Topic: Mortgage Loans
-
If we need to force-place property insurance for a mortgage loan, or if the borrower fails to pay property taxes, can we add those amounts to the borrower’s periodic payments for the next twelve months? Our mortgage documents state that we may add force-placed insurance charges to the loan, but they do not state that we may charge the borrower for our payment of delinquent taxes (although the agreement does require the borrower to pay the taxes).
—
by
Force-Placed Insurance Premiums Yes, we believe you may reamortize the loan and add the amount of the force-placed premiums to the borrower’s periodic payments, since your loan agreements permit you to add such premium payments to the loan amount. Delinquent Property Tax Payments The answer is less clear regarding delinquent property tax payments, since your…
-
If a customer is repeatedly delinquent on mortgage payments, are we required to continually issue the Homeownership Counseling and SCRA notices under the National Housing Act?
—
by
Yes, you must provide this notification every time the customer becomes past due. You are required to provide the notice to a delinquent borrower no later than 45 days after the date on which the borrower becomes delinquent. If the borrower subsequently misses another payment, you again must provide the notice within the 45-day window.…
-
Can we charge a late fee after a ten-day delinquency on a loan secured by a mortgage? It appears that Illinois law permits late fees after ten days, but the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) preemption provisions permit late fees after fifteen days.
—
by
We are not aware of any law that would prevent you from charging a late fee after a ten-day delinquency on a loan that is secured by a mortgage, provided that your customers have agreed to such charges in their loan agreements. While Section 4.1a of the Illinois Interest Act requires a ten-day grace period…
-
Does Illinois law require mechanics lien coverage on final mortgage insurance policies for construction loans that are refinanced into an amortized loan?
—
by
No, we are not aware of any such requirement in Illinois law. Our guess is that the Freddie Mac representative was providing you with a generic response, in the sense that it would expect the mortgage note to comply with all relevant aspects of a state’s laws.
-
Under the CFPB’s upcoming TILA/RESPA Integrated Disclosure (TRID) rules, should we include attorneys’ fees and home inspection fees on the Loan Estimate and the Closing Disclosure if we do not require either of these services?
—
by
Inspection Fees The TRID rules require you to disclose home inspection fees on the Loan Estimate and Closing Disclosure if the fees are paid at closing and if your institution is “aware” of the fees, even when you do not require those services. The Staff Interpretation of the rule states that a creditor is “aware”…
-
Does the right of rescission apply to a refinancing where we are removing one of the two borrowers on the loan? We are not advancing new funds, and the borrower who is refinancing will pay the closing costs out of pocket.
—
by
No, we do not believe that the right of rescission (ROR) applies. The ROR does not apply to a refinancing of a loan that already is secured by the borrower’s principal dwelling if no new money is advanced. Based on the information you gave us, both conditions are met here. Also, we note that amounts…
-
Before a fixed-rate balloon loan matures, we would like to extend the loan with a longer loan term and a higher interest rate. Are we required to treat this transaction as a refinancing?
—
by
While there may be some arguments to the contrary, we believe the more prudent approach would be to treat the transaction as a refinancing requiring new disclosures, because the interest rate will be increased. Both the TILA and RESPA define “refinancing” as a transaction where an existing obligation is satisfied and replaced by a new…
-
Are there any limitations on late fees under Illinois law for consumer loans or consumer mortgage loans?
—
by
There are very few limitations on late charges under Illinois law for consumer loans or consumer mortgage loans, provided that your customers have agreed to such charges in the loan agreements. The Illinois Banking Act permits banks to charge fees, interest and other charges, provided that the bank sets these charges based on its “prudent…
-
We are acquiring an institution that has three-year balloon loans. We would like to modify the notes by extending the balloon term to five years and changing the interest rate. Will new GFEs be required, or can we treat this as a modification?
—
by
While we can provide you with some guidance on determining whether these changes will be considered a refinancing, the issue is very fact-specific, and absent more facts, we cannot advise as to whether a specific balloon loan term or interest rate change would be considered a modification or refinancing (the latter requiring new TILA and…
-
Assuming that we meet the small creditor and the rural/underserved loan prerequisites, do we qualify for the exemption from the escrow account requirements for higher-priced mortgage loans? We stopped using escrow accounts for first-lien higher-priced mortgage loans after January 1, 2014, and we have not established escrows for any consumer after that date.
—
by
Yes, you will qualify for the small creditor exemption from the higher-priced mortgage loan escrow requirements, provided that you (and your affiliates) do not maintain an escrow account for any extension of credit secured by real property or a dwelling for which a loan application is received on or after January 1, 2014. In addition:…