Topic: Truth in Lending Act (TILA)
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We received a loan application from an individual who inherited an interest in a home, along with six others. The home is not subject to a mortgage. The applicant will not be living in the home but will be renting it to his son. Is this transaction exempt from RESPA and TILA, and should we report it as a purchase or a refinance for HMDA purposes?
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We believe this transaction would be exempt from both TILA and RESPA as a business purpose transaction, since the borrower will be renting out the property. For HMDA purposes, there appears to be a difference of opinion as to whether the transaction is reportable at all. It would not fall under the definition of “refinancing,”…
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One of our customers recently died, and the customer had an outstanding credit card balance and a deposit account with our institution. Can we place a hold on the account in the amount of the credit card balance? We have not obtained a security interest in the deposit account.
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No, you will not be able to place a hold on the deposit account. The Regulation Z prohibition on offsetting deposit account funds against consumer credit card debts — with certain exceptions that do not appear to apply in this situation — also applies to freezing or placing a hold on deposit account funds. For…
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Does the right of rescission apply to a refinancing where we are removing one of the two borrowers on the loan? We are not advancing new funds, and the borrower who is refinancing will pay the closing costs out of pocket.
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No, we do not believe that the right of rescission (ROR) applies. The ROR does not apply to a refinancing of a loan that already is secured by the borrower’s principal dwelling if no new money is advanced. Based on the information you gave us, both conditions are met here. Also, we note that amounts…
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We want to gift iPad minis to borrowers who are eligible for secondary market financing and close a home purchase or a home refinancing loan. Do we need to disclose the value of the gift in our marketing? Are there any disclosures related to the gift that we must provide the customer?
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No, we do not believe Regulation Z’s closed-end credit advertising rules would require you to disclose the value of the gift, and we are not aware of any other disclosure requirements that might apply to such gifts. In addition, we note that you will not have to report the gift on IRS Form 1099-MISC if…
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Are we required to back-date payments made on consumer open-end lines of credit products (HELOCs and overdraft protection lines) to the prior business day if they are made in our lobby on Saturdays or in our night drop box on the weekend?
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No, Regulation Z does not require you to backdate payments received on a non-business day, but you must either credit payments on the “date of receipt” — meaning the date on which the payment reaches your institution — or ensure that any delays in crediting payments do not result in a late charge or a…