Topic: Truth in Lending Act (TILA)
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Is it true that a seller credit for property taxes should be shown on only the Closing Disclosure (CD) and not the Loan Estimate (LE)? Or should a tax credit be reflected in the “Adjustments and Other Credits” section of the LE?
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You may choose whether to disclose a property tax credit on the LE if the credit is for taxes that will be due before the first scheduled loan payment or within sixty days after the closing date. However, if the credit is for taxes that will not be due until more than sixty days after…
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For closed-end mortgage transactions, we use a company to verify a borrower’s employment using their work phone number. The company charges a fee for this verification service, which we pass on to the borrower. We have been listing this fee in “Section B” of the Loan Estimate (LE) and Closing Disclosure (CD), since the borrower cannot shop for these services. Would this fee be considered a prepaid finance charge or is it just a finance charge?
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First, we agree that an employment verification fee would be considered a finance charge, since it would not be charged in a comparable cash transaction and does not fall into any of the categories that are exempted from the definition of finance charge. Whether it is a prepaid finance charge depends on how it is…
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We are updating the fields in our LaserPro system for end-of-year HOEPA triggers, and there are fields to enter the HOEPA triggers for first lien non-real estate loans less than $20,000 and greater than or equal to $20,000. Where can I find these thresholds?
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The HOEPA (i.e., high-cost mortgage loan) points and fees trigger is based on whether the loan amount is less than an inflation-adjusted threshold of $20,000, or greater than or equal to the inflation-adjusted threshold of $20,000. For 2019, that threshold was $21,549. For 2020, that threshold is $21,980. Additionally, for transactions that are less than…
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We are updating the fields in our Laser Pro system for end-of-year HOEPA triggers. Where can I find the state of Illinois high-cost mortgage interest rate triggers for first and second liens?
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Illinois’ equivalent of the federal HOEPA regulations for “high-cost” mortgage loans is the Illinois High Risk Home Loan Act (Act). Under the Act, the interest rate trigger for a “high risk home loan” is an annual percentage rate that exceeds the average prime offer rate (APOR) by more than six percentage points for first lien…
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Is there an escrow requirement when a small lender refinances a higher-priced mortgage loan (HPML)? We have a loan for which an escrow was not established at origination that now qualifies as an HPML. Also, would the HPML escrow requirement apply to the refinancing of a business purpose loan secured by a principal dwelling?
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We believe that a small creditor would be subject to Regulation Z’s escrow requirement when refinancing an HPML, unless an exception applies, as discussed below. However, the HPML escrow requirement would not apply to the refinancing of a commercial purpose loan, since the HPML regulations apply only to consumer loans. Regulation Z defines an HPML,…
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Can a small lender extending a higher-priced mortgage loan (HPML) under $250,000 use a broker price opinion or in-house valuation, or is an appraisal required?
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Appraisals are required for HPMLs unless an exception applies, as discussed below. Regulation Z generally requires lenders to obtain written appraisals for HPMLs, but it contains eight exceptions to the HPML appraisal requirement. Exceptions include loans that meet the criteria for a qualified mortgage (QM) loan, loans that do not exceed $27,200, loans secured by…
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Do the escrow requirements for higher-priced mortgage loans (HPML) apply to both property taxes and insurance? Or can a borrower with an HPML escrow only for taxes?
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Regulation Z’s escrow requirements for HPMLs generally apply to both property taxes and insurance, subject to the exceptions below. Regulation Z provides that a creditor may not extend an HPML “secured by a first lien on a consumer’s principal dwelling unless an escrow account is established before consummation for payment of property taxes and premiums…
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We are an Illinois-chartered savings bank, and we are considering offering a loan modification program for owner-occupied, single-family residential properties that would allow a borrower to pay a fee to lower the interest rate on the remaining loan balance. The borrower would execute a modification agreement on the original note, and the loan would be kept in our portfolio. Are there any compliance concerns related to this program, and would any additional regulatory paperwork be required?
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We believe your proposed modification program would be permissible and, aside from the caveats noted below, would not require additional disclosures — but the documentation for the modifications must demonstrate that the existing loans are not being satisfied or released. It is possible to lower the interest rate on a mortgage loan and charge a…
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We provide our loan customers with a list of service providers that includes the local office of a national title insurance company. The title insurance company has many locations, and they do not all charge the same fees. If a customer chooses a different location of the company than the one on our list, has that customer “shopped” for the service provider? When this happens, on which sections of the Loan Estimate and Closing Disclosure should we list the services?
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Whether your customer has “shopped” for the service provider when they use an office of a national title insurance company other than the one on your list depends on whether the chosen office is a separate legal entity from the one on your list. If the office location chosen by your customer corresponds to a…
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We collect our own debts for residential home loans, and we are a large servicer for purposes of the CFPB’s mortgage servicing rules. Can you recommend any training resources on Regulation X and Regulation Z as they apply to loss mitigation? We would like to develop our staff’s ability to make critical assessments of loss mitigation situations. Any resources for developing related soft skills, such asking probing questions, also would be useful.
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We can recommend a Total Training Solutions (TTS) webinar focusing on Regulations X and Z as they apply to the 2017 revised mortgage servicing rules and a webinar on mortgage servicing compliance that covers loss mitigation options, applications, and processes. Also, the American Bankers Association (ABA) provides a webinar on mortgage servicing and loss mitigation.…