” that “grants or…
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Is there any conflict when a bank employee works as a loan processor and also works as a realtor on the side? In this instance, the employee is not a loan originator or loan officer and performs purely administrative tasks for non-consumer loans. The bank does not pay referral fees or other compensation to the employee for clients who choose the bank for their banking or mortgage needs.
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We are not aware of any law or regulation that would prohibit a bank employee from also working as a real estate broker in her free time, provided that she does not receive any compensation for referring her clients to the bank. In this situation, RESPA’s prohibition on referral compensation would be inapplicable, as the…
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Some of our home mortgage customers “refinance” their loans and use some of the proceeds to improve their current residence or purchase a different property. Our loan document specifically states that the transaction “does not satisfy and release” the original loan note. Are these transactions reportable under HMDA?
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No, we do not believe that these transactions are reportable under the Home Mortgage Disclosure Act (HMDA) and Regulation C, because they are not “extensions of credit.” The HMDA and Regulation C require your bank to report closed-end and open-end extensions of credit. The official interpretations in Regulation C clarify that a modification, renewal, extension,…
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In our view, the 2015 HMDA Final Rule excludes potential asset annuitization and depletion from income reporting. Does that mean that asset annuitization and depletion also should not be used for debt-to-income ratio reporting?
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No, we believe that calculations of the potential annuitization or depletion of an applicant’s assets may be included in debt-to-income HMDA reporting, pursuant to the 2017 HMDA Final Rule that was published in September 2017. We agree that the official comments to Regulation C require reporting institutions to exclude the potential annuitization or depletion of…
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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 serve as a correspondent bank for other local community banks on home mortgage loans. Those banks accept loan applications in their names and forward the applications to us to review. For each application that we receive from them, we pull credit reports, run the application through our underwriting systems, and provide a list of conditions that must be met for us to purchase the loan. The other bank closes the loan in its name, initially funds the loan, and then sells the loan to our bank. Under the new Home Mortgage Disclosures Act (HMDA) final rule that takes effect this year, should we report these applications as submitted to our institution? Should we report these loans as initially payable to our institution?
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Based on the facts provided, we believe you should indicate that the applications are not submitted directly to your institution. For “origination” loans, the 2015 HMDA Final Rule requires you to report whether the application was submitted directly to your bank (identified in new data field number 93). The Official Interpretations explain that a financial…
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If we accept a home mortgage loan application via email, should we treat the application as received by mail or internet under Regulation C?
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We believe that you should treat an application received by email as received by mail, unless the email application includes a video component. With respect to reporting an applicant’s ethnicity, race, and sex, Appendix B to Regulation C states that “if you accept an application through electronic media without a video component (for example,…