Topic: Mortgage Loans
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We have a customer who would like a home equity line of credit (HELOC). His wife is not on the title for the house and she will not be a co-signor on the HELOC. Do we need to include her as grantor on the mortgage? Or is it sufficient to have her sign a waiver of her homestead rights?
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The wife does not need to sign the mortgage, since she is not a borrower and is not on the title to the property securing the HELOC, but she should sign a waiver of her homestead exemption rights. Note that a waiver of homestead exemption rights is not valid unless it is signed by both…
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We are considering offering local civil service employees and teachers a discounted mortgage loan origination fee. This would not be a short-term advertising campaign, but a long-term program to build loyalty with civil employees within our village. Would there be any fair lending or other regulatory concerns with this type of program? Could we include our village board members in the program?
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Yes, you may run into fair lending concerns regarding this type of discount program. Neither federal nor state anti-discrimination laws treat “occupation” as a protected class. In other words, you are not prohibited from giving preferential treatment to an individual based their occupation. However, such a policy may create a fair lending challenge if it…
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Is there any Illinois law that puts a ceiling on interest rates on commercial loans?
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No, we are not aware of any limits on interest rates for commercial loans in Illinois law. The Illinois Banking Act permits banks to charge fees, interest and other charges agreed to by the borrower, provided that the bank sets these charges based on its “prudent business judgment and safe and sound operating standards.” Additionally,…
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We are working with borrowers who are obtaining mortgages from the Illinois Housing Development Authority (IHDA) as well as from our bank. The two mortgages will be closed with the same title company at the same time. They will be separate mortgages, with significantly different terms. We are including in our disclosures the recording fees for both our mortgage and IHDA’s mortgage. We know that we can exclude our bank’s recording fee from the finance charge calculation. But can we exclude the IHDA recording fee?
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In our view, fees related to IHDA’s loan should be disclosed only on IHDA’s loan disclosures. We recommend removing IHDA’s fee for recording their lien from your disclosures, which will definitively remove the fee from your finance charge calculation.
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When a title insurance agent is acting as settlement agent for a residential mortgage closing, do we need to show the agent’s Illinois title insurance license number on the Closing Disclosure?
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Yes, we believe 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) identified in the table…
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One of our business customers is an LLC with three members. After the LLC entered into a mortgage loan with our bank, the LLC transferred the property securing the mortgage to a new LLC, which is owned by two of the three members from the original LLC. While this property transfer did violate our loan agreement, we would like to renew the loan with the new LLC. Can we modify the existing loan or do we need to redo the mortgage and loan agreement altogether?
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We recommend entering into a new mortgage and loan agreement with the new LLC, rather than attempting to modify the original loan to reflect both a new borrower and new property owner. While the LLCs have two owners in common, they should be treated as distinct entities and as separate borrowers. Entering into a new…
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We recently received notice that a consumer mortgage loan borrower is filing for Chapter 7 bankruptcy. Should we continue sending loan notices to the borrower? What about other communications, such as deposit account statements?
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We do not recommend sending any loan notices to a borrower who has filed for bankruptcy without consulting with bank counsel. The Bankruptcy Code prohibits creditors from attempting to collect a debt after a borrower has filed for bankruptcy — this is known as the “automatic stay.” A bankruptcy court also may impose similar limitations…
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Is it permissible to include a waiver of homestead exemption rights in the mortgage?
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Yes, it is permissible to include the waiver of homestead exemption in the mortgage document. The Illinois Conveyances Act makes clear that any “deed or other instrument” that contains a clause expressly “releasing or waiving the right of homestead” is sufficient, provided that the “other spouse joins in such release or waiver.” For resources related…
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Our customer has a mortgage loan with us. Are there privacy concerns (or any other concerns) if we were to disclose past-due payment information to a third party who lives at the property and signed the mortgage but not the note?
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No, such a disclosure falls within certain exceptions to Regulation P’s privacy requirements. Regulation P permits banks to disclose account information to “persons holding a legal or beneficial interest relating to the consumer.” In this situation, the third party signed the mortgage, signifying his interest in the property that is the subject of your customer’s…
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In Illinois, does a mortgage have to be notarized in order to be valid?
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No, a mortgage does not need to be notarized in order to be valid. The Illinois Conveyances Act addresses the form and substance of a valid mortgage. In one provision, the Act states that a mortgage may be acknowledged by a notary using their official seal. In another provision, the Act states that any instrument…