Topic: Mortgage Servicing Transfers
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If we are merging two affiliated banks, are we exempt from the Real Estate Settlement Procedures Act (RESPA)’s mortgage servicing transfer notice requirements? We plan to continue accepting payments made in the acquired bank’s name and the payment address will not be changing. If we are exempt from RESPA’s notice requirements, is there a similar exemption under the Illinois Banking Act?
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Yes, we believe you would be exempt from providing notice of any mortgage servicing transfers resulting from the merger under RESPA if there is no change in account numbers or amount of payment due. Regulation X states that “a transfer that results from mergers or acquisitions of servicers or subservicers” are not considered transfers of…
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If we purchase a bank’s assets as part of a merger, what do we need to file for mortgages that we purchased from the bank to protect our mortgage liens? Should we record assignments of the mortgages to ensure that we can foreclose?
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Ideally, we believe that a purchasing bank should record assignments of the mortgages it acquires. Although recording assignments reflecting the acquisition of mortgage notes is unnecessary to preserve your mortgage lien and priority position as to third parties, recording an assignment could protect your bank from having its lien extinguished as a non-record claimant in…
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We are an out-of-state bank that purchased an Illinois bank, which will merge into our bank. Do we need to send mortgage transfer notices as required by the Illinois Banking Act to mortgage customers from the Illinois bank if the only thing that will be changing for them is the name of the institution they will be corresponding with? We will continue receiving and processing mortgage payments at the same location and phone number. Or does Illinois law not apply since we are an out-of-state bank?
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We believe that your bank is required to send transfer notices for residential mortgage financing transactions under the Illinois Banking Act, in addition to potentially sending notices under Regulation X and Regulation Z, as well as Regulation P. Under the Illinois Banking Act, any bank making residential mortgage financing transactions is required to send written…
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Is there an Illinois state law requirement for a mortgage servicer to send a “Hazard Insurance Endorsement Letter” to the insurance company when a bank is transferring servicing of a mortgage loan to another servicer?
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No, we are not aware of a requirement under Illinois law for a mortgage servicer to send a “Hazard Insurance Endorsement Letter” or other notice to an insurance company when a bank transfers servicing of a mortgage loan to another servicer. Although Regulation X references the possibility that state law may require notice of a…
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We recently closed a mortgage loan secured by a property held in an Illinois land trust. The note, mortgage, and land trust riders were signed by both the borrower and the trustee of the land trust. Now the borrower has requested that we consent to a transfer of the property out of the land trust and into the borrower’s name so the borrower can close the land trust. If we authorize this transfer of title, could our loan and collateral position be jeopardized?
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Assuming the borrower is the beneficiary of the land trust, and the trustee of the land trust signs the transfer, we do not believe that your loan or collateral position would be jeopardized by a transfer of the property out of the land trust and into the borrower’s name, as the transfer would not change…
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We recently converted to a new loan servicing platform, and we are in the process of transferring servicing rights from our bank to a separate mortgage company, without transferring the underlying loan. We will send out the required notice of servicing transfer. Are we required to complete an assignment of mortgage?
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If your bank is transferring only the servicing rights and not the loans themselves, you likely do not want to be assigning title to the mortgages to the servicer. Typically, an assignment of a mortgage transfers ownership of a loan, and that does not appear to be your bank’s intent. For resources related to our…
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Is the Illinois version of the Notice of Assignment, Sale and Transfer form intended to supersede the federal form? Or should we provide the RESPA form and include a reference to Illinois law?
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No, the Illinois notice of a mortgage servicing transfer does not supersede the federal notice required by the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA). Consequently, you should provide either a combined notice that encompasses both the federal and Illinois requirements or separate federal and Illinois notices. It would be…
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Our loan software is alerting us that Illinois law requires a notice of servicing transfers, on top of the federal requirements in RESPA. They cite to 38 Ill. Adm. Code 1050.820. Can you send us this Illinois law? Does it differ from the federal law?
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Yes, Illinois law requires banks to send a mortgage servicing transfer notice, and the content of the Illinois notice differs from the content of the servicing transfer notices required by federal law. The Illinois Banking Act’s requirements for the servicing transfer notice include (1) “the name and address of the transferee,” (2) “the name, address…
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If we purchase the assets of a failed bank through the FDIC, do we have to send the Regulation Z Notice of Mortgage Transfer to borrowers?
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We believe that a bank would have to send Regulation Z mortgage transfer disclosures after acquiring residential loans through an FDIC purchase and assumption transaction. As stated in the rule commentary, “[d]isclosures are required under this section when, as a result of a merger, corporate acquisition, or reorganization, the ownership of a mortgage loan is…