Topic: Mortgage Loans
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Are we allowed to charge credit report, appraisal or application fees upfront for consumer mortgage loan applications?
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You may charge a credit report fee up front, but not application or appraisal fees. Under the TILA-RESPA Integrated Mortgage Disclosure (TRID) rules, a creditor may charge a credit report fee before preparing the Loan Estimate and documenting the consumer’s intent to proceed with the transaction. However, a creditor may not charge other fees, such…
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Is the Illinois version of the Notice of Assignment, Sale and Transfer form intended to supersede the federal form? Or should we provide the RESPA form and include a reference to Illinois law?
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No, the Illinois notice of a mortgage servicing transfer does not supersede the federal notice required by the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA). Consequently, you should provide either a combined notice that encompasses both the federal and Illinois requirements or separate federal and Illinois notices. It would be…
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What are the requirements to be considered a small servicer under Regulation Z? Does servicing loans for a fee affect small servicer status?
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Your bank will be deemed to be a “small servicer” if the bank and all of its affiliates were servicing 5,000 or fewer residential mortgage loans as of January 1 of this year, provided that your bank (or its affiliates) originated or currently owns those loans. Your bank will not qualify as a “small servicer”…
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We refinanced a mortgage loan that is secured by a manufactured home and the underlying land. The original lender had taken a mortgage in the underlying land, notated its lien on the manufactured home’s title, and filed a UCC-2 form for the manufactured home. That lender released its mortgage and removed its lien from the title, but it has not released its UCC lien. We have had no luck working with the lender — they appear not to understand (they just keep resending the mortgage release instead of a UCC release). Can the borrower file something to release the UCC lien?
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Yes, the borrower (or even your bank) may file a termination statement regarding the UCC lien, provided that the borrower is entitled to the termination, and, if your bank files it, the termination statement indicates that the borrower authorized the filing. Once a secured obligation has been satisfied, the UCC requires the secured party to…
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We have a home equity line of credit (HELOC) that was taken out jointly by a married couple. The couple is separated (not yet divorced), and the wife would like to refinance the HELOC. The husband is not on the deed to the house securing the HELOC. Does the husband need to sign the mortgage, right of rescission notice, Truth in Lending disclosures, or the homestead waiver? Is Illinois a community property state?
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No, Illinois is not a community property state. In this case, because the husband is not the borrower and is not on the title to the property securing the HELOC, we believe that his signature is required only regarding any waiver of his homestead rights. However, we do recommend checking with the secondary market purchaser…
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For a residential mortgage loan made to an Illinois land trust that is secured by residential property held in the trust (where our collateral is a first lien on the assignment of the beneficial interest in the land trust), does Regulation B require us to provide an appraisal notice and copy of the appraisal?
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Yes, we believe that you should provide a copy of the appraisal and appraisal notice to the land trustee for a loan secured by an assignment of the beneficial interest in the land trust, provided that the property held in the land trust is a dwelling (defined in Regulation B as a residential structure with…
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We are considering providing new mortgage borrowers a $90.00 gift card for membership to a local organization. Would there be any tax or regulatory implications for a gift like this?
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We are not aware of any disclosure or other requirements that would apply to such a gift, provided that it is given to all new mortgage borrowers uniformly. Notably, the IRS rules require you to report gifts that are valued over $600 on its 1099-MISC form, but the $90 gift cards would not trigger this…
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Is the APR calculation the correct way to calculate interest on a residential mortgage under the Servicemembers Civil Relief Act (SRCA)? Does the 6% interest rate cap include the cost of credit life and credit accident and health insurance?
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No, the APR calculation is not the correct way to calculate the total interest on a residential real estate loan under the SCRA. The SCRA limits the maximum interest rate on loans to active duty military service members to 6%. “Interest” is defined broadly to include all service charges, renewal charges, fees, or any other…
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We would like to establish a centralized underwriting process where our bank will receive applications and forward them to our holding company. The holding company will review the application, make the credit decision based on its own lending criteria, and send the application back to our bank to close the loan. In this process, who should report the loan under the Home Mortgage Disclosure Act (HMDA)?
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We believe that your holding company is responsible for reporting the loan originations under HMDA, unless it is acting as your agent in making the credit decision (which does not appear to be the case here). Only one financial institution reports the origination of a covered loan. When multiple entities are involved in the origination…
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Does a non-borrowing spouse need to sign the Closing Disclosure for a purchase mortgage loan if the spouse is listed on the title to the property securing the loan? We would have the spouse sign the mortgage.
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No, Regulation Z does not require a non-borrowing spouse to sign a Closing Disclosure. In fact, Regulation Z does not require any signatures on the Closing Disclosure — obtaining signatures on the Closing Disclosure form is optional. In addition, because the non-borrowing spouse is not entitled to the right of rescission on a purchase transaction,…