Topic: Mortgage Payoff Statements and Releases
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Is there a restriction on charging a “payoff processing fee,” such as when providing a payoff statement to an outside entity like a title company, for a loan that is not a high-cost mortgage loan? If so, should the payoff processing fee be disclosed in the loan documents?
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No, other than Regulation Z’s prohibition against charging fees for payoff statements for high-cost mortgage loans, we are not aware of any law prohibiting a payoff processing fee, provided the borrower has agreed to the fee in the loan documents. The Illinois Banking Act permits banks to charge any fees, interest and other charges based…
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A customer would like a loan to purchase a mobile home that will be affixed to his land and to pay off an existing loan secured by the land. The loan amount will be the purchase price of the mobile home plus the payoff amount of mortgage, which is held by another bank. Where do we list the land mortgage payoff amount on the Calculating Cash to Close table on the Loan Estimate?
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For a purchase transaction, we believe that the payoff amount for the land mortgage loan is part of the calculation used to determine the amount that should be placed on the “Closing Costs Financed” line of the Loan Estimate’s Calculating Cash to Close Table. To calculate “Closing Costs Financed” for a purchase transaction (other than…
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An external auditor told us that the Illinois Interest Act prohibits us from charging loan release fees for home equity lines of credit (HELOCs), citing 815 ILCS 205/4.1. Is that true?
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We believe that Illinois law permits banks to charge HELOC lien release fees, provided that your customer has agreed to pay such fees on the HELOC agreement. Section 4.1 of the Interest Act appears to prohibit lenders from charging borrowers for “expenses, including recording fees and otherwise” when releasing a mortgage lien. However, the Illinois…
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In the Illinois Interest Act, there are provisions that appear to prohibit us from charging fees for releasing a security interest for a home equity line of credit (HELOC), including recording fees charged by the county recorder. Do I understand that correctly? Or are we exempted under the Illinois Financial Services Development Act?
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We believe that Illinois law permits banks to charge HELOC lien release fees, including county recorder fees, provided that your customer has agreed to pay such fees. Section 4.1 of the Interest Act appears to prohibit lenders from charging borrowers for “expenses, including recording fees and otherwise” when releasing a mortgage lien. However, the Illinois…
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When a borrower pays off a note, do we send him the original note stamped “paid” or should we keep the original note and send the borrower a copy?
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In our view, it does not matter whether you send the original or a copy of the note, provided both are clearly marked as having been satisfied (for example, as in “paid”). We are not aware of any law or regulation that requires lenders to retain or relinquish the original note after a loan is…
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Does the Interest Act prohibit us from charging lien release fees for home equity lines of credit?
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No, we do not believe that the Interest Act would prohibit you from charging a mortgage lien release fee, on the condition that the customer contracted to pay such a fee in your loan agreement. While Section 4.1 of the Interest Act appears to prohibit charging for lien releases on revolving credit lines, that provision…
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We want to implement three new fees for all of our loan customers: an NSF fee, an expedited payoff fee (for sending payoff statements via fax or courier), and a check-by-phone payment fee. How should we disclose these new fees? We are considering doing this for all of the types of consumer loans that we make.
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In general, if you charge any new types of fees, your customers must agree to them. First, you should check your controlling loan agreements for provisions that might apply to the unilateral imposition of these new fees, as well as for any terms regarding the disclosure of new fees. It may be that there are…
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We record the release of mortgage liens for our customers. How quickly should we be recording the releases?
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Because your institution has taken responsibility for recording mortgage releases, we believe that you should record the releases within one month after a mortgage loan has been paid off. Other options are to deliver mortgage releases to your customers or, for certain mortgages, to permit title insurance companies to record the releases. The Illinois Mortgage…
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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…