Topic: Truth in Lending Act (TILA)
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When there is no title company serving as a settlement agent in a mortgage loan transaction, should we list our own information in the “Settlement Agent” blanks on pages 1 and 5 of the Closing Disclosure (CD), or leave them blank?
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We believe you should leave these spaces blank on the CD if there is no settlement agent involved in the mortgage loan transaction. Regulation Z states that for every closed-end consumer credit transaction secured by real property, the creditor shall disclose on page 1 of the CD, “[t]he name of the settlement agent conducting the…
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An FDIC examiner has advised us that if we have any loans with an exception (such as a loan-to-value (LTV) or debt-to-income (DTI) ratio exception), we need to notify our Board of the exception. Is this accurate? Our board would have already approved the loans.
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We are not aware of any requirement to notify your board of directors of individual loans with LTV or DTI ratio exceptions after the loans have been approved. However, you are required to report the aggregate amount of loans with LTV ratios that exceed the statutory LTV limits to your board, at least quarterly. The…
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We have a consumer loan secured by a certificate of deposit (CD) from our bank. We provide this loan to customers who want to establish credit histories. The loan proceeds were used to open the CD securing the loan. We disclosed under Section 1026.18(m) of Regulation Z that the customer was giving a security interest in “the goods or property being purchased.” However, we believe that we should have documented this as taking an assignment of the CD instead, as we do not believe a CD is a consumer good. Did we disclose the security interest incorrectly?
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No, we do not believe you were incorrect in disclosing that the customer was giving a security interest in the goods or property being purchased when the proceeds of the consumer loan were used to purchase the CD securing the loan. For covered transactions other than mortgage loans, Section 1026.18(m) of Regulation Z requires the…
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What disclosures are we required to make available on our bank’s website?
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Below is a non-exhaustive list of the disclosures and notices that you may choose to post or may be required to post on your bank’s website. This list may be incomplete depending on the products and services you offer or advertise on your website, some of which may trigger additional disclosure requirements. Privacy Notices The…
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We want to offer a HELOC with interest-only payments and no annual fees. Are there any restrictions on interest-only loans or other compliance issues that we should be aware of?
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No, we are not aware of any Illinois or federal law that would generally prohibit interest-only HELOCs, although you should be aware that such a HELOC may result in a prohibited balloon payment if the HELOC qualifies as a high-risk or high-cost mortgage. Subsection 4(1) of the Interest Act expressly permits savings banks to collect…
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We are extending a purchase money mortgage loan to a borrower whose sales contract states that the seller will pay a $10,000 credit at closing for foundation repairs to the property. The borrower will be responsible for scheduling the repairs and hiring a contractor, and the seller will not be responsible for any additional expenses. We are going to hold the $10,000 in escrow until the repairs are complete, and we do not want these funds to reduce the amount the borrower needs to bring to the closing. Do we need to disclose the seller credit on the Loan Estimate (LE), and where should we list it on the Closing Disclosure (CD)?
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We believe that disclosing the seller credit for repairs on the LE is optional and that you should list the seller credit in Section N (“Due from Seller at Closing”) of the CD. For the LE, Regulation Z’s Official Interpretations provide lenders with two options for addressing a seller credit. When the lender knows that…
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We assess a “fax/email” fee when sending payoff statements for home equity lines of credit (HELOCs). When disclosing this fee at origination, is it sufficient to state that the fee will be charged, or do we need to provide the amount of the fee in the disclosure? We will ensure that the fee we assess is reasonable given the CFPB’s scrutiny of “junk fees.”
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We recommend disclosing the amount of the fax/email fee at origination if it is known. Although Regulation Z does not expressly require creditors to disclose the amount of fees associated with payoff statements, it does require you to explain how the fee amount will be determined. For HELOCs, Regulation Z requires creditors to disclose an…
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We are currently assessing a “fax/email” fee when we send payoff statements for home equity lines of credit (HELOCs). Are there any prohibitions against this practice under state law?
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No, other than Regulation Z’s prohibition against charging fees for payoff statements for high-cost mortgage loans, we are not aware of any law prohibiting charging fees for sending payoff statements, provided the borrower has agreed to the fee in the loan documents. Regulation Z requires that for consumer loans secured by a consumer’s dwelling, the…
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We are extending a closed-end mortgage loan secured by a second lien on a home (we have the first lien as well). Should we use the right of rescission notice contained in model form H-8 (General) or H-9 (Refinancing With Original Creditor)? Our Loan Department thinks we should use form H-9 because the extension of new money can be thought of as a refinance, even though we identified the transaction as a home equity loan, not a refinance, on our TRID disclosures.
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We do not recommend using form H-9 unless the transaction is satisfying and replacing your original loan and meets the definition of a “refinancing” under Regulation Z. Whether a transaction is considered a “refinancing” depends on the specific circumstances of the second lien and your contract with the borrower. Under Regulation Z, a refinancing occurs,…
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In the past, we have not disclosed lien release fees for a HELOC at origination as required by Regulation Z. We sometimes offer a change in terms agreement at the maturity of an account, for example after five years, instead of a rewrite of the loan. In the change in terms agreement, can we add language related to the future release fee and meet the disclosure requirement in Regulation Z, or should this have been included in the original disclosures and loan agreement?
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No, we do not believe that adding language to a change in terms agreement allowing you to charge a lien release fee would satisfy Regulation Z’s requirement to disclose such fees at account opening. For home-equity plans, Regulation Z states that creditors must disclose at account opening “the circumstances under which a finance charge will…