Topic: Mortgage Loans
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Does Illinois law require us to inform a borrower that they will receive the following materials in connection with their residential mortgage loan application: the Settlement Cost Booklet, a Good Faith Estimate of Settlement Costs, a “RESPA Servicing Disclosure,” a copy of the loan application or equivalent form, a copy of the bank’s privacy statement, a notice detailing the customer identification procedures, the Consumer Handbook on Adjustable Rate Mortgages, and a separate disclosure and description for the specific type of adjustable rate mortgage.
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No, we do not believe Illinois law requires you to inform a borrower that you will be providing those disclosures. However, we understand it may be a best practice to obtain a borrower’s signature acknowledging receipt of those disclosures, as proof of your compliance with those federal requirements.
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Can we record a mortgage that shows a maximum lien that is higher than the actual note amount? For example, if a house is worth $150K, but the loan amount is $100K, can we record a mortgage for $150K?
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Yes, we believe it is permissible to state a maximum lien amount on a mortgage that is higher than the loan amount, provided that the customer agrees to the maximum lien amount that you will be recording. There are cases in Illinois that support the use of a maximum lien amount that exceeds the loan…
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Did the federal Protecting Tenants at Foreclosure law expire on December 31, 2014? We realize the Illinois law is still in place, so how should we update our policy and procedures?
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Yes, the Protecting Tenants at Foreclosure Act of 2009 expired on December 31, 2014. See the notes to 12 USC 5220
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We are converting to a new forms vendor, and as part of the conversion process, we have been asked whether our loan documents provide for arbitration — is it common for mortgages to include arbitration clauses?
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We do not know whether arbitration clauses are common in mortgage documents. However, for consumer mortgages that are secured by a dwelling, including open-end mortgages secured by a consumer’s principal dwelling, Regulation Z prohibits mandatory arbitration clauses, as well as any “terms that require arbitration or any other non-judicial procedure to resolve any controversy or…
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We are in the process of implementing the new integrated mortgage disclosure rules. Our forms vendor for prompted us to check state law as to whether a loan document for a consumer mortgage loan can state that a late charge will be assessed when a payment “is more than # days late” instead of “# days or more late.”
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We are not aware of any requirements under Illinois law as to the number of days for computing a late charge or the exact wording of your loan agreements regarding late charges. If your late charge practices match the language in your loan documents for late charges, and your late charges otherwise comply with all…
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Can our loan documents provide for an increased interest rate after a late payment on a commercial real estate loan that is secured by the borrower’s primary residence?
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We cannot give you a definitive answer, as we do not have all of the relevant facts. There are very few limitations on interest rates and fees charged by banks under Illinois law for commercial loans. Any default rates (charged after a late payment or other default) must be agreed to by your customers in…
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We do not require our mortgage customers to establish escrow accounts. Are we still required to comply with the notice provisions in the Illinois Mortgage Escrow Account Act?
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We recommend complying with the Mortgage Escrow Account Act’s notice provisions for all purchase money mortgages secured by single-family, owner-occupied residential properties, even though escrow accounts are not mandatory at your institution. The Act does not distinguish between mandatory or voluntary escrow accounts, and further, it does not distinguish between loans that have escrow accounts…
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The Illinois High Risk Home Loan Act requires us to compare a loanâÂÂs interest rate to the yield on U.S. Treasury securities, but Regulation Z requires us to use the average prime offer rate. Should we be running two tests for HOEPA?
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The Illinois High Risk Home Loan Act has been amended to adopt the federal standard of the average prime offer rate (APOR). 815 ILCS 137/10 (scroll down to view the section “after P.A. 97-849 takes effect,” since that law took effect on January 10, 2014). However, we do recommend running separate interest rate tests under…