Topic: Truth in Lending Act (TILA)
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We are working with a borrower who obtained a grant from a government housing program in addition to a loan from our bank. The housing program requires a grant mortgage, which we will include in our disclosures and record at the same time we record our mortgage. Should the recording fee for the grant mortgage be included as a finance charge?
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No, we believe that this fee should be excluded from the finance charge calculation, provided that it is itemized and disclosed. Regulation Z's finance charge calculation excludes fees “that actually are or will be paid to public officials” for recording a mortgage, among other similar fees. In our view, the fact that you are disclosing…
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Where should a seller’s closing protection letter fee be listed on a Closing Disclosure? We require closing protection letters, and the borrower was allowed to shop for the title insurance company.
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In our view, the appropriate place to list a seller’s closing protection letter fee is on page 2, section C of the Closing Disclosure, which is titled “Services Borrower Did Shop For.” Section C is the place to list fees for services that the lender requires and that the borrower was allowed to shop for.…
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When we reach the permanent financing phase on a construction loan, we have borrowers execute a change in terms modifying the loan. Are we required to treat these transactions as refinancings, requiring new sets of disclosures under the TILA-RESPA Integrated Disclosure (TRID) requirements?
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We believe that you may modify a construction loan without it falling within Regulation Z’s definition of a “refinancing” (which would require new disclosures under the TRID requirements). However, the language that you use in the loan modification documents will determine whether you achieve this result. The general rule is that a refinancing occurs only…
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We are working with borrowers who are obtaining mortgages from the Illinois Housing Development Authority (IHDA) as well as from our bank. The two mortgages will be closed with the same title company at the same time. They will be separate mortgages, with significantly different terms. We are including in our disclosures the recording fees for both our mortgage and IHDA’s mortgage. We know that we can exclude our bank’s recording fee from the finance charge calculation. But can we exclude the IHDA recording fee?
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In our view, fees related to IHDA’s loan should be disclosed only on IHDA’s loan disclosures. We recommend removing IHDA’s fee for recording their lien from your disclosures, which will definitively remove the fee from your finance charge calculation.
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When a title insurance agent is acting as settlement agent for a residential mortgage closing, do we need to show the agent’s Illinois title insurance license number on the Closing Disclosure?
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Yes, we believe that when a settlement or closing agent is a registered title insurance agent, the Closing Disclosure should display the agent’s Illinois title insurance registration number. Regulation Z’s requirements for the Closing Disclosure include the disclosure of “a license number or unique identifier for each person (including natural persons) identified in the table…
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We recently converted to a new statement rendering system that differentiates between consumer and non-consumer accounts. We have revocable trusts where the beneficiary, trustee, and settlor are all the same person. Some of these trusts are opened using the individual’s tax identification number (TIN), and some are opened using an Employer Identification Number (EIN). The new system does not consider the EIN trust accounts to be consumer accounts. Is a trust considered a “consumer” under Regulation DD? I know that trusts (including land trusts) are considered to be “consumers” under Regulation Z for disclosure and rescission purposes.
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A trust is not subject to the requirements of Regulation DD, provided that the account was opened by a trustee pursuant to a formal written trust agreement. Under Regulation DD, “consumer” means “a natural person who holds an account primarily for personal, family, or household purposes, or to whom such an account is offered.” The term “natural person”…
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We recently received notice that a consumer mortgage loan borrower is filing for Chapter 7 bankruptcy. Should we continue sending loan notices to the borrower? What about other communications, such as deposit account statements?
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We do not recommend sending any loan notices to a borrower who has filed for bankruptcy without consulting with bank counsel. The Bankruptcy Code prohibits creditors from attempting to collect a debt after a borrower has filed for bankruptcy — this is known as the “automatic stay.” A bankruptcy court also may impose similar limitations…
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When providing settlement services, does a title company or its individual employees need a Nationwide Mortgaging Licensing System (NMLS) number in Illinois? Our title company said they don’t need an NMLS number, but our auditor said that we can’t leave the title company’s NMLS number blank on our closing disclosures.
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In Illinois, title companies and their employees are not required to obtain an NMLS identification number when they are acting as settlement agents, provided they are not receiving compensation for “brokering, funding, originating, servicing or purchasing of residential mortgage loans.” The CFPB’s Closing Disclosure includes a table on page five entitled “Contact Information” that contains…
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In Illinois, is a title company or title agent required to obtain a Nationwide Mortgage Licensing System (NMLS) registration when they are acting as closing agents? If so, should we list it in the Closing Disclosure?
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In Illinois, title companies and their employees are not required to obtain an NMLS identification number when they are acting as closing agents, provided they are not receiving compensation for “brokering, funding, originating, servicing or purchasing of residential mortgage loans.” The CFPB’s Closing Disclosure includes a table on page five entitled “Contact Information” that contains…
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Can you clarify whether we can pay referral fees for mortgages to our own employees? Are there any other requirements or caps?
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Yes, you may pay mortgage referral fees to bank employees who refer mortgage business to your bank. RESPA prohibits most referral fees related to mortgages, but that prohibition does not apply when compensating bank employees for mortgage referrals. Any referral fees paid to bank employees who are loan originators for referrals also must comply with…