Topic: Mortgage Loans
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A commercial borrower in Wisconsin is in default, and we have a lien on their real property, which we are contemplating foreclosing. However, the borrower has failed to submit a substantial amount of sales tax to the Wisconsin Department of Revenue, which recently filed liens against the same property. We contacted the Department of Revenue, and they asked us how much we would pay for them to release their liens. Is our lien superior to the Department of Revenue’s liens, and can we potentially foreclose them out?
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While we are not experts on the laws of states other than Illinois, it appears that Wisconsin law provides that mortgages executed to a state or national bank that have been “duly recorded” have “priority over all liens upon the mortgaged premises . . . except tax and special assessment liens filed after the recording…
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Can our loan officers notarize borrowers’ signatures on mortgages and deeds of trust? Our bank heard that a law was passed in Illinois prohibiting this, but we do not know if it has become effective.
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Disclaimer: The IBA has received information from the Office of the General Counsel for the Illinois Secretary of State that changes our guidance on this question. Please review this Q&A for our most recent guidance on this subject. No, loan officers are not currently prohibited from notarizing borrowers’ signatures on mortgages and deeds of trust…
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Our bank partners with a third-party originator that refinances home mortgage loans. We underwrite these refinancings and purchase the loans from the third-party after the closing. Do we need to complete a “Tangible Net Benefit Form” when purchasing these loans, even though we are not considered the lender when the loan closes? Because we prepare closing documents on behalf of the third-party originator, should we be completing the “Tangible Net Benefit Form” for them? Also, would we be violating any law or regulation if we refinance a mortgage without completing a “Tangible Net Benefit Form” to remove a borrower due to a divorce? If this occurs, would we be protected if we keep the divorce decree on file to show that the refinance was justified?
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Because the Illinois Fairness in Lending Act applies to any entity that “assists” with a refinancing, we recommend working with your third-party originator to ensure that their refinancings result in a tangible net benefit to the borrower if you will be assisting in the refinancings and receiving related fees. The Illinois Fairness in Lending Act…
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Do we need to complete a “Net Tangible Benefit Form” under the Illinois Fairness in Lending Act and Illinois High Risk Home Loan Act when refinancing a home loan, even if we are not the original creditor? Does the Illinois Fairness in Lending Act’s net tangible benefit requirement apply to all financial institutions in Illinois, or does the collateral property’s location matter? If we decide to refinance a home loan that we did not originate, how can we ensure that the refinance is beneficial when we have limited knowledge of the original loan? Typically, we are not aware of the original loan’s interest rate when considering a refinancing application.
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While you are not required to use a particular form, we recommend conducting some kind of net tangible benefit analysis when refinancing mortgage loans secured by a borrower’s principal residence to ensure you are complying with the Illinois Fairness in Lending Act and Illinois High Risk Home Loan Act (if the loan is considered “high…
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We have a mortgage company that is a third party-originator and does mortgage document preparation and underwriting for all banks under our holding company. Would the proposed administrative rules for residential mortgage lenders under the Illinois Community Reinvestment Act (Illinois CRA) apply to our mortgage company? Also, would our mortgage company be considered an “affiliate” of our bank since they are under the same holding company?
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The Illinois CRA rules for residential mortgage lenders will apply to your mortgage company if it is licensed under the Illinois Residential Mortgage License Act of 1987 and lent or originated 50 or more residential mortgage loans in the previous calendar year. Additionally, if the Illinois CRA rules for banks are finalized as proposed, your…
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A condo association in Florida would like to open a deposit account at our bank, which is chartered in Illinois. The association’s condo declaration states that it may deposit funds only with financial institutions authorized to do business in Florida. The Florida Division of Financial Institutions has advised us that we would need to meet all Florida law requirements for providing banking services in the state to be considered authorized to do business in Florida. We are not interested in pursuing any Florida approvals related to banking. Are you aware of any type of reciprocity agreement or any other law or regulation that would allow us to open this deposit account?
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No, we are not aware of any laws or regulations that would override a condo declaration and provide reciprocity for your bank. Unless the condominium association amends its declaration, it appears that you have to comply with its requirements before opening the deposit account. While the Illinois Banking Act’s “super wild card” provision generally provides…
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A borrower who is delinquent on their January, February, and March consumer mortgage loan payments made a payment sufficient to cover one month’s payment, plus an additional $100. If we apply the payment to the amount owed for January, can we use the additional $100 to collect a late charge for the January payment before placing the excess funds into an unapplied account?
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We recommend reviewing your loan documents to determine whether a partial payment can be applied to a late fee when monthly periodic payments remain outstanding. For example, Fannie Mae’s standard mortgage provides that payments should be applied to each periodic payment in the order in which it became due, beginning with the oldest outstanding periodic…
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If we are considered a mortgage broker under Regulation X, can we charge a reasonable fee for ordering appraisals and title work, pulling credit reports, and submitting applications to the correspondent bank that will serve as the lender? Do we need to include anything about acting as a mortgage broker in our lending policy?
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Yes, we believe you can charge a reasonable fee for services you perform as a mortgage broker, including ordering appraisals and title work, pulling credit reports, and submitting loan applications to the correspondent bank. We are not aware of any requirement to include information related to acting as a mortgage broker in your lending policy…
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A borrower died and their mortgage loan is now in default. The deceased borrower’s spouse resides in the home and is in title to the property but is not a borrower on the loan. We are aware that we cannot file a foreclosure action until the loan is 120 days delinquent. Are we required to send a notice of acceleration after the third missed payment, and can you provide a sample of such a notice?
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Whether a notice of acceleration is required generally depends on the terms of your loan agreement. However, if the mortgage loan is a “high risk home loan” as that term is defined in the Illinois High Risk Home Loan Act, you are required by statute to deliver a notice to the borrower informing them of…
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Are we allowed to charge a fee for releasing our lien after a borrower pays off their home equity line of credit (HELOC)? When we added a lien release fee to our documents, our loan document provider produced a “critical warning” stating that under Illinois law, the lender must pay all expenses to release a security interest in real estate when the security interest no longer secures any credit under a line of credit.
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Yes, we believe that Illinois law permits banks to charge HELOC lien release fees, provided your customers have agreed to pay such fees in the HELOC agreement and they have been properly disclosed under Regulation Z. Section 4.1 of Illinois’s Interest Act prohibits lenders from charging for “expenses, including recording fees and otherwise” when releasing…