Topic: Mortgage Loans
-
Currently, our systems cannot separate out commercial loans with primary residences taken as collateral from other commercial loans. Does the Illinois Grace Period Notice requirement apply to these loans? Do you recommend providing the Grace Period Notice to all of our delinquent commercial borrowers, even if we did not take a primary residence as collateral?
—
by
Please note that this answer discusses the Illinois grace period notice requirement, which expired on July 1, 2016, pursuant to a sunset provision. Please see 735 ILCS 5/15-1502.5. Scope of Grace Period Notice Requirements for Commercial Loans Yes, the Illinois Grace Period Notice requirements apply to commercial loans that have a primary residence as collateral.…
-
What are the record retention requirements for loan documentation?
—
by
Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA. Illinois Statute of Limitations We believe that loan agreements should be retained for a period…
-
We record the release of mortgage liens for our customers. How quickly should we be recording the releases?
—
by
Because your institution has taken responsibility for recording mortgage releases, we believe that you should record the releases within one month after a mortgage loan has been paid off. Other options are to deliver mortgage releases to your customers or, for certain mortgages, to permit title insurance companies to record the releases. The Illinois Mortgage…
-
Our commercial loan processing software (LaserPro) permits us to set a maximum lien amount either at the loan amount, twice the loan amount, or a set amount that we enter. When and why should we use those options?
—
by
Because your question pertains specifically to LaserPro, we contacted LaserPro’s legal counsel (with LaserPro’s permission) and discussed the three lien amount options you described. LaserPro’s counsel told us that the three options are intended to permit lenders to set a maximum lien amount that can cover any future advances and any other notes that are…
-
Our current policy is to notify all refinance customers of a right of rescission, even if we are not extending any additional funds and we are refinancing one of our own loans. Are we creating a problem by giving this disclosure in transactions where the right of rescission does not apply?
—
by
As a general rule, we recommend that you do not deliver a notice of a right of rescission (ROR) when the customer (or other consumer who has an ownership interest in the property securing the loan) is not entitled to Regulation Z’s right of rescission. The ROR under Regulation Z does not apply to a…
-
What are the regulatory requirements that apply to the assumption disclosure? What should we do if we failed to include an assumption clause in the Truth in Lending Act closing disclosure?
—
by
Regulation Z requires that creditors disclose the assumption policy that will apply to any residential mortgage transaction. 12 CFR 1026.18(q). The phrase “residential mortgage transaction” is defined as “a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained in the consumer’s principal dwelling to…
-
We have decided to make only qualified mortgages (QMs). One of our customers wants to purchase a motor home, and both the motor home and the customer’s house will be collateral for the loan. If the motor home is not considered as part of the loan collateral, we’re concerned that the loan would not be considered a QM due to a high loan-to-value ratio.
—
by
We believe that a mortgage loan that qualifies as a qualified mortgage (QM) would not be disqualified simply because it is only partially secured by the borrower's home. Of course, the new Regulation Z ability-to-repay (ATR) requirements would apply to this loan. The ATR rules apply to consumer credit transactions secured by a “dwelling,” provided…
-
Do you see any problems with making a mortgage loan secured by an Illinois home to a non-U.S. citizen who lives in Illinois? How would we collect if the borrower defaults on the loan? Would we have to litigate in a foreign country?
—
by
Lending to a non-U.S. citizen is a business decision that depends on the amount of risk your institution is willing to accept. Should the borrower default on the loan, you may have to litigate in U.S. federal court, where rules and procedures will differ from Illinois state courts. The choice between initiating a collection action…
-
We formulate our loans so that the loan term is 30 years plus one month. Would these loans be considered Qualified Mortgages? I know that in order to be a Qualified Mortgage, the loan cannot have a term longer than 30 years.
—
by
Yes, we believe that a loan with a term of 30.1 years may still comply with the CFPB’s 30-year term limitation for a qualified mortgage. The official interpretations clarify that the period of time between the consummation of a loan and the time the first payment is due in the repayment schedule does not count…
-
For how long should a bank retain original collateral documents such as the Note, Mortgage, and Guaranty?
—
by
Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA. We do not believe that Illinois law requires financial institutions to retain hard copies of…