Topic: Truth in Lending Act (TILA)
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We would like to establish a centralized underwriting process where our bank will receive applications and forward them to our holding company. The holding company will review the application, make the credit decision based on its own lending criteria, and send the application back to our bank to close the loan. In this process, who should report the loan under the Home Mortgage Disclosure Act (HMDA)?
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We believe that your holding company is responsible for reporting the loan originations under HMDA, unless it is acting as your agent in making the credit decision (which does not appear to be the case here). Only one financial institution reports the origination of a covered loan. When multiple entities are involved in the origination…
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For an auto loan, we charge a document preparation fee and a lien recording fee. Both fees are added to the loan amount requested and then withheld from the amount given to the borrower. Are either of these fees considered a finance charge or a prepaid finance charge? Should we include the fees in the amount financed?
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We believe that a document preparation fee would be considered a finance charge, as it would not be charged in a comparable cash transaction and is not otherwise exempted from the definition of a finance charge (because the loan is not secured by residential real estate). In addition, the document preparation fee is a prepaid…
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Can we charge a cancellation fee when customers elect to terminate their escrow accounts? What about a fee to obtain the current property value when customers cancel their private mortgage insurance (PMI)?
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We are not aware of any law or regulation that prevents you from charging either fee. Regarding the escrow cancellation fee, the Illinois Mortgage Escrow Account Act does not address whether a mortgage lender may charge a fee for terminating an escrow account at the consumer’s request (e.g., when the when the mortgage is reduced…
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Does a non-borrowing spouse need to sign the Closing Disclosure for a purchase mortgage loan if the spouse is listed on the title to the property securing the loan? We would have the spouse sign the mortgage.
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No, Regulation Z does not require a non-borrowing spouse to sign a Closing Disclosure. In fact, Regulation Z does not require any signatures on the Closing Disclosure — obtaining signatures on the Closing Disclosure form is optional. In addition, because the non-borrowing spouse is not entitled to the right of rescission on a purchase transaction,…
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Can we modify a matured loan? In some cases, a loan matures and then we perform a collateral review and pull credit and wish to modify the loan. Is that permissible?
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Yes, you may modify a matured loan (unless some provision in the loan agreement prevents you from modifying the loan’s terms). In addition, if you structure the loan modification documents correctly, it may fall outside of Regulation Z’s definition of a “refinancing,” eliminating the need to provide new loan disclosures. The Seventh Circuit has considered…
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Our loan software is alerting us that Illinois law requires a notice of servicing transfers, on top of the federal requirements in RESPA. They cite to 38 Ill. Adm. Code 1050.820. Can you send us this Illinois law? Does it differ from the federal law?
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Yes, Illinois law requires banks to send a mortgage servicing transfer notice, and the content of the Illinois notice differs from the content of the servicing transfer notices required by federal law. The Illinois Banking Act’s requirements for the servicing transfer notice include (1) “the name and address of the transferee,” (2) “the name, address…
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A compliance firm told us that we are required to disclose the name and license number for the settlement agent and a contact person on page five of the Closing Disclosure. But our title company told us that they do not obtain NMLS numbers for individual agents. Are we required to list NMLS numbers for a title agent if the agent has not obtained one?
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No, we do not believe that you need to include an NMLS number for title agents who have not obtained a license from the state of Illinois. The Official Interpretations of the Closing Disclosure rules state that if a person does not have an NMLS ID, then that space in the Closing Disclosure simply is…
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Under the Illinois Electronic Fund Transfer Act, are we prohibited from advertising our products on our ATM screens if the ATM can be accessed by non-customers?
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No, the Illinois Electronic Fund Transfer Act (EFTA) does not prohibit you from advertising your products and services on the screens of ATMs that may be accessed by non-customers, provided that the advertisement appears only to your customers after they insert a card issued by your bank. The Illinois EFTA generally prohibits a bank from…
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Do you know of any Illinois Banking Act provision that would limit the loan amount (i.e., $5,000) for a Home Equity Line of Credit?
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There is no such limitation in the Illinois Banking Act. You may be thinking of the Illinois Interest Act, which prohibits a lender from taking a security interest in real property for a revolving line unless the line of credit is in excess of $5,000. However, the Illinois Financial Services Development Act exempts any…
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Does the Illinois Financial Services Development Act require us to provide a thirty day notice before increasing the rate on a HELOC? We adjust HELOC rates monthly and notify borrowers of the rate change on the periodic statement before the change.
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No, we do not believe that thirty days advance notice is required before rate changes resulting from the interest calculation disclosed under a HELOC’s account agreement. The Illinois Financial Services Development Act requires thirty days advance notice before amending a HELOC agreement. That provision would not apply in this case because the agreement is not…