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?
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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?
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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?
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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?
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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…