Topic: Truth in Lending Act (TILA)
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Are we required to send out a payment receipts to customers whose loan payments are automatically deducted from their checking or savings account at another financial institution?
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No, we are not aware of any requirement to issue a payment receipt confirmation when you receive an automatic loan payment from a customer’s account at another bank, unless your loan agreement includes such a requirement. For resources related to our guidance, please see: Regulation Z, 12 CFR 1026.41(a) – (d) (Timing, form and content requirements for…
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Our bank qualifies as a small creditor. We have one branch located in a Metropolitan Statistical Area (MSA), and all other branches are in rural or underserved areas, where we do the majority of our lending. Do we qualify as operating in a rural or underserved area for purposes of the qualified mortgage (QM) rule? For example, could we make an ARM loan that qualifies as a QM if the borrower’s debt-to-income ratio is 44%? We would hold the loan in portfolio, and it would not include any nontraditional characteristics (such as a balloon payment or interest-only payments).
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Yes, we believe that your bank qualifies as a small, rural lender. The CFPB recently amended Regulation Z to establish that a small creditor just needs to originate one covered transaction in a rural or underserved area to qualify for the special provisions in Regulation Z for small, rural lenders. Because your bank is a…
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Are we allowed to charge credit report, appraisal or application fees upfront for consumer mortgage loan applications?
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You may charge a credit report fee up front, but not application or appraisal fees. Under the TILA-RESPA Integrated Mortgage Disclosure (TRID) rules, a creditor may charge a credit report fee before preparing the Loan Estimate and documenting the consumer’s intent to proceed with the transaction. However, a creditor may not charge other fees, such…
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For an upcoming compliance examination, the FDIC has requested a list of all loans secured by deposit accounts where the yield on the account is under 5% per year. Are you aware of any laws that would prohibit us from taking deposit accounts as collateral where the yield is less than 5% per year?
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No, we are not aware of any prohibition on taking deposit accounts as collateral for loans based on the deposit account’s yield. Regulation Z does impose several additional requirements when a deposit account will be securing a consumer credit card account (requiring disclosures and specific language in the credit card agreement), but it does not…
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Is the Illinois version of the Notice of Assignment, Sale and Transfer form intended to supersede the federal form? Or should we provide the RESPA form and include a reference to Illinois law?
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No, the Illinois notice of a mortgage servicing transfer does not supersede the federal notice required by the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA). Consequently, you should provide either a combined notice that encompasses both the federal and Illinois requirements or separate federal and Illinois notices. It would be…
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What are the requirements to be considered a small servicer under Regulation Z? Does servicing loans for a fee affect small servicer status?
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Your bank will be deemed to be a “small servicer” if the bank and all of its affiliates were servicing 5,000 or fewer residential mortgage loans as of January 1 of this year, provided that your bank (or its affiliates) originated or currently owns those loans. Your bank will not qualify as a “small servicer”…
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We have a home equity line of credit (HELOC) that was taken out jointly by a married couple. The couple is separated (not yet divorced), and the wife would like to refinance the HELOC. The husband is not on the deed to the house securing the HELOC. Does the husband need to sign the mortgage, right of rescission notice, Truth in Lending disclosures, or the homestead waiver? Is Illinois a community property state?
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No, Illinois is not a community property state. In this case, because the husband is not the borrower and is not on the title to the property securing the HELOC, we believe that his signature is required only regarding any waiver of his homestead rights. However, we do recommend checking with the secondary market purchaser…
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For a residential mortgage loan made to an Illinois land trust that is secured by residential property held in the trust (where our collateral is a first lien on the assignment of the beneficial interest in the land trust), does Regulation B require us to provide an appraisal notice and copy of the appraisal?
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Yes, we believe that you should provide a copy of the appraisal and appraisal notice to the land trustee for a loan secured by an assignment of the beneficial interest in the land trust, provided that the property held in the land trust is a dwelling (defined in Regulation B as a residential structure with…
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Is the APR calculation the correct way to calculate interest on a residential mortgage under the Servicemembers Civil Relief Act (SRCA)? Does the 6% interest rate cap include the cost of credit life and credit accident and health insurance?
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No, the APR calculation is not the correct way to calculate the total interest on a residential real estate loan under the SCRA. The SCRA limits the maximum interest rate on loans to active duty military service members to 6%. “Interest” is defined broadly to include all service charges, renewal charges, fees, or any other…
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How should we classify a rate-lock extension fee on a revised Loan Estimate? Is it considered an “origination charge”? We charge this fee when we extend the time period for a rate-lock.
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Yes, a rate-lock extension fee is an origination charge. Under Regulation Z, “origination charges” include each amount that the consumer will pay to the creditor for originating and extending the credit. Such items may include, for example, “application fee, origination fee, underwriting fee, processing fee, verification fee, and rate-lock fee.” As an extension of the…