Topic: Truth in Lending Act (TILA)
-
Does Illinois law dictate how title charges are to be described and itemized?
—
by
No, we are not aware of any Illinois law that addresses how you should disclose title insurance charges. When disclosing title insurance charges in Illinois, your institution should follow the TRID rules. For more information on the TRID requirements for title insurance disclosures, we recommend reading the following IBA Q&As: What is the correct way…
-
If we pay property taxes on behalf of a delinquent borrower, can we add those amounts to the loan principal and charge interest? Our loan agreement requires borrowers to pay the taxes. It does not expressly permit us to add the taxes to the loan principal, but it does generally permit us to add amounts advanced on behalf of a borrower to the loan principal and charge interest on those amounts.
—
by
It may be possible to add the property taxes to the loan principal, but it would depend on the specific language in your loan agreement. Our advice is to ask your bank counsel to review the note and mortgage document for an answer to this question. Going forward, we recommend establishing a uniform policy for…
-
Because some of our MLOs are not renewing their NMLS registrations, some of our branches will not have any MLOs available to originate residential loans. In those branches, can non-MLOs take loan applications to forward for processing, provide their names on loan documents (such as the promissory note), or act as the closing agent for loans or modifications?
—
by
In our view, if an employee’s name appears on loan documents or if the employee is actively participating in a loan or modification closing, those actions likely would trigger the SAFE Act mortgage loan originator (MLO) registration requirements. However, if the employee’s actions are limited to taking completed loan applications from customers and forwarding them…
-
What is the correct way to disclose a seller-paid owner’s title insurance policy on the Closing Disclosure?
—
by
You should disclose the owner’s title policy under “Other Costs” in the “Seller-Paid” column. The Closing Disclosure rules require you to disclose title insurance charges, even if they are paid by the seller, under “Other.” For resources related to our guidance, please see: Regulation Z, 12 CFR 1026.38(g)(4) (“Under the subheading “Other” and in the…
-
In the new Closing Disclosure, where should we disclose a seller’s payment for the owner’s title insurance policy? What if the title insurer discounts the owner’s policy when it is purchased at the same time as the lender’s policy? For example, the lender’s title policy is $300, the owner’s title policy is $400, and a $35 discount is applied to the owner’s title policy, making it $365.
—
by
You should disclose the discounted amount of the owner’s title policy, $365, under “Other Costs” in the “Seller-Paid” column. The Closing Disclosure rules require you to disclose title insurance charges, even if paid by the seller, under “Other.” Based on informal guidance we received from a CFPB attorney, you may disclose the owner’s policy as…
-
Are we required to fill out a Loan Estimate for a bridge loan to purchase a new home? The loan term would be one year – 11 months interest only, with a final balloon payment. The loan would be secured by the borrowers’ current residence and the purchased property. On the Loan Estimate, what should we disclose as the Property, Property Value, Purpose, and Product?
—
by
Yes, the new Loan Estimate is required for every “closed-end consumer credit transaction secured by real property,” including bridge loans. Property: The Loan Estimate should list both property addresses, because both properties secure the transaction. The Official Interpretations to Regulation Z state that “where more than one property secures the credit transaction, § 1026.37(a)(6) requires…
-
Our mortgage software understated the APR for several adjustable rate mortgage (ARM) loans by about 20 basis points. How should we calculate the cure amount? Are we required to pay the borrowers the difference between the total amount of interest that we should have disclosed and the amount that we did disclose?
—
by
In order to avoid civil liability (and exam criticism) for overstating the APR on these loans, the Truth in Lending Act (TILA) requires you to notify and reimburse your affected customers for the overcharges within sixty days of discovering the error. While the TILA does not specify a calculation method for the required reimbursements, clear…
-
In Illinois, the seller usually pays for the owner’s title policy. Should we disclose the owner’s policy premium on the Loan Estimate?
—
by
You are not required to disclose the owner’s title policy on the Loan Estimate if the borrower is not going to pay for it. Only fees paid by the borrower are disclosed on the Loan Estimate. In most cases, the borrower will not be paying for the owner’s title policy, and consequently Regulation Z does…
-
Can a HELOC branch lobby banner or outside rolling digital sign contain the phrase “prime minus xx.xx%,” “prime floating,” or “x year term” without triggering the additional disclosures under Regulation Z?
—
by
Yes, you should provide additional disclosures on advertisements using the terms “Prime Floating,” “Prime Minus xx.xx%,” or “X Year Term.” Unlike Regulation X, Regulation Z does not provide exceptions or permit short-form advertising disclosures for banners or scrolling digital signs. Regulation Z’s rules for home-equity plans require additional disclosures when an advertisement uses a trigger…
-
Some of our customer’s mortgage loan payments are auto-debited from deposit accounts held at our bank. In those cases, does a monthly checking account statement satisfy Regulation Z’s mortgage periodic statement requirements, since it will show the debits for the mortgage payments? We service fewer than 5,000 mortgages, but we do sell some of our loans on the secondary market.
—
by
It is possible to combine the periodic statements required for closed-end mortgage loans with checking account statements, provided that you include all of the additional disclosures required for mortgage periodic statements. However, Regulation Z exempts your institution from the mortgage periodic statement requirements altogether if you qualify as a “small servicer.” As stated in a…