Topic: Truth in Lending Act (TILA)
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Do we have to disclose an owner’s title insurance premium on the Loan Estimate and Closing Disclosure when we know that this will be paid by the seller? We require owner’s title insurance and allow the borrower to shop for it, but typically the seller pays for the premium. If we do not disclose the premium on a Loan Estimate, wouldn’t this create a tolerance issue when including it on the Closing Disclosure?
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Disclosing a seller-paid premium for owner’s title insurance on the Loan Estimate is optional, but you must disclose this fee on the Closing Disclosure. With respect to the Loan Estimate, Regulation Z’s Official Interpretations provide lenders two options for disclosing the seller-paid premium for an owner’s title insurance policy. If the lender knows that the…
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If a closed-end loan has a combined purpose to purchase a manufactured home and to construct a basement for the home, what should we list as the loan’s purpose on the Loan Estimate? Does it matter if the loan will be structured as a short-term loan with three separate advances? The manufactured home will secure the loan.
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In our view, you should identify the loan as a purchase loan, regardless of how it is structured. The TRID rules require lenders to identify just one of four possible loan purposes in the Loan Estimate: (1) purchase, (2) refinance, (3) construction, or (4) home equity. A purchase loan is one made to finance the acquisition…
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What should we list as the loan purpose on the Loan Estimate under the TILA-RESPA Integrated Disclosure (TRID) rules for a closed-end loan to purchase a manufactured home that will be attached to land? The borrower already owns the land, and the loan proceeds will be used to purchase a modular manufactured home to be placed on the land, but a portion of the loan also will be used to build a basement, porch and garage for the manufactured home. The loan will be secured by both the manufactured home and the land it will sit on. Is this a purchase loan or a construction loan?
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In our view, the purpose of this loan should be identified as a purchase. The TRID rules require lenders to identify just one of four possible loan purposes in the Loan Estimate: (1) purchase, (2) refinance, (3) construction, or (4) home equity. We believe that “construction” is inapplicable for two reasons. First, the purpose of construction is…
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We are sending an email advertisement to existing auto loan customers for a credit card that we offer through a third party. Those who apply for the credit card will receive an Amazon gift card. The email also contains a link to the additional disclosures required under Regulation Z. Is the link sufficient, or should we include the disclosures in the body of the email? Also, should we specify that the offer is only for the email recipient or for existing auto loan customers, so that recipients don’t share the offer email? Are there any other issues with such an email advertisement?
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Yes, Regulation Z and its Official Interpretations permit electronic advertisements to provide the additional required disclosures through a link, provided any trigger terms in the email are “accompanied by a link that directly takes the consumer to the additional information.” We also recommend reviewing the email to ensure that it complies with the CAN-SPAM Act,…
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When we make payments for taxes or insurance from a borrower’s escrow account, we are charged a fee for making the payments electronically. Can we pass the electronic payment fees on to the borrower? Or should our bank absorb that cost because we choose to make the payments electronically instead of mailing a check?
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Yes, we believe your bank may pass on the costs of these electronic payment fees to your borrowers, although to receive maximal protection under Illinois law, you should ensure that your customer agreements contain language that encompasses such passed on charges. Neither federal nor Illinois law prohibits charging borrowers any fees imposed on the bank…
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When preparing a Loan Estimate, what is the best practice for disclosing the estimated property tax and escrow information for a purchase loan? Should we call the county for the most recent assessment, or is the most recent tax bill sufficient? In some instances, a multiplier has been added since the most recent tax bill was printed, resulting in increased taxes.
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We recommend obtaining publicly available tax information directly from the county, when possible. Regulation Z requires that estimated property taxes on a Loan Estimate must reflect the “taxable assessed value of the real property securing the transaction after consummation.” Property tax estimates are not subject to a tolerance — meaning they are treated as having…
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On a residential mortgage loan application, does the loan officer have to sign the application? We are not a HMDA reporting institution.
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No, we do not believe that loan originators are required to sign loan applications. Regulation Z requires the disclosure of a loan originator’s name and NMLS identifier on credit applications and other documents related to residential mortgage loans, but it does not require the loan originator’s signature. However, secondary market investors may impose their own…
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Under the Military Lending Act (MLA) rule changes that took effect in 2016, can we still rely on a signed borrower statement to confirm whether a loan applicant is a member of the military?
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Yes, your bank may rely on its own method to assess whether an applicant is covered by the Military Lending Act, including by relying on a borrower’s statement. However, under the revised rule, there are only two ways to verify an applicant’s status that will create a presumption of compliance with the rule: (1) checking…
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We have a borrower who is purchasing a new home, but we are also taking a security interest in their current principal dwelling as an abundance of caution. Does rescission apply in this case?
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Yes, we believe the right of rescission would apply in this case. Regulation Z generally provides a right to rescind a credit transaction when a consumer’s ownership interest in a principal dwelling will be subject to a security interest. Therefore, we believe this loan would be subject to Regulation Z’s right of rescission. For resources…
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We want to promote some closed-end loan products in an advertisement designed for mobile devices. The advertisement would include terms that trigger certain additional disclosures under Regulation Z. Can we include a link in the advertisement to another webpage that will have the required disclosures?
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Yes, when an electronic advertisement includes terms that trigger additional disclosures, Regulation Z and its Official Interpretations permit the advertisement to include a link that takes consumers directly to the additional required information. For resources related to our guidance, please see: Regulation Z, 12 CFR 1026.24(e)(1) (“If a catalog or other multiple-page advertisement, or an…