Topic: Mortgage Loans
-
Do we need to provide the bank’s NMLS number to our customers on any written communications? Our current procedures cover only the use of a loan originator’s NMLS number.
—
by
Regulation Z requires the disclosure of NMLS identifiers for both financial institutions and loan originators on credit applications, Loan Estimate and Closing Disclosures, notes and loan contracts, and security instruments. Notably, the SAFE Act’s provisions regarding NMLS identifiers apply only to mortgage loan originators, not to financial institutions. For resources related to our guidance, please…
-
Can a HELOC branch lobby banner or outside rolling digital sign contain the phrase “prime minus xx.xx%,” “prime floating,” or “x year term” without triggering the additional disclosures under Regulation Z?
—
by
Yes, you should provide additional disclosures on advertisements using the terms “Prime Floating,” “Prime Minus xx.xx%,” or “X Year Term.” Unlike Regulation X, Regulation Z does not provide exceptions or permit short-form advertising disclosures for banners or scrolling digital signs. Regulation Z’s rules for home-equity plans require additional disclosures when an advertisement uses a trigger…
-
Are we required to include the homeowner’s insurance premiums line on Page 2 of the Loan Estimate in Section F (Prepaids) for refinances?
—
by
Yes, you are required to include the homeowner’s insurance premiums line on Page 2 of the Loan Estimate in Section F for refinances. Regulation Z requires that a new set of disclosures be provided whenever there is a refinancing, and in the Prepaids Section of the Loan Estimate (Section F on Page 2), the rule…
-
Some of our customer’s mortgage loan payments are auto-debited from deposit accounts held at our bank. In those cases, does a monthly checking account statement satisfy Regulation Z’s mortgage periodic statement requirements, since it will show the debits for the mortgage payments? We service fewer than 5,000 mortgages, but we do sell some of our loans on the secondary market.
—
by
It is possible to combine the periodic statements required for closed-end mortgage loans with checking account statements, provided that you include all of the additional disclosures required for mortgage periodic statements. However, Regulation Z exempts your institution from the mortgage periodic statement requirements altogether if you qualify as a “small servicer.” As stated in a…
-
Under the Mortgage Escrow Account Act, we must notify a customer 45 business days after paying property taxes, but we also can send an alternative annual notice. Will we meet the annual notice requirement by sending the annual escrow account statement required by RESPA, since it includes our contact information?
—
by
Yes, the annual escrow account statement required by RESPA should be sufficient, assuming that the contact information on the notice (such as a phone number, email address, or internet website) provides a means of accessing the required information about property tax payments. The Illinois Mortgage Escrow Account Act requires lenders to provide an annual escrow…
-
Are we required to complete a “net tangible benefit/anti-flipping” worksheet, on top of our other tests for compliance with HPML, HOEPA, HRHLA, QM, etc.?
—
by
While there are no Illinois laws that expressly require you to use a net tangible benefit worksheet, we still would advise that you complete some sort of tangible net benefit analysis when refinancing mortgage loans secured by a borrower’s principal residence, in order to avoid a violation of the Illinois Fairness in Lending Act or…
-
Our residential construction loan agreements permit us to charge a fee if the customer does not choose to obtain permanent financing with our institution. The loans are secured by the borrower’s principal dwelling. Can we charge this type of fee?
—
by
Yes, from what you have told us, we believe you may charge this fee. We are not aware of any law that would prohibit such a contingent fee for a short term construction loan, assuming that the loan is not subject to Illinois’ High Risk Home Loan Act (HRHLA), as discussed below. Unlike Regulation Z,…
-
Why does our forms vendor suggest using “limitations on cross-collateralization” clauses in our commercial and consumer promissory notes and security agreements?
—
by
Your vendor’s limitations on the cross-collateralization clauses in its loan forms appear to be meant to prevent you from inadvertently triggering and violating statutes and regulations that apply to residential real estate loans. For example, if your bank places a broad cross-collateralization clause in the mortgage document for a loan secured by residential real estate,…
-
Are cross-collateralization clauses enforceable?
—
by
Yes, courts in Illinois generally have upheld cross-collateralization clauses, which are provisions in security agreements that secure both the current loan and future loans (whether made by the same or another lender). The U.S. Court of Appeals for the Seventh Circuit recently held that a cross-collateralization clause in a mortgage document was enforceable because it…
-
Where is a third-party fee that is charged by a realtor to the borrower as part of the sales contract recorded on the Loan Estimate?
—
by
A third party fee charged by a realtor should be recorded as “other costs” in Section H on the Loan Estimate if the creditor is aware of the fee when the Loan Estimate is issued. For citations related to our guidance, please see: Regulation Z, 12 CFR 1026.37(g)(4) (“Under the subheading ‘Other,’ an itemization of…