Topic: Mortgage Loans
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We have a mortgage and an assignment of rents on rental property. The renter recently had a federal tax lien filed against it. Does our mortgage lien and assignment of rent trump the IRS tax lien?
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Yes, we believe your mortgage lien and assignment of rent trumps the IRS tax lien. The Internal Revenue Code provides that a tax lien is inferior to a perfected security interest of a secured party if the secured party does not have “actual notice or knowledge” of the tax lien at the time the security…
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Is property that is zoned as commercial but has been rehabbed into a residence that is owner-occupied a business loan or a consumer loan?
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This loan should be classified as a consumer loan. We are not aware of any mortgage-related laws that refer to a property’s zoning classification when distinguishing between consumer and business purpose loans. The Truth in Lending Act, Real Estate Settlement Procedures Act, and several Illinois laws have subtle distinctions in their loan definitions — but…
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Can we offer a HELOC on non-owner-occupied rental property? The loan purpose is to make repairs on the rental property, the borrower is an individual, and the loan amount is over $5,000.
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Yes, you may offer a HELOC on non-owner-occupied rental property. We are not aware of any law or regulation that would prevent it. The Illinois Financial Services Development Act, which applies to any revolving credit plan where the borrower is a natural person, expressly permits a financial institution to secure the loan with real property.…
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Does Illinois law require us to include a mortgage loan originator’s NMLS number on the closing documents for a HELOC? We know this is not required under federal law.
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No, Illinois law does not require a financial institution employee to provide a Nationwide Mortgage Licensing System and Registry (NMLSR) identifier on loan documents. The Illinois law governing the licensure of mortgage loan originators, the Residential Mortgage License Act of 1987, governs the use of NMLSR identifiers on loan documents, but it does not apply…
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Are banks subject to the Illinois Residential Mortgage License Act of 1987? We were told that we need to provide a Borrower Information Document to mortgage loan applicants under the Act.
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No, the Illinois Residential Mortgage License Act of 1987 does not apply to financial institutions. The Act exempts “any bank . . . savings bank, or credit union.” However, if your institution has subsidiaries or affiliates that are not banks, they are not covered by this exemption. For resources related to our guidance, please see:…
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What Illinois laws or regulations will affect TRID implementation?
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While there are many potential intersections between the TRID rules and Illinois law, so far we have found three areas where it is necessary to consult Illinois law in order to comply with the TRID rules: (1) Under the upcoming TRID rules, the new Closing Disclosure must state whether a consumer “may remain responsible for…
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Under the upcoming TRID rules, the new Closing Disclosure must state whether a consumer “may remain responsible for any deficiency after foreclosure.” Does Illinois law protect borrowers from personal liability for the unpaid loan balance after a judicial sale?
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No, Illinois law does not protect borrowers against deficiencies after the judicial sale. The Illinois Mortgage Foreclosure Law states that a foreclosure does not affect the lender’s right to obtain a personal judgment against the borrower in the event of a deficiency. A number of Illinois courts have permitted a mortgagee to pursue a money…
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A customer asked one of our commercial lenders about a business-purpose loan secured by a second lien on the customer’s personal property. The commercial lender provided informal verbal approval before referring the customer to a mortgage loan originator for the formal application and approval process. Would the commercial lender’s actions be considered taking a loan application for SAFE Act purposes?
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No, the SAFE Act regulations would not apply because the loan was a business-purpose loan. The SAFE Act requirements apply only to mortgage loan originators who take applications for “residential mortgage loans,” defined as “any loan primarily for personal, family, or household use that is secured by a mortgage . . . .” Even though…
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Under the upcoming TRID rules, we must provide the Closing Disclosure three business days before “consummation” of the loan, and Regulation Z provides that state law governs when “consummation” occurs. What is the definition of “consummation” under Illinois law?
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Under Illinois case law, a mortgage loan is consummated on the date of the loan closing. A number of Illinois courts have held that consummation occurs on the date of the loan closing for purposes of the TILA. For resources related to our guidance, please see below: Personius v. Homeamerican Credit, Inc., 234 F.Supp.2d 817, 820…
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Are we required to use a “same name” affidavit for loans where a customer’s name on the loan documents does not match the name on his or her Illinois driver’s license (e.g., “Bill” versus “William”)? What are the possible consequences of having a customer sign a loan document using a nickname?
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No, we are not aware of any law or rule that would require you to use a same name affidavit for a customer that signed loan documents with a name other than what is on his or her driver’s license, although this practice may be advisable. Loan documents using a nickname very likely are enforceable…