Topic: Mortgage Loans
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Will vacant lot loans be covered by the updated Military Lending Act rules that become effective on October 3, 2016?
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Yes, the amended Military Lending Act rules will cover a consumer-purpose loan secured by a vacant lot, unless the loan purpose is to finance the initial construction of a dwelling on the vacant lot. In general, the amended Military Lending Act rules cover all consumer-purpose loans, with several specific exemptions, including an exemption for residential…
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Can we modify a matured loan? In some cases, a loan matures and then we perform a collateral review and pull credit and wish to modify the loan. Is that permissible?
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Yes, you may modify a matured loan (unless some provision in the loan agreement prevents you from modifying the loan’s terms). In addition, if you structure the loan modification documents correctly, it may fall outside of Regulation Z’s definition of a “refinancing,” eliminating the need to provide new loan disclosures. The Seventh Circuit has considered…
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Our loan software is alerting us that Illinois law requires a notice of servicing transfers, on top of the federal requirements in RESPA. They cite to 38 Ill. Adm. Code 1050.820. Can you send us this Illinois law? Does it differ from the federal law?
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Yes, Illinois law requires banks to send a mortgage servicing transfer notice, and the content of the Illinois notice differs from the content of the servicing transfer notices required by federal law. The Illinois Banking Act’s requirements for the servicing transfer notice include (1) “the name and address of the transferee,” (2) “the name, address…
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We originate some mortgage loans with properties and/or borrowers located outside of Illinois. Does our privacy notice need to include privacy requirements for each state? If yes, do you know of a resource on state privacy laws?
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It is conceivable that another state’s financial privacy law would apply to a mortgage loan made by an Illinois bank, requiring you to provide information about that state’s law on your annual privacy notice. Whether another state’s law applies to a mortgage loan is a complicated question that will depend on the circumstances of each…
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We provide annual escrow account statements to our mortgage borrowers. Does Illinois law require us to send receipts for every property tax payment?
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No, Illinois law does not require lenders to send receipts for each property tax payment, provided that the lender is sending an annual escrow account notice (such as the annual notice required by RESPA) with contact information for borrowers to access additional details about individual property tax payments (such as through a toll-free number or…
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Do you know of any Illinois Banking Act provision that would limit the loan amount (i.e., $5,000) for a Home Equity Line of Credit?
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There is no such limitation in the Illinois Banking Act. You may be thinking of the Illinois Interest Act, which prohibits a lender from taking a security interest in real property for a revolving line unless the line of credit is in excess of $5,000. However, the Illinois Financial Services Development Act exempts any…
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Since the Illinois grace period notice requirement expired on July 1, 2016, should we stop sending this notice to delinquent borrowers?
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Yes, you are no longer required to send grace period notices to borrowers who became delinquent on or after July 1, 2016. The section in the Code of Civil Procedure requiring mortgagees to send a grace period notice to delinquent borrowers included a sunset date, which automatically repealed the section on July 1, 2016. We…
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We closed on a mortgage loan refinancing on July 1, and the borrower asked us to lower the interest rate on July 5. We refused, and the borrower is threatening to rescind the transaction on the last day of the right of rescission period — July 6. If the borrower reapplies for the refinancing after rescinding, can we reject the customer’s application?
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Yes, we believe that you may reject the customer’s application, which will require you to provide an appropriate adverse action notice. Regulation B does not prohibit a creditor from rejecting an applicant due to the applicant’s previous exercise of the right of rescission. Regulation B permits creditors to consider “any information obtained” in connection with…
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When filling out the new Loan Estimate form, where should we place the following fees? (1) FHA initial mortgage insurance premium, (2) VA initial funding fee, and (3) Conventional Single Premium Borrower/Lender Paid Mortgage Insurance.
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We believe that all three fees should be disclosed under “Services You Cannot Shop For.” The Regulation Z Official Interpretations state that “government funding fees” and “upfront mortgage insurance fees” should be listed on the Closing Disclosure under the heading “Services You Cannot Shop For.” The FHA and VA fees are government funding fees, since…
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We have a loan secured by property in Cook County that is not occupied by the owner. The points and fees for the loan trigger the homeownership counseling requirements in the Residential Real Property Disclosure Act. However, is this loan exempt because it is non-owner-occupied?
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Yes, the loan is exempt because it is secured by non-owner-occupied property. The Residential Real Property Disclosure Act exempts loans that are secured by non-owner-occupied property. For this type of exempt loan, the Act requires a certificate of exemption to be attached to the mortgage for recording. For resources related to our guidance, please see:…