Topic: Truth in Lending Act (TILA)
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In an answer to a previous question, you indicated that the $3 mandatory title work fee that title companies charge should be put in the “Taxes & Other Government Charges” section of the Loan Estimate. However, we were under the impression that the fee goes with the title company charges in the “Can/Cannot Shop For” section. Can you provide any more information on this issue?
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We believe the $3 mandatory title fee should be disclosed in “Section E. Taxes and Other Government Fees” because the fee is required by an Illinois law and is remitted by the title company to a governmental entity. The Illinois Title Insurance Act requires title insurance companies to remit to the state of Illinois “an…
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How should we disclose the Illinois Department of Revenue’s Rental Housing Support Program surcharge, which county recorders collect with each mortgage recording? Is the surcharge exempt from the finance charge calculation, and should it be disclosed in the “Taxes and Other Government Fees” section of the Loan Estimate (LE) and Closing Disclosure (CD)?
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We believe that the Rental Housing Support Program surcharge is exempt from the finance charge calculation and should be disclosed in the “Taxes and Other Government Fees” section of the LE and CD. Regulation Z provides that taxes and fees prescribed by law that actually are or will be paid to public officials for perfecting…
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Do you have sample written procedures for making determinations of a prospective loan originator’s financial responsibility, character, and general fitness, as required under Regulation Z for loan originators who are not required to be licensed?
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No, we do not have sample written procedures for determinations regarding a prospective loan originator’s financial responsibility, character, and general fitness. However, we have requested sample written procedures from the IBA’s Compliance Division Advisory Committee and will send you any submissions we receive. Regulation Z requires banks to determine whether a loan originator employee (who…
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Can our bank charge prepayment penalties on all types of commercial loans? If allowed, can we include a demand clause as well? Are there any interest rate limits? Is any collateral prohibited?
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Commercial Loan Prepayment Penalties and Demand Clauses Yes, we believe you may charge prepayment penalties on all types of commercial loans. Regulation Z and the Illinois High Risk Home Loan Act impose restrictions on prepayment penalties for certain consumer loans, but these restrictions do not apply to commercial transactions. Similarly, we believe that you may…
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Where should the $3 mandatory title fee be disclosed on the Loan Estimate? Should this be disclosed in “Section B. Services You Cannot Shop For” or in “Section C. Services You Can Shop For”? We believe it should be Section B since the fee is applicable in every transaction with a title policy and is always $3.
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We believe the $3 mandatory title fee, which is required by Illinois law, should be disclosed in “Section E. Taxes and Other Government Fees.” The Illinois Title Insurance Act requires title insurance companies to remit to the state of Illinois “an amount equal to $3 for each policy issued by all of its agents in…
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Our bank partners with a third-party originator that refinances home mortgage loans. We underwrite these refinancings and purchase the loans from the third-party after the closing. Do we need to complete a “Tangible Net Benefit Form” when purchasing these loans, even though we are not considered the lender when the loan closes? Because we prepare closing documents on behalf of the third-party originator, should we be completing the “Tangible Net Benefit Form” for them? Also, would we be violating any law or regulation if we refinance a mortgage without completing a “Tangible Net Benefit Form” to remove a borrower due to a divorce? If this occurs, would we be protected if we keep the divorce decree on file to show that the refinance was justified?
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Because the Illinois Fairness in Lending Act applies to any entity that “assists” with a refinancing, we recommend working with your third-party originator to ensure that their refinancings result in a tangible net benefit to the borrower if you will be assisting in the refinancings and receiving related fees. The Illinois Fairness in Lending Act…
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Do we need to complete a “Net Tangible Benefit Form” under the Illinois Fairness in Lending Act and Illinois High Risk Home Loan Act when refinancing a home loan, even if we are not the original creditor? Does the Illinois Fairness in Lending Act’s net tangible benefit requirement apply to all financial institutions in Illinois, or does the collateral property’s location matter? If we decide to refinance a home loan that we did not originate, how can we ensure that the refinance is beneficial when we have limited knowledge of the original loan? Typically, we are not aware of the original loan’s interest rate when considering a refinancing application.
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While you are not required to use a particular form, we recommend conducting some kind of net tangible benefit analysis when refinancing mortgage loans secured by a borrower’s principal residence to ensure you are complying with the Illinois Fairness in Lending Act and Illinois High Risk Home Loan Act (if the loan is considered “high…
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A borrower who is delinquent on their January, February, and March consumer mortgage loan payments made a payment sufficient to cover one month’s payment, plus an additional $100. If we apply the payment to the amount owed for January, can we use the additional $100 to collect a late charge for the January payment before placing the excess funds into an unapplied account?
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We recommend reviewing your loan documents to determine whether a partial payment can be applied to a late fee when monthly periodic payments remain outstanding. For example, Fannie Mae’s standard mortgage provides that payments should be applied to each periodic payment in the order in which it became due, beginning with the oldest outstanding periodic…
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If we are considered a mortgage broker under Regulation X, can we charge a reasonable fee for ordering appraisals and title work, pulling credit reports, and submitting applications to the correspondent bank that will serve as the lender? Do we need to include anything about acting as a mortgage broker in our lending policy?
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Yes, we believe you can charge a reasonable fee for services you perform as a mortgage broker, including ordering appraisals and title work, pulling credit reports, and submitting loan applications to the correspondent bank. We are not aware of any requirement to include information related to acting as a mortgage broker in your lending policy…
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Are we allowed to charge a fee for releasing our lien after a borrower pays off their home equity line of credit (HELOC)? When we added a lien release fee to our documents, our loan document provider produced a “critical warning” stating that under Illinois law, the lender must pay all expenses to release a security interest in real estate when the security interest no longer secures any credit under a line of credit.
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Yes, we believe that Illinois law permits banks to charge HELOC lien release fees, provided your customers have agreed to pay such fees in the HELOC agreement and they have been properly disclosed under Regulation Z. Section 4.1 of Illinois’s Interest Act prohibits lenders from charging for “expenses, including recording fees and otherwise” when releasing…