Topic: Real Estate Settlement Procedures Act (RESPA)
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Can our lenders host luncheons for realtors? Can we provide food?
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Yes. Providing space for a luncheon and free food for realtors should not be a problem, provided that you are not limiting attendance or favoring certain realtors based on their referrals to your institution. The Real Estate Settlement Procedures Act (RESPA) regulations prohibit you from providing “any fee, kickback or other thing of value” in…
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Do the new RESPA rules requiring a 120-day grace period before initiating a foreclosure action include an exception for abandoned properties?
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No. There is no exception for abandoned properties in the RESPA prohibition on initiating a foreclosure action before the borrower is more than 120 days delinquent (provided that the property is the borrower's principal residence). 12 CFR 1026.41(f)(1)(i). The CFPB received requests from industry commenters to include such an exception, and the CFPB declined to…
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Under the new CFPB rule requiring us to delay filing a foreclosure action until a borrower is 120 days or more delinquent, what is the definition of the “first notice” in the foreclosure action?
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The new RESPA servicing rules prohibit servicers from initiating a foreclosure action (by filing a “first notice or filing” in the foreclosure process) until the borrower is more than 120 days delinquent. 12 CFR 1024.41(f)(1)(i). The CFPB’s staff commentary defines “first notice or filing” as “the earliest document required to be filed with a court or…
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Under the CFPB’s new mortgage servicing rules, when does the 120-day delinquency period start running?
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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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We’ve been giving disclosures to loan customers about homeowners insurance. An Illinois law, 215 ILCS 5/1412, says that if we are a financial institution and offer insurance (either directly or through an affiliate), we have to give an affiliated business disclosure. We had a close relationship with an insurance company at one time, but we do not currently have any affiliate or relationships with any insurance companies. Do we need to keep giving this notice to our customers?
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We do not see any reason to disclose an affiliate relationship to customers after the affiliate relationship has ended. The Illinois law you cited, 215 ILCS 5/1412, requires disclosure to customers only if your institution offers insurance directly or through an affiliate. Since your institution does not currently offer insurance directly or through an affiliate,…
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We have a customer who did not share with the loan officer that he had a previous VA loan that was not disclosed before the loan closing. The VA funding fee that was disclosed on the borrower’s GFE was short by $4,500, as the fee goes up for each VA loan that is made. Is that a valid changed circumstance?
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We believe that the borrower’s failure to disclose the first Veterans Administration (VA) loan would constitute a valid changed circumstance, and as a result the RESPA rules permit you to provide the borrower with a revised good faith estimate (GFE) reflecting the resulting increase in the VA funding fee. The RESPA regulations define “changed circumstance”…
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Our examiners told us that we cannot charge an escrow set up fee (a one-time fee for the initial set up). Does Regulation X prohibit such fees?
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While we agree that Regulation X prohibits charging fees for preparing and distributing escrow account statements, we believe it is permissible to charge an initial escrow set up fee, provided that it is unrelated to the preparation and distribution of the initial escrow account statement. Section 12 of Regulation X prohibits escrow account fees for…
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Do RESPA and Regulation Z cover a loan that is secured by vacant land and by a mobile home that won’t be permanently affixed to the land?
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We believe that RESPA would apply to a loan secured by land and by a mobile home. The RESPA regulations state that they apply to loans secured by vacant land if “a structure or a manufactured home will be constructed or placed on the real property using the loan proceeds” within two years after the…
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If we extend a balloon loan that has not yet matured but change the payment terms (by changing the term from three years to one year), would that be considered a refinance or a renewal?
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Whether a subsequent transaction related to the same loan should be treated as a refinancing with new TILA and RESPA disclosures depends on the loan documents. The general rule is that a refinancing occurs only when an existing obligation is “satisfied and replaced by a new obligation undertaken by the same consumer” (under Regulation Z)…
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What requirements/documents are required by the State of Illinois regarding escrowing on business purpose loans for rental property? The customer is requesting the escrowing.
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We are not aware of any federal regulations that apply to escrow accounts for commercial loans. RESPA excludes from coverage any loan made “primarily for a business, commercial, or agricultural purpose,” as Regulation Z defines the term (in 12 CFR 1026.3(a)(1) and the accompanying official staff commentary). 12 CFR 1024.5(b)(2). The Regulation Z commentary specifically…