Topic: Truth in Lending Act (TILA)
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We had a residential mortgage closing scheduled for Saturday, but the borrowers did not show up. They plan to come in tomorrow for the closing, instead. All of the loan documents, including the closing disclosures, have Saturday’s date. Can we simply change the date on all the loan documents? Do we need to re-issue the closing disclosures to reflect the new closing date? If so, do we have to wait three days for the closing?
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You must provide the customer with a new closing disclosure reflecting the revised closing date. However, you do not need to wait three days to hold the closing. In general, creditors must provide consumers with closing disclosures no later than three business days before closing. It is only necessary to restart the three-day waiting period…
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Is a Lender’s Closing Protection Letter fee considered a finance charge?
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We believe that a closing protection letter fee charged by a title insurance company should not be considered a finance charge under the Truth in Lending Act (TILA), based on two separate exemptions. First, Regulation Z specifically exempts certain real-estate related fees from the scope of finance charges, including fees for title insurance “and similar…
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When filling out the new Loan Estimate form, where should we place the following fees? (1) FHA initial mortgage insurance premium, (2) VA initial funding fee, and (3) Conventional Single Premium Borrower/Lender Paid Mortgage Insurance.
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We believe that all three fees should be disclosed under “Services You Cannot Shop For.” The Regulation Z Official Interpretations state that “government funding fees” and “upfront mortgage insurance fees” should be listed on the Closing Disclosure under the heading “Services You Cannot Shop For.” The FHA and VA fees are government funding fees, since…
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Under the TILA-RESPA Integrated Disclosure (TRID) rules, when is a mortgage considered consummated? Does the answer differ for purchase money loans versus refinancings?
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Under Illinois case law, a mortgage loan is consummated on the date of the loan closing (whether a purchase money loan or a refinancing). A number of Illinois courts have held that consummation occurs on the date of the loan closing for purposes of the TILA and Regulation Z. For resources related to our guidance,…
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If an LLC enters into a mortgage loan for the purpose of purchasing the primary residence for the LLC’s owner, do the TILA-RESPA Integrated Disclosure (TRID) rules apply?
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No, the TRID rules do not apply to loans made to business entities. The TRID rules (and Regulation Z generally) apply only to consumer credit transactions, meaning loans offered to a consumer for personal, family or household purposes. A loan extended to a business entity, such as an LLC, is exempt. However, you may have…
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If a bank is the trustee of a land trust that will provide collateral for a home loan entered into by an individual, is the bank entitled to receive a copy of all disclosures? The trust beneficiary will be signing the loan documents, and the trustee will be signing only the mortgage.
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Yes, we believe that the trustee (as well as the individual borrower) would be entitled to receive all disclosures for a mortgage loan secured by property held in the land trust. The Official Interpretations to Regulation Z clarify that a land trustee that enters into a mortgage transaction is treated as the “consumer” and is…
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Can you give me the list of disclosures I would need to perform a mortgage loan renewal for a closed-end balloon loan? Can we charge the customer for an appraisal? We are not advancing new money to the borrower.
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We are not aware of any laws or regulations that require you to provide specific disclosures when renewing a mortgage loan (versus refinancing a mortgage loan, which would require new TILA and RESPA disclosures). We do recommend consulting with your bank counsel when creating the loan renewal agreement and any other legal documents. In addition,…
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We are in the process of modifying an existing home equity balloon loan to extend the term from five years to ten years and to begin amortization. The loan has matured. Can we modify the loan without providing the new TRID disclosures, or should we treat it as a refinancing?
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We believe that you may renew a balloon loan after its maturity date 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 is important in order to achieve this result. The Seventh Circuit has…
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If a residential property is used to collateralize a commercial loan is the loan to be treated as a consumer loan?
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Whether a loan is considered a consumer or commercial transaction depends on the primary purpose of the loan, not the type of collateral securing the transaction. For example, a loan to expand a business is a business purpose loan, even if it is secured by the borrower's residence or personal property. Special rules will deem…
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If the US Department of Agriculture (USDA) loan guarantee fee for a consumer mortgage decreased by one penny after we issued our Loan Estimate, do we need to issue a revised Loan Estimate to reflect that change? We do not know why there is now a one-cent difference, but we believe it was a software rounding issue. There are no other changes to the closing fees and costs.
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No, the TILA-RESPA Integrated Disclosure (TRID) rules do not require you to issue a revised Loan Estimate simply due to a one-cent decrease in a USDA loan guarantee fee. Regulation Z permits creditors to issue revised Loan Estimates only in certain situations such as when changed circumstances result in increased charges. In this case, you…