Topic: Higher-Priced Mortgage Loans (HPMLs)
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Under the new HPML requirements, we must keep escrow accounts for HPMLs open for five years. However, what if Illinois law permits a borrower to cancel the escrow before the five years is up?
In the context of mortgage escrow accounts, to the extent that a federal requirement conflicts with the Illinois law, federal law will preempt the state law. Olsen v. Financial Fed. Sav. & Loan Ass’n, 105 Ill.App.3d 364, 371 (1st Dist. 1982). (This is not always the case, as some federal laws expressly allow state law…
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As to Section 7 of the Mortgage Escrow Account Act, does federal law preempt the mortgage escrow requirement for higher priced mortgage loans or where Fannie Mae requires an escrow account? Is the 65% notification still required, even though we would not be able to release the escrow account under federal law?
Section 7 exempts mortgages guaranteed by the federal government from Section 5 (allowing cancellation at 65%). 765 ILCS 910/7 (“The borrower shall not have the right to terminate any such arrangement under Section 5 in conjunction with mortgages insured, guaranteed, supplemented, or assisted by the State of Illinois or the federal government that require an…
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During a compliance review we discovered a higher-priced mortgage loan that did not have an escrow account (as required by Regulation Z). What is the best way to resolve this error?
Under the facts you gave us, we see two separate violations: (1) a violation of Regulation Z’s requirement to escrow higher-priced mortgage loans, at least for the first 365 days, and (2) a violation of the prohibition on unfair, deceptive, or abusive acts or practices in relation to consumer financial products and services. The Regulation…
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Are higher-priced mortgage loans and three- and five-year balloon renewals treated as higher-priced mortgage loans, or are they just renewals of the same note?
Whether a renewal of a loan is treated as a higher-priced mortgage loan depends on whether it is considered a “refinancing” under Regulation Z. Supplement I to Section 226, Paragraph 1(d)(5)-1 (“if the transaction were a modification of an existing obligation’s terms that does not constitute a refinance loan under §226.20(a), the final rules, including…