Topic: Real Estate Settlement Procedures Act (RESPA)
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We want to offer a credit monitoring service to customers affected by recent data breaches. We would offer the service with a discount and would receive a referral fee from the provider. Can we receive a referral fee, and do we need to disclose the referral fee?
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We believe that you may collect a referral fee for sales of credit monitoring services to your deposit customers, though with some caution, but we do not recommend selling the credit monitoring services to your residential loan customers, due to RESPA’s prohibition on referral fees. For your deposit customers, we are not aware of any…
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Can we provide the 65% notice required by the Illinois Mortgage Escrow Account Act with the annual escrow statement required by RESPA?
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We do not believe it would be permissible to combine an annual RESPA escrow account notice with the one-time notice required by the Mortgage Escrow Account Act, since different timing requirements apply to both notices. Section 5 of the Mortgage Escrow Account Act (MEAA) law requires mortgage lenders to send a notice informing a borrower…
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One of our residential mortgage loan customers is several months behind on his payments, and the homeowner’s insurance for the property securing the loan has lapsed. The escrow account has been exhausted. Under the CFPB’s servicing rules, can we force-place the homeowner’s insurance? Or, if we prefer, can we rely solely on our mortgage protection insurance?
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To answer your first question, the CFPB rules may limit your ability to force-place hazard insurance. To answer your second question, we do not believe that those rules require you to maintain or force-place hazard insurance for the borrower (other than flood insurance, when required) — meaning that you could, theoretically, rely solely on your…
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On a GFE and HUD-1, how should we disclose transfer taxes? Does Illinois law state which party is responsible for paying transfer taxes? We currently disclose the taxes as a charge to the borrower in Block 8 of the GFE and in Line 1203 of the HUD-1 Statement.
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From what you have told us, it sounds like you are disclosing transfer taxes correctly. As stated in HUD’s Settlement Cost Booklet, transfer taxes should be disclosed in Block 8 of the GFE and in Line 1203 of the HUD-1 Statement: “Line 1203 lists the charge for transfer taxes. Transfer taxes are charged by state…
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We have a balloon loan that has matured, and we are not renewing the loan. The customer has not made the balloon payment. Did the new RESPA 120 day foreclosure grace period begin to run after the loan matured?
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Please note that this answer discusses the Illinois grace period notice requirement, which expired on July 1, 2016, pursuant to a sunset provision. Please see 735 ILCS 5/15-1502.5. Yes, we believe the loan should be considered “delinquent,” because it has matured and the borrower has not paid the balloon payment. The new RESPA servicing rules…
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During the ABA’s recent Mortgage Compliance Q&A call with the CFPB, the CFPB responded to a question by telling us to “check state law.” The question was how to define “delinquency” for purposes of the 120-day stay on foreclosure actions, particularly when a delinquent borrower is occasionally making payments.
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Please note that this answer discusses the Illinois grace period notice requirement, which expired on July 1, 2016, pursuant to a sunset provision. Please see 735 ILCS 5/15-1502.5. The new RESPA servicing rules prohibit servicers from initiating a foreclosure action until “a borrower’s mortgage loan obligation is more than 120 days delinquent.” 12 CFR 1024.41(f)(1)(i).…
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Our mortgage servicing company prepares the escrow statements for our loans, and our auditors identified a recurring issue on the initial escrow account statements for loans where a property tax installment is paid (by the title company) before the first loan payment. For these loans, the initial escrow statements are showing only one disbursement of property taxes. Should we be showing two property tax installments on the initial escrow statement?
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Yes. From what you have told us, it sounds like the initial escrow account statements are not being prepared correctly. Even if a property tax installment is paid before the first loan payment, the initial escrow account statement should include every disbursement made in the 12 months following the first loan payment. So, if the…
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We received a law bulletin from a law firm stating that the Illinois “grace period notice” requirement conflicts with the new CFPB rule requiring us to wait 120 days before initiating a foreclosure action. Do you agree?
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Please note that this answer discusses the Illinois grace period notice requirement, which expired on July 1, 2016, pursuant to a sunset provision. Please see 735 ILCS 5/15-1502.5. No, you do not have to wait 120 days before mailing the Illinois “grace period notice” to delinquent borrowers, as required by 735 ILCS 5/15-1502.5(c). The new…
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Does RESPA apply to a loan to purchase a non-owner occupied rental property? We know it is exempt from Regulation Z.
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We believe that neither RESPA nor Regulation Z would apply to the loan to purchase a rental property that would not be owner-occupied. RESPA excludes from coverage any loan made “primarily for a business, commercial, or agricultural purpose, as defined by” Regulation Z. 12 CFR 1024.5(b)(2). As you noted, Regulation Z does not apply to…