Topic: Truth in Lending Act (TILA)
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We discovered a mortgage loan for which we never provided a Loan Estimate at any time during the loan origination process. Are we required to refund the property taxes escrowed along with all costs associated with the loan?
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We believe that your institution should issue a refund for all costs that you were required to disclose on the Loan Estimate, including escrowed property taxes, to cure your failure to provide a good faith estimate for any of the loan costs. Regulation Z allows creditors to cure a failure to provide good faith estimates…
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After issuing a Closing Disclosure (CD), if the amount needed to pay off an existing mortgage loan changes — lowering the amount of cash due from the borrower at closing — we would revise the CD at closing to reflect the new payoff amount. When this occurs, should we revise the issue date of the CD to be the same as the closing date?
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Yes, if you revise a CD at closing to reflect an updated payoff amount, you should revise the issue date of the CD to reflect the closing date. Under Regulation Z, if the disclosures provided in the CD become inaccurate before consummation, “the creditor shall provide corrected disclosures reflecting any changed terms to the consumer…
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If we increase the loan amount on a construction loan or closed-end mortgage loan, can we document it with only a change in terms agreement, or would we also need to record a modification of mortgage? We are also trying to determine when such a change would be considered a refinancing under Regulation Z.
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The answer to both questions is highly dependent on the exact wording of the mortgage and related loan documents. When increasing the loan amount of a construction loan or closed-end mortgage with a future advance, your bank should confirm (ideally, with the assistance of bank counsel) that the original mortgage or note allows such future…
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We are updating the fields in our Laser Pro system for end-of-year HOEPA triggers. Where can we find the state of Illinois high cost mortgage interest rate triggers for first and second liens? Also, where can we find the HOEPA triggers for first lien non-real estate loans less than $20,000 and greater than or equal to $20,000?
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The Illinois High Risk Home Loan Act contains similar restrictions as the federal HOEPA high-cost mortgage regulations. Under this law, the interest rate trigger for a “high risk home loan” is an annual percentage rate that exceeds the average prime offer rate (APOR) by more than six percentage points for first lien mortgages or by…
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We are an Illinois-chartered savings bank, and we are considering changing the fee we charge consumer borrowers for a mortgage loan modification. Typically, borrowers request these modifications to reduce the interest rate or change the term of their loan instead of doing a full refinance. These modifications are not for loss mitigation purposes. Are there any restrictions on the method we use to calculate these modification fees, and are there any regulatory issues (such as fair lending concerns) that we need to consider? We would use the same method to calculate the modification fees for all borrowers.
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Generally, a savings bank may charge a mortgage loan modification fee agreed to by the borrower, and we are not aware of any restrictions on the calculation method. We are not aware of fair lending concerns if you use the same method to calculate all borrowers’ modification fees. The Illinois Savings Bank Act permits a…
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We want to provide customers with a generic “skip-a-payment” form through DocuSign that does not contain any borrower-specific information. Borrowers who would like to take advantage of this offer would have to fill in the information related to their loan. Is this permissible, or do the forms need to include the borrower’s loan information (such as the maturity date) before the form is sent out?
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We believe a bank may offer a “skip-a-payment” option using a generic offer form, and we are not aware of any laws that would require you to include borrower-specific information in such a form. Of course, we recommend verifying the information that borrowers provide on the forms against your bank’s files. Also, we are aware…
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We are looking for a chart that explains what charges should be included in the HOEPA (i.e. high-cost mortgage loan) points and fees calculation. Also, some of our closings are being held at a title company, and we would like to know if the title company fees are considered prepaid finance charges and if they should be included in the HOEPA points and fees calculation.
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We recommend referring to charts published by the National Credit Union Administration (NCUA) that outline the charges that should be included and excluded from the HOEPA points and fees calculation. Also, the CFPB has released a small entity compliance guide that walks through each category of charges included in the points and fees calculation. Both…
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We would like to discontinue using a P.O. box where we have been accepting mailed mortgage payments. Our notes, welcome letter, and periodic statements list the P.O. box address. Must we send notice to all customers that the P.O. box will be closed and payments must be sent to a new address? Or, can we post a statement on our website or only reach out only to those customers currently using the P.O. box?
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We are not aware of any state or federal laws that specifically require you to formally notify customers that you will no longer be accepting payments at a P.O. box address, but we recommend providing ample notice to all of your customers and modifying your promissory notes to remove the P.O. box address. In the…
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Are we required to issue delinquency notices for commercial, residential real estate, and consumer non-real estate loans? If there are multiple borrowers on these accounts, must each borrower receive a delinquency notice?
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Yes, we believe that there are federal delinquency notice requirements for residential real estate and consumer non-real estate loans that your bank must comply with, but we do not believe that there are similar requirements under Illinois law or for commercial loans. We do recommend reviewing your loan agreements for each type of loan to…
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We are providing the payment deferral outlined in the CARES Act to all our loan customers, including loans held in portfolio and loans serviced for Fannie Mae. Some of our customers will soon be entering the repayment phase of the forbearance agreement. Would adding the accrued interest to the principal balance and re-amortizing the loan over the remaining term trigger flood insurance requirements as a M.I.R.E. event? Does it matter whether capitalizing the accrued interest would cause the loan balance to exceed the original principal balance? Also, would any other disclosure requirements be triggered — assuming the modification does not constitute a “refinancing” under Regulation Z?
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We believe that adding unpaid interest to the loan’s principal balance (i.e., capitalizing the interest) —regardless of whether this would cause the loan balance to exceed the original principal balance — would trigger the flood insurance requirements, unless your loan contract permits unpaid interest to be capitalized, or your forbearance agreement by its terms is…