Topic: Real Estate Settlement Procedures Act (RESPA)
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We provide annual escrow account statements to our mortgage borrowers. Does Illinois law require us to send receipts for every property tax payment?
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No, Illinois law does not require lenders to send receipts for each property tax payment, provided that the lender is sending an annual escrow account notice (such as the annual notice required by RESPA) with contact information for borrowers to access additional details about individual property tax payments (such as through a toll-free number or…
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If an LLC enters into a mortgage loan for the purpose of purchasing the primary residence for the LLC’s owner, do the TILA-RESPA Integrated Disclosure (TRID) rules apply?
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No, the TRID rules do not apply to loans made to business entities. The TRID rules (and Regulation Z generally) apply only to consumer credit transactions, meaning loans offered to a consumer for personal, family or household purposes. A loan extended to a business entity, such as an LLC, is exempt. However, you may have…
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We are in the process of modifying an existing home equity balloon loan to extend the term from five years to ten years and to begin amortization. The loan has matured. Can we modify the loan without providing the new TRID disclosures, or should we treat it as a refinancing?
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We believe that you may renew a balloon loan after its maturity date without it falling within Regulation Z’s definition of a “refinancing” (which would require new disclosures under the TRID requirements). However, the language that you use in the loan modification documents is important in order to achieve this result. The Seventh Circuit has…
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If a residential property is used to collateralize a commercial loan is the loan to be treated as a consumer loan?
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Whether a loan is considered a consumer or commercial transaction depends on the primary purpose of the loan, not the type of collateral securing the transaction. For example, a loan to expand a business is a business purpose loan, even if it is secured by the borrower's residence or personal property. Special rules will deem…
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In our area, the seller for a real estate purchase transaction almost always chooses the title company. Our Loan Estimates do state that the borrower is permitted to shop, and we provide a written list of providers. But because the seller selects the title company, is that estimated charge subject to 10% tolerance?
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First, the Real Estate Settlement Procedures Act (RESPA) prohibits sellers from requiring a buyer to use a particular title company. However, if the seller suggests a particular title company, and the buyer acquiesces to that suggestion, the charge would be subject to a 10% tolerance as a third-party service that the borrower could shop for…
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Are bridge loans subject to the TRID disclosure requirements even though they are exempt from RESPA?
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Yes, the TILA-RESPA integrated disclosure (TRID) disclosure requirements apply to bridge loans, even though bridge loans are exempt from RESPA regulations. In publishing the final rule implementing TRID, the CFPB acknowledged that temporary loans may have unique characteristics that make them ill-suited for RESPA disclosures. Nevertheless, the CFPB included temporary loans in the TRID disclosure…
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If we have a loan secured by a mobile home that is treated as chattel property under Illinois law, what disclosures and timing requirements apply under Regulation Z? (The loan is not secured by land.)
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While the TRID rules and Regulation X do not apply to a loan secured by a mobile home that is not also secured by land, there are certain provisions of Regulation Z that do apply. Under Regulation Z, you should provide an interest rate and payment summary, together with a specialized disclosure required for non-TRID…
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Should we include a title company’s “closing fee” in the finance charge calculation? The closing fee is charged for the service of conducting the real estate closing. We thought that a closing fee should be excluded, since we do not require the imposition of the charge, nor do we require the use of a particular title company as closing agent. Moreover, cash transactions also have closing fees, and fees that are charged in comparable cash transactions are not required to be included in the finance charge.
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We believe that a separately itemized fee for conducting a loan closing should be included in the finance charge calculation if it is a required service, even though your institution permits borrowers to select the service provider. Regulation Z and the accompanying Official Interpretations include fees charged for a conducting or attending a closing in…
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We know that if a residential mortgage loan customer cycles in and out of delinquency (missing a payment, later making payments to bring the account current, and then missing another payment), we would send a written early intervention notice every 180 days under 12 CFR 1024.39(b). But if the customer stays delinquent, without making additional payments, should we send only one written early intervention notice or should we send repeat notices every 180 days? We are large servicer.
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We recommend that you continue providing written early intervention notices for borrowers who remain delinquent for more than 180 days after you send the first early intervention notice (which must be sent within 45 days from the date of the first delinquency). Regulation X requires you to provide a written early intervention notice to a…
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We are thinking about offering $25 gift cards to existing bank customers who refer mortgage loans to us. Is that permissible? What if we provide the gift cards to employees or to others?
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Providing a gift card to a bank customer for referrals of “federally related mortgage loans” would violate RESPA's prohibition against kickbacks. RESPA's prohibition against kickbacks applies to “federally related mortgage loans,” which includes loans secured by 1-4 family residential real property and manufactured home (with certain exceptions, such as for temporary financing). There is no…