Topic: Mortgage Loans
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What is the extent to which equipment and inventory must be covered by flood insurance on a loan that is secured by improved real estate located in a flood zone?
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You may be required to obtain flood insurance on the equipment and inventory securing the loans that are also secured by the mortgage. Under the National Flood Insurance Act (NFIA), if a loan is secured by improved real estate located in a flood zone, the lender must ensure that the borrower obtains flood insurance that…
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If a high cost loan has a rate of 6.2% above APOR for a first lien mortgage, would it be considered a “high risk” loan in Illinois? What are the differences between the Illinois law and the federal regulations?
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We do not have a reference that covers every difference between the Illinois and federal laws, though our analysis below touches on some of those differences. Essentially, the laws have very similar definitions of what is considered a “high-cost” or “high risk” mortgage loan (except for the differing thresholds of 6.0% versus 6.5%), but there…
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For a mortgage loan, do we need to have CIP information & a tax ID number for an insurance company before we pay the company from an escrow account?
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We do not believe that your CIP would apply to an insurance company that simply receives checks from the bank. The CIP rules apply only to “customers,” defined as an individual or person that “opens a new account.” 31 CFR 1020.100(c)(1)(i). However, you may be required to obtain a tax identification number for purposes of…
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If we are lending money to a fire protection district (to finance the construction of a new firehouse), can the fire protection district give us a mortgage to secure the loan?
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The Fire Protection District Act explicitly authorizes fire protection districts to execute mortgages (though it does limit, somewhat, the total amount of a fire protection district’s indebtedness). Under the Act, a fire protection district’s board of trustees has the power to “execute a mortgage . . . and the proceeds of the note or notes…
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Under the new Illinois Supreme Court mortgage foreclosure rules, do we have to file a loss mitigation affidavit if we do not have an in-house loss mitigation program? Do we need to create one?
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We do not believe that the new Illinois Supreme Court mortgage foreclosure rules would require a bank that does not have an in-house loss mitigation program to start providing such a program. (See the most recent April 8, 2013 version of the rules, which includes some brief committee comments on Rule 114, which mandates the…
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We are making an unsecured loan to purchase a primary residence. Would this be subject to RESPA, Regulation Z, or the HPML requirements?
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We believe that an unsecured loan would be exempt from the higher-priced loan requirements, the RESPA rules, and the HMDA requirements (which are contained in Section X of Fannie Mae’s Uniform Residential Loan Application form). All three regulations apply only to loans that are secured by certain types of properties, as explained below, and therefore…
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Under the Illinois Mortgage Escrow Account Act, we have to allow customers to terminate their escrow accounts once a loan is paid down to 65% of the original loan amount. Does this conflict with federal escrow requirements, and if so, which law applies?
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Based on our discussion of this issue with an attorney at the CFPB, to the extent that a federal requirement conflicts with the Illinois law, federal law preempts the state law. (Also, we are aware of at least one case holding that federal escrow regulations that conflict with Illinois law preempt the Illinois law’s requirements.…
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Is there a state regulation on how many mortgages can be on commercial real estate? We have an application on commercial real estate that already has two mortgages.
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We are not aware of any restrictions on the number of mortgages that can be filed on a single commercial property under Illinois law.
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We do not have a homeownership preservation program in place; does the Mortgage Escrow Account Act require this?
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We do not believe that anything in those provisions requires the bank to set up a “homeownership preservation program.” Instead, Section 6.5 creates exemptions from some of the Act’s requirements for loans made by a “Subprime Mortgage Lender.” 765 ILCS 910/6.5. The term is defined as “a mortgage lender that has, for at least 2…
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Can you provide information regarding the proper steps a bank should take if we suspect a borrower of mortgage fraud?
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The Illinois Criminal Code specifically prohibits mortgage fraud, defined as making “any false statement or report . . . with the intent to influence in any way the action of a financial institution to act upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan.” 720 ILCS 5/17-10.6(d). (This offense was added…