Topic: Mortgage Loans
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How can we properly disclose at the origination of a home equity line of credit (HELOC) what the release fee will be when the loan is terminated? We are aware that such fees are allowable in Illinois, but we can’t say with certainty what the amount will be, and the fees vary by county.
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We do not believe you are required to disclose the exact amount of the release fee at the HELOC’s origination. Rather, you can disclose the existence of the release fee and explain how it will be determined. For home-equity plans, Regulation Z states that creditors must disclose at account opening “the circumstances under which a…
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An individual borrower would like to transfer the ownership of their property to an LLC while retaining the promissory note and mortgage. We service the loan, which was sold to Freddie Mac, and we believe Freddie Mac’s guidelines would allow the transfer if it is permissible under state law. If we allow the transfer and the borrower defaults on the loan, will we retain our right to collect on the loan and potentially foreclose the mortgage? Also, would we need to have the borrower sign an agreement acknowledging the transfer?
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We believe it is possible for title to the property to be transferred to an LLC without affecting your right to collect on the loan and potentially foreclose the mortgage. We are not aware of any state law restrictions that would prohibit such a transfer, but we recommend reviewing the terms of your mortgage to…
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How can we properly disclose at the origination of a home equity line of credit (HELOC) what the release fee will be when the loan is terminated? We are aware that such fees are allowable in Illinois, but we can’t say with certainty what the amount will be, and the fees vary by county.
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We do not believe you are required to disclose the exact amount of the release fee at the HELOC’s origination. Rather, you can disclose the existence of the release fee and explain how it will be determined. For home-equity plans, Regulation Z states that creditors must disclose at account opening “the circumstances under which a…
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Are we required to include a loan’s payment terms and interest rate in a mortgage or modification? We would like to cease including this information in our recorded documents if it is not required.
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No, we do not believe you are required to include a loan’s payment terms and interest rate in a mortgage or modification. The Illinois Conveyances Act provides that a mortgage may be substantially in a form that “recite[s] the nature and amount of indebtedness, showing when due and the rate of interest, and whether secured…
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We are a national bank that is going to begin offering escrow accounts to mortgage loan customers. We are aware we will need to provide several documents in conjunction with these accounts, including an initial escrow account statement, annual escrow account statement, escrow closing notice, Illinois Mortgage Escrow Account Act notice, Illinois notice of right to terminate escrow, Illinois notice of tax payments, Illinois escrow account disclosure agreement, and Illinois escrow account election form. Are there any other federal or state documents we may be overlooking, and can you direct us to any model forms (other than the escrow closing notice, which we have)?
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While we cannot provide an exhaustive list of every document you might need in relation to offering your customers escrow accounts, as your needs may vary depending on the circumstances of each loan, we believe the federal documents you listed generally would meet federal requirements related to providing escrow accounts, with the caveats noted below.…
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Our consumer mortgages that secure revolving lines of credit provide that they also secure future advances made within twenty years from the date of the mortgage. Can we modify these mortgages to extend the advance period beyond twenty years, or do we need to obtain new mortgages?
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No, we do not believe you can modify these mortgages to extend the advance period beyond twenty years, as we do not believe the mortgages would be a lien on any funds advanced beyond the twenty-year time period. As a result, we believe you would need to record a new mortgage to secure the advancement…
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We have a mortgage loan borrower whose outstanding loan balance is $8,000. Their property’s insurable value is $100,000, and the maximum National Flood Insurance Program (NFIP) coverage is $250,000. Can we require the borrower to obtain $250,000 in coverage rather than $8,000? Would there be any concerns if we force place flood insurance in the amount of $250,000?
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We would caution against requiring the borrower to obtain $250,000 in coverage in this scenario, since it far exceeds the amount the borrower would recover in the event of a loss. Additionally, we believe you are prohibited from force placing insurance in an amount exceeding the minimum amount required under the NFIP. The minimum amount…
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Is there a model Illinois Mortgage Escrow Account Act notice (advising borrowers that they may terminate their escrow account when certain conditions are met) that also references Regulation Z’s additional requirements for canceling escrow accounts associated with higher-priced mortgage loans (HPMLs)? Can we modify our current notice to reference Regulation Z’s HPML escrow cancellation requirements?
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No, we are not aware of a model Illinois Mortgage Escrow Account Act notice that references Regulation Z’s additional requirements for canceling escrow accounts associated with HPMLs, but we submitted a request for such a notice to our Compliance Division Advisory Committee and will provide any responses we receive. Additionally, we believe you may modify…
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If a mortgage loan applicant is scheduled to come into the bank to receive and sign their Loan Estimate (LE) on the third business day after we received their application — but is unable to do so because the bank is closed due to inclement weather — can the LE be signed on the following business day, or is the date of the closure for inclement weather considered a “business day” for purposes of the LE deadline? Should we mail the LE as a precaution instead of planning to hand deliver the LE?
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No, we do not believe a day on which your bank closes due to inclement weather would be considered a “business day” for purposes of delivering the LE — provided your bank ceases to carry out substantially all of its business functions on that day. Whether to mail or hand deliver the LE to a…