Topic: Mortgage Loans
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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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In a residential real estate transaction, if the loan will not close on the date listed in the sales contract between the buyer and the seller, does the sales contract require an extension?
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Whether an extension is required depends on the language in the sales contract. For example, the Residential Real Estate Contract form used by the National Association of Realtors provides that the closing shall be on the specified date or “at such time as mutually agreed upon, by the Parties, in writing.” Such language requires a…
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When a title insurance agent acts as a settlement agent for a residential mortgage closing, we have been tracking down and using their Illinois title insurance registration number in lieu of an NMLS number on the Closing Disclosure. Is this still correct?
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Yes, we believe it is still true that when a settlement or closing agent is a registered title insurance agent, the Closing Disclosure should display the agent’s Illinois title insurance registration number. Regulation Z’s requirements for the Closing Disclosure include the disclosure of “a license number or unique identifier for each person (including natural persons)…
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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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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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We would like to foreclose on a consumer mortgage loan. The borrower’s wife signed the mortgage, but she is not on the title to the mortgaged home and did not sign the loan agreement. The borrower has informed us that he has moved out of the home securing our loan, his wife’s boyfriend has moved in, the home’s condition is deteriorating, and he is done making loan payments. If the borrower signs an affidavit averring that the home is no longer his primary residence, are we still required to wait 120 days before filing for foreclosure?
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No, we do not believe that the 120-day grace period requirement will apply if your bank has an affidavit from the borrower averring that the mortgaged property is not his principal residence. The requirement to delay initiation of foreclosure proceedings until a mortgage loan is more than 120 days delinquent applies only to loans secured…
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Under the Illinois Mortgage Escrow Account Act, do we have to wait until a loan reaches 65% of the original balance before we can cancel an escrow account? We have a customer who has requested cancellation of their escrow account, although they have not yet paid down the balance to 65%, and we would like to accommodate this request.
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Yes, we believe that a bank may terminate an escrow account on the borrower’s request before the outstanding mortgage loan balance is reduced to 65% of the original loan amount, provided that an escrow account is not otherwise required. An escrow account may be otherwise required, for example, “in conjunction with mortgages insured, guaranteed, supplemented,…
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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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Is a final inspection fee included in the APR calculation? Our understanding is that if the final inspection is completed after closing, the fee should be included in the APR calculation. For example, we made a loan to fund an improvement, and we performed a final inspection after the closing to confirm that the value with the improvement was consistent with our “as improved” appraisal.
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Yes, a fee for an inspection that is conducted after the loan closing should be included in the finance charge and annual percentage rate (APR) calculation. Regulation Z excludes from the finance charge calculation “fees for inspections . . . if the service is performed prior to closing” for real estate and residential mortgage transactions.…