Topic: Mortgage Loans
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Our promissory notes for HELOCs and consumer installment loans indicate that payments made after 2:00 p.m. will be processed on the next day. Our residential mortgage notes do not have a cut-off time. Do we need to specify a cut-off time? If so, what would be a reasonable time? Should the cut-off time be included in the note, monthly statements, or somewhere else?
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No, you are not required to establish a cut-off time for processing consumer loan payments. However, if you do establish a cut-off time for when payments are received for HELOCs or closed-end residential mortgages, the time must be “reasonable.” By rule this means that for HELOCs your cut-off time cannot be before 5:00 p.m., and…
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We obtain credit reports from a third party vendor. On the Loan Estimate for consumer mortgage loans, do we have to disclose and charge the exact fees expected to be charged by the vendor, or are we permitted to round up this fee?
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Regulation Z requires lenders to round credit report fees to the nearest whole dollar on the Loan Estimate. Amounts ending in $0.49 or under must be rounded down, and amounts ending in $0.50 or up must be rounded up. Under both Regulation X and Regulation Z, the general rule is that a lender must charge…
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We read that the Illinois Department of Financial and Professional Regulation (IDFPR) repealed its rules regarding the Predatory Lending Database Program. Does this mean that a Certificate of Exemption is no longer required for covered transactions?
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No, a Certificate of Compliance or a Certificate of Exemption still needs to be filed for covered mortgages. You are correct that the IDFPR’s administrative rules for the Predatory Lending Database program were repealed, effective August 28, 2017. However, the law establishing this program — the Residential Real Property Disclosure Act (Act) — has not been repealed. The Act,…
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Do the TILA-RESPA Integrated Disclosure (TRID) rules require disclosures for a consumer-purpose, construction-only loan to build a home from the ground up, where the borrower will obtain permanent financing at a later date? What if we extend the maturity date for this loan without extending new money or changing any other terms? Also, would this loan be reportable under the Home Mortgage Disclosure Act (HMDA)? Would the extension be HMDA reportable?
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TILA-RESPA Integrated Disclosure (TRID) Requirements Yes, the TRID disclosures are required for closed-end, consumer-purpose construction loans secured by real property. However, whether they would be required when you extend the term of an existing loan depends on the language you use in the extension agreement. TRID disclosures are required for existing loans only when they…
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Are borrowers required to purchase their residence at least six months before they are eligible for a cash-out refinance? Is a “24 month chain of title” required on title commitments for cash-out refinances?
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We are not aware of any law or regulation that requires a borrower to have purchased their property at least six months before obtaining a cash-out refinancing. Likewise, we are not aware of any requirement for a lender to obtain a “24 month chain of title” report prior to a refinancing. However, we do note…
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We recently converted to a new loan servicing platform, and we are in the process of transferring servicing rights from our bank to a separate mortgage company, without transferring the underlying loan. We will send out the required notice of servicing transfer. Are we required to complete an assignment of mortgage?
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If your bank is transferring only the servicing rights and not the loans themselves, you likely do not want to be assigning title to the mortgages to the servicer. Typically, an assignment of a mortgage transfers ownership of a loan, and that does not appear to be your bank’s intent. For resources related to our…
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If we make a loan on secured by three different condominium units all located in the same building, do we need a separate flood determination (also known as a flood certificate) for each unit? All three units are located in the same building, under one address, and all three are being purchased simultaneously.
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No, we believe that obtaining one flood determination for the building will be sufficient, unless more than seven years have passed or the applicable flood maps have been revised since the original flood determination was obtained. The flood insurance regulations require lenders to obtain a flood determination whenever a building (or mobile home) will be…
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We have a business customer who is using a line of credit to purchase condominium units within a large complex, without buying the entire complex. The complex consists of multiple two-story buildings, with several units in each building. Each building has its own address. The borrower is purchasing the units as they become available, and each new purchased unit will secure the line of credit. When the borrower purchases a unit, we do not order a new flood determination if we have previously ordered one for another unit in the same building. Is obtaining one flood determination for each building sufficient? Or should each unit have a separate flood determination (also known as a flood certificate)?
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No, we believe that obtaining one flood determination per building is sufficient, unless more than seven years have passed or the applicable flood maps have been revised since the original flood determination for that building was obtained. The flood insurance regulations require lenders to obtain a flood determination whenever a building (or mobile home) will…
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Does the Mortgage Escrow Account Act (MEAA) apply to commercial loans or refinancings? Also, does it apply when we originate a loan with a loan-to-value ratio under 65%? For example, what if the property is worth $100,000, but we make the loan for $50,000 (a 50% loan-to-value ratio)?
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No, we do not believe that the MEAA applies to commercial loans or refinancings. The MEAA applies only when mortgage lenders extend a loan or service a loan made for the purpose of purchasing a “single-family owner occupied residential property.” Note, however, that the MEAA applies to loans within its scope regardless of their loan-to-value…
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We want to sell a commercial real estate note. How much notice (if any) do we have to provide to the borrower?
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We are not aware of any law or regulation that requires any particular notice to the borrower when selling a commercial real estate note. Consequently, any notice requirements likely will be governed only by your loan agreement.