Topic: Real Estate Settlement Procedures Act (RESPA)
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We have an affiliated law firm that provides title services to our bank. The law firm’s owner is the chairman of our board. On the affiliated business arrangement disclosure required by RESPA, do we need to list the owner’s name in addition to the law firm’s name?
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We believe that the affiliated business arrangement (AfBA) disclosure should include the name of your bank’s chairman. RESPA and Regulation X require the AfBA disclosure to include “the nature of the relationship (explaining the ownership and financial interest) between the provider of settlement services (or business incident thereto) and the person making the referral.” To explain the ownership and…
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We send annual RESPA escrow account statements to our borrowers. Do the RESPA notices fulfill the Illinois Mortgage Escrow Account Act’s notice requirements in Section 15 (which requires more information than that included in the RESPA notice, such as a property’s PIN)?
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It depends. The annual escrow account statement required by RESPA by itself will not satisfy the Illinois Mortgage Escrow Account Act’s notice requirements, but it can if you add language to the notice stating that the bank’s contact information in the notice provides a means for accessing the dates and amounts of the borrower’s property…
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Is there any conflict when a bank employee works as a loan processor and also works as a realtor on the side? In this instance, the employee is not a loan originator or loan officer and performs purely administrative tasks for non-consumer loans. The bank does not pay referral fees or other compensation to the employee for clients who choose the bank for their banking or mortgage needs.
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We are not aware of any law or regulation that would prohibit a bank employee from also working as a real estate broker in her free time, provided that she does not receive any compensation for referring her clients to the bank. In this situation, RESPA’s prohibition on referral compensation would be inapplicable, as the…
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We would like to foreclose on a consumer mortgage loan. The borrower’s wife signed the mortgage, but she is not on the title to the mortgaged home and did not sign the loan agreement. The borrower has informed us that he has moved out of the home securing our loan, his wife’s boyfriend has moved in, the home’s condition is deteriorating, and he is done making loan payments. If the borrower signs an affidavit averring that the home is no longer his primary residence, are we still required to wait 120 days before filing for foreclosure?
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No, we do not believe that the 120-day grace period requirement will apply if your bank has an affidavit from the borrower averring that the mortgaged property is not his principal residence. The requirement to delay initiation of foreclosure proceedings until a mortgage loan is more than 120 days delinquent applies only to loans secured…
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Several customers who escrow their real estate taxes have prepaid them and now want a refund from their current escrow accounts. Can we impose a fee for analyzing whether a refund is required? If so, must we disclose the fee in writing? How quickly must we issue a refund after a borrower request?
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We are not aware of any prohibition against charging a fee for conducting an escrow analysis. However, your bank’s loan agreement with its borrowers must allow your bank to charge additional or unforeseen fees, such as for the analysis you have described. If the agreement does not contain language permitting such charges, then we recommend…
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Under the new Mortgage Servicing Rules that took effect October 19, 2017, we are required to make “good faith efforts” to establish live contact with a delinquent borrower no later than the 36th day of delinquency and again no later than 36 days after each payment due date. Does this mean that we must continue to make phone calls until a foreclosure sale is confirmed? Our bank does not qualify as a small servicer.
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No, in general we do not believe that a loan servicer’s responsibility to make good faith efforts to establish live contact always requires phone calls to be made up to the date of the final foreclosure sale. A servicer’s obligation to make live contact varies from case to case. (While not applicable here, we also…
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When a borrower has been delinquent for at least ninety days, we used to send a letter demanding the entire amount past due, with a lockout preventing payments from processing. Under the latest mortgage servicing amendments that went into effect in October of 2017, can we still send out this letter and refuse to credit loan payments? Will we be able to file a foreclosure action after 120 days of delinquency? We are a small servicer.
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Yes, we believe that your bank may send demand letters and refuse to credit monthly loan payments on a delinquent closed-end consumer mortgage loan, provided that you already have accelerated the loan because of the delinquency. The general rule under Regulation Z for closed-end consumer mortgage loans is that servicers must credit periodic payments covering…
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We want to sell a commercial real estate note. How much notice (if any) do we have to provide to the borrower?
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We are not aware of any law or regulation that requires any particular notice to the borrower when selling a commercial real estate note. Consequently, any notice requirements likely will be governed only by your loan agreement.
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We recently received an application for a home purchase loan where the current owner qualifies for senior and veteran property tax exemptions, but the applicant would not. This will be a higher-priced mortgage loan, so we will escrow for property insurance and property tax payments. Due to the current exemptions, the applicant would not have to pay property taxes for a year or more after purchasing the home. Should we state on the initial escrow analysis, Loan Estimate (LE) and Closing Disclosure (CD) that we will require an escrow account for property taxes? Should we list the estimated taxes and amount for prepaid taxes as zero on the LE and CD? We do calculate estimated taxes in order to complete our ability-to-repay analysis, based on a formula provided by our local county assessor’s office.
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Yes, your bank must disclose that an escrow account is required on the CD. Your bank may choose to disclose the estimated future property taxes on page 1 of the LE, but this is not required. Other than that, there is no clear place in the LE, CD or initial escrow analysis to disclose the…
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We are making a higher-priced mortgage loan for the purchase of a mobile home that will not be located in a mobile home park. The borrower is leasing the underlying land, which will not secure the loan. The mobile home will be taxed as real property on the landowner’s tax bill, so the borrower will not owe any property taxes. Are we still required to escrow for taxes? We will be setting up an escrow account for property insurance payments.
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We recommend setting up an escrow account for the borrower, even though the escrow account will not be used to collect funds for property tax payments. Before consummating a higher-priced mortgage loan, the creditor must establish an escrow account “for payment of property taxes and premiums for mortgage-related insurance required by the creditor.” We believe…