Topic: Truth in Lending Act (TILA)
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What are the restrictions on giving incentive pay to our lenders?
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Regulation Z’s loan originator compensation rules prohibit certain incentive payments to loan originators as to closed-end consumer loans secured by dwellings, but it also identifies several permissible compensation methods. Otherwise, we are not aware of any rules that would restrict incentive compensation for other types of loans. Under Regulation Z, loan originators may not receive…
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Are higher-priced mortgage loans and three- and five-year balloon renewals treated as higher-priced mortgage loans, or are they just renewals of the same note?
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Whether a renewal of a loan is treated as a higher-priced mortgage loan depends on whether it is considered a “refinancing” under Regulation Z. Supplement I to Section 226, Paragraph 1(d)(5)-1 (“if the transaction were a modification of an existing obligation’s terms that does not constitute a refinance loan under §226.20(a), the final rules, including…
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If a bank received notice from the FDIC that it did not comply with Truth in Lending Act disclosure requirements but the finance charge was overstated and annual percentage rate was within tolerances, how should the bank rebut the notice?
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If the finance charge was overstated in the original disclosure, then the disclosure should be considered accurate under the TILA regulations. 12 CFR 1026.18(d)(1)(ii). Your written rebuttal should include the regulation and an explanation of why you believe the FDIC should reconsider its conclusion that the disclosure was inaccurate.
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Are there any compliance issues in using a HELOC to secure a home purchase mortgage loan?
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While there is some indication that HELOC proceeds may be used to purchase a home, we have never encountered such a situation. The federal commentary on the right to rescission acknowledges that residential mortgage transactions are made on open-end credit plans, while noting that this practice is seldom used. Comment 1, Official Staff Commentary, 12…
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We received a bulletin indicating that there has been a change in Illinois law regarding non-titled spouses. What is that change, and are non-titled spouses required to sign homestead waivers and notices of the right of rescission?
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There have not been any amendments to the Illinois law governing homestead rights since 2005, so the change in Illinois indicated likely refers to the new civil union law, which became effective June 1, 2011. Under that law, every reference to “spouse” in any Illinois statute is now deemed to include a “party to a…
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Does the right of rescission (ROR) apply to a home equity line of credit secured by an Illinois land trust?
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In our view, such a customer would have a right of rescission if his or her interest in the land trust is subject to the security interest. Regulation Z provides a right to rescind to “each consumer whose ownership interest is or will be subject to the security interest . . . .” 12 CFR 1026.15(a). This right to…