Topic: Mortgage Loans
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Are lender paid closing costs excluded from the IHRHLA points and fees test?
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Provided that you are not retaining any portion of the closing costs, we believe that lender paid closings costs would be excluded from the “points and fees” calculation. The Illinois High Risk Home Loan Act (IHRHLA) exempts “bona fide third-party charges not retained by the mortgage originator, creditor, or an affiliate of the mortgage originator…
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Can we capitalize interest on an open-end loan? One of our customers ran into some problems, so we’ve offered to restructure her loan, and our loan officer asked if we could capitalize the outstanding interest on the loan.
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We are not aware of any laws or regulations that prohibit you from capitalizing interest (also known as “re-aging”) an open-end loan. The FFIEC imposes some limits on re-aging past due accounts, without prohibiting the practice, in its Uniform Retail Credit Classification and Account Management Policy (65 Fed. Reg. 36903, 36904 (June 12, 2000)): Open-End…
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Does the notification requirement in the Mortgage Escrow Account Act apply to a business-purpose loan, where we are taking a mortgage on the borrower’s principal residence?
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We do not believe that the law would apply to a business-purpose loan, even if the loan is secured by a mortgage on the borrower’s primary residence. The Mortgage Escrow Account Act applies only to “the granting or servicing of a mortgage on a single-family owner occupied residential property” that is made “for the purpose…
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Under the upcoming “QRM” rules, would we be considered a “securitizer or sponsor,” subject to the 5% risk retention requirement? Would that be the case even if we sell loans only to the GSEs, and what might happen if or when the GSEs are wound down?
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First, we note that the credit risk retention rules and the “qualified residential mortgage” (QRM) definition are still in proposed form and have not yet been finalized. See 78 Fed. Reg. 57927 (September 20, 2013). With that said, we will analyze your questions under the current proposal, with the understanding that the final rules could…
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Can we add a provision to our junior lien mortgage agreements that would allow us to recoup any third party fees that we paid at closing, in the event that the customer pays off the loan shortly after closing (i.e., within two or three years)?
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[Please note that this question was revised on August 5, 2015, to reflect a change made to Illinois law by Public Act 99-288.] Yes, you may recoup third party fees from customers who prepay loans, provided that recoupment is possible only within the first three years after the loan closing. Both federal and Illinois law…
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When a borrower is delinquent on a mortgage loan, we send out the SCRA notice and the Illinois Homeownership Counseling Notice after thirty days and the Federal Notice of Homeownership Counseling after forty-five days. Are there any other notices we should be sending?
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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. Beyond the SCRA and Homeownership Counseling notices required under federal law (12 USC 1701x(c)(5)), and the Grace Period Notices required under Illinois law (735 ILCS 5/15-1502.5), we…
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Do RESPA and Regulation Z cover a loan that is secured by vacant land and by a mobile home that won’t be permanently affixed to the land?
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We believe that RESPA would apply to a loan secured by land and by a mobile home. The RESPA regulations state that they apply to loans secured by vacant land if “a structure or a manufactured home will be constructed or placed on the real property using the loan proceeds” within two years after the…
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If we have a property that is going into a foreclosure, under a non-residential mortgage, do we have to do the loss mitigation affidavit before filing? The Cook County version of the loss mitigation affidavit requires us to state why a borrower was not eligible for our loss mitigation programs, and one of the options provided on the form provides that the borrower is ineligible because the mortgage is a commercial mortgage. Since that is the case, do we still have to file a loss mitigation affidavit?
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The new Illinois Supreme Court rules on foreclosure actions do not exempt commercial loans or commercial properties. In fact, the Court’s loss mitigation rule itself expressly states that it applies to “all actions filed under the Illinois Mortgage Foreclosure Law . . . .” Illinois Supreme Court Rule 114. All residential and commercial foreclosures are filed…
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For purposes of sending SCRA notices for consumer loans, is it sufficient to send the notice to the business address for a loan secured by a primary residence, or do we have to send the notice to the individual who owns the residence as well?
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Because there are no explicit requirements as to which notice to use for issuing HUD’s required SCRA notice, we do not see any problems in sending the notice to a business address when the business is making the loan. The Housing and Urban Development Act requires creditors to “provide notice” to eligible homeowners, but it…
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One of our vendors believes that we need to use a form required by the Illinois Residential Mortgage License Act of 1987, but I don’t think that law applies to financial institutions. Do you agree?
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We agree that the Illinois Residential Mortgage License Act of 1987 does not directly apply to financial institutions. Section 1-3 states that the Act does not apply to an institution that is considered an “exempt person or entity.” 205 ILCS 635/1-3(a). The term “exempt person or entity” is defined to include “any bank, . .…