Topic: Mortgage Loans
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We originated a consumer mortgage loan to joint borrowers, who recently informed us that they have legally changed their names. Is there anything we need to do other than document this in the loan file? Should we be concerned that the borrowers’ names now do not match the loan documents?
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No, we do not believe you need to take any additional action to address a consumer customer’s name change after updating your internal loan file and verifying the name change, as your promissory note, mortgage, and current lien position would not be affected by a name change (subject to the caveat for blanket UCC financing…
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When reporting loans in excess of our supervisory loan-to-value limits under Part 365 of the FDIC’s regulations, how should we determine the value of a property in a purchase transaction that includes funds for improvements? For example, if the purchase price is $50,000, the loan amount is $75,000, and the appraised as-completed value is $100,000, is the property value the purchase price or the as-completed value? It appears that “value” is defined as the lesser of the purchase price or appraised value, and we do not see any exceptions for loans that include funds for improvements.
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We agree that the value of the property in your example would be the purchase price of $50,000, and not the as-completed value of $100,000. We also agree that there do not appear to be any applicable exceptions. The Interagency Guidelines outlining the calculation and reporting of loan-to-value ratios generally define the property value for…
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We were advised not to renew a HELOC if the mortgage is twenty or more years old and that we should refinance instead. Does Illinois law specify when a mortgage securing future advances will expire? We have not found anything indicating that advances made after twenty years would not be secured by the mortgage.
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Yes, we believe that Illinois law imposes a twenty-year limitation on the security provided for future advances made under a mortgage securing a HELOC. The Illinois Banking Act provides that mortgages that secure revolving credit loans secure future advances only if “made within twenty years from the date thereof . . . .” A separate…
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We have a potential loan customer that wants to purchase a mobile home park and the mobile homes located in it. We want to extend a mortgage loan to them secured by both the land and the mobile homes they will be purchasing. Do the certificates of title for the mobile homes need to be surrendered to the Secretary of State for us to extend this mortgage loan? If so, is there an exemption from this requirement if the mobile homes are located in a mobile home park?
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We believe that it is necessary to surrender the certificates of title for the mobile homes, among other required steps, in order to extend a mortgage loan secured by a manufactured (or mobile) home as real property (with the underlying land). There is no exemption from these required steps for mobile homes located in a…
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We want to offer a HELOC with interest-only payments and no annual fees. Are there any restrictions on interest-only loans or other compliance issues that we should be aware of?
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No, we are not aware of any Illinois or federal law that would generally prohibit interest-only HELOCs, although you should be aware that such a HELOC may result in a prohibited balloon payment if the HELOC qualifies as a high-risk or high-cost mortgage. Subsection 4(1) of the Interest Act expressly permits savings banks to collect…
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We are extending a purchase money mortgage loan to a borrower whose sales contract states that the seller will pay a $10,000 credit at closing for foundation repairs to the property. The borrower will be responsible for scheduling the repairs and hiring a contractor, and the seller will not be responsible for any additional expenses. We are going to hold the $10,000 in escrow until the repairs are complete, and we do not want these funds to reduce the amount the borrower needs to bring to the closing. Do we need to disclose the seller credit on the Loan Estimate (LE), and where should we list it on the Closing Disclosure (CD)?
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We believe that disclosing the seller credit for repairs on the LE is optional and that you should list the seller credit in Section N (“Due from Seller at Closing”) of the CD. For the LE, Regulation Z’s Official Interpretations provide lenders with two options for addressing a seller credit. When the lender knows that…
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Does Illinois law allow us to hire a real estate broker as a loan originator if the individual will not act in both capacities on a transaction? The employee will not be receiving any compensation for referring their clients to the bank, and the majority of the loans they will be working on are consumer purpose. We are a Federal Housing Administration (FHA)-approved lender.
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We are not aware of any law or regulation that would prohibit a bank employee from also working as a real estate broker in their free time, provided they do not receive any compensation for referring their clients to the bank, and provided that the employee does not act as both a real estate broker…
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We assess a “fax/email” fee when sending payoff statements for home equity lines of credit (HELOCs). When disclosing this fee at origination, is it sufficient to state that the fee will be charged, or do we need to provide the amount of the fee in the disclosure? We will ensure that the fee we assess is reasonable given the CFPB’s scrutiny of “junk fees.”
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We recommend disclosing the amount of the fax/email fee at origination if it is known. Although Regulation Z does not expressly require creditors to disclose the amount of fees associated with payoff statements, it does require you to explain how the fee amount will be determined. For HELOCs, Regulation Z requires creditors to disclose an…
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We ordinarily use three title companies for our consumer and commercial real estate loans, but we also regularly use other title companies we have never reviewed before. We enter into written “proposals” with these title companies, which are basic agreements reviewing products and pricing. What is the recommended due diligence we should conduct before using these title companies for any kind of title services or loan closings for the bank?
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We believe that the appropriate level of due diligence depends on the services these title companies are providing to your bank. For example, a title company providing lender’s title insurance or escrow services to your bank may present a higher degree of risk (and consequently require a more extensive review) than a title company that…