Topic: Mortgage Loans
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Aside from filing a SAR, is there any other reporting we are obliged to do if we receive a mortgage loan application with what we believe to be fraudulent information — falsified tax returns, bank statements, etc.?
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We believe your bank should file the SAR, and management should report the filing to your Board of Directors. The FDIC's rules state the following about additional reporting at 12 CFR 353.3(b)(2) and 353.3(c), as follows: (b)(2) In situations involving violations requiring immediate attention, such as when a reportable violation is ongoing, the bank shall…
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We received a law bulletin from a law firm stating that the Illinois “grace period notice” requirement conflicts with the new CFPB rule requiring us to wait 120 days before initiating a foreclosure action. Do you agree?
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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. No, you do not have to wait 120 days before mailing the Illinois “grace period notice” to delinquent borrowers, as required by 735 ILCS 5/15-1502.5(c). The new…
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Does RESPA apply to a loan to purchase a non-owner occupied rental property? We know it is exempt from Regulation Z.
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We believe that neither RESPA nor Regulation Z would apply to the loan to purchase a rental property that would not be owner-occupied. RESPA excludes from coverage any loan made “primarily for a business, commercial, or agricultural purpose, as defined by” Regulation Z. 12 CFR 1024.5(b)(2). As you noted, Regulation Z does not apply to…
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Can we charge increased interest rates on loans after they mature under Illinois law? Is the answer different for consumer loans?
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There are very few limitations on interest rates and fees charged by banks under Illinois law, whether for commercial or consumer loans. However, any post-maturity rates (also known as default rates) must be agreed to by your customers in your loan agreements, and they may be subject to court scrutiny if they are not considered…
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How should we distribute the CHARM Handbook and the HUD Settlement Cost Booklet to customers who access our loan applications online? Currently, our online system automatically prints the both documents, leading to customer complaints. We don’t accept applications online; customers can submit applications by faxing, mailing, or bringing the application to a branch.
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We do not believe that the Consumer Handbook on Adjustable Rate Mortgages (CHARM Handbook) or the Settlement Cost Booklet (referred to in the rules as the “special information booklet”) need to be automatically printed with loan applications that your customers access online. As explained below, the CHARM Handbook can be provided to an online loan…
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Can we renew a bridge loan that closed before January 10, 2014, and still have it be exempt from ATR and QM? What if a bridge loan was closed after the rules went into effect and will need to be renewed?
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We believe that the ability-to-repay (ATR) and qualified mortgage (QM) rules exempt all bridge loans with terms of twelve months or less, regardless of when a bridge loan was entered into. 12 CFR 1026.43(a)(3)(ii). (The regulations do not fully define the term “bridge loan,” other than specifying that the term of such a loan should…
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One of our mortgage loan customers sent in a payment by check, but the check bounced. After two return attempts, the customer is now 54 days overdue. Should we send the 45 day notice or just wait until we send the 60 day notice?
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We recommend sending the borrower both delinquency notices. The 45 day SCRA notice is due “before the expiration of the 45-day period beginning on the date on which the failure occurs” (which is the failure “to pay any amount by the date the amount is due under a home loan”). 12 USC 1701x(c)(5). If the customer…
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If a borrower is not paying property taxes on the property securing a loan, but is making their mortgage payments, are we required to send the housing counseling notice required by Illinois law? Must we send the notice before initiating legal action?
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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. The answer depends on whether the mortgage loan is considered delinquent. The notice requirement in the Code of Civil Procedure (sometimes called the “grace period notice” requirement)…
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Can lenders require borrowers to use particular title insurers?
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For consumer mortgage loans secured by the borrower’s principal residence, Illinois law prohibits lenders from requiring borrowers to use a particular title insurance company. The Title Insurance Act prohibits lenders from requiring a party to a contract for the sale of residential real property to use a particular title insurance company or agent. 215 ILCS…
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Under the CFPB’s new mortgage servicing rules, when does the 120-day delinquency period start running?
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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. The new RESPA servicing rules prohibit servicers from initiating a foreclosure action until “a borrower’s mortgage loan obligation is more than 120 days delinquent.” 12 CFR 1024.41(f)(1)(i).…