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The rest of your earlies will not apply since you have a takeout. Be sure to document your file with the fact that you have a takeout from another institutions.
Dmurry,
This is a great question. The long and short of it, is that I don’t think this particular situation is ever addressed, that I’m aware of. You are correct in that this wouldn’t necessarily be covered by a reason for redisclosure as spelled out in the regulation. You also make a great point that the charges would not be changing either. If commonsense applied then by all means I would be saying redisclose, you don’t have anything to worry about. Unfortunately that is not the case. You never know how a particular auditor or more importantly, a regulator, would view this subject.
I think the safest route would be to document your file well as to what has occurred. I think I would even go as far as to, send the applicant’s a letter explaining the issue about the address and as to why it is not the correct address, and keep a copy of the letter in file. This accomplishes two things. One, it allows you to clarify any questions that might arise from your applicants about the different address and answers any questions, someone may have in looking at the loan file. The second item that it addresses, would be to essentially avoid the whole question as to if you could redisclose or not.
I hope this helps Dmurry!
I’m not familiar with Texas law at all, so I might be missing something here, but in KY there are many banks that offer HELOC’s with a variable rate, and their payment amounts do change.
Unless there is some kind of stipulation specific to Texas, you should be good to go.
1026.2 Definitions and rules of construction
(23) Prepaid finance charge means any finance charge paid separately in cash or by check before or at consummation of a transaction, or withheld from the proceeds of the credit at any time.
Above is the definition of Prepaid Finance Charges as defined in Reg Z. The terms you mentioned are not specifically defined in Reg Z so I’ll have to interpret them.
If a fee fits the definition of a “Prepaid Finance Charge” and is include in the loan amount then to me that would be a “financed prepaid financed charge”. Any fees that do not fit the definition of a Prepaid Finance Charge that is then included in the loan amount aka financed, then to me that would be “other charges financed”.
Hope this helps!
Tstrait, is correct about the five questions. HELOCs are typically not for the purchase or refinance of dwelling. This is not the intended purpose for HELOC products and generally would not apply, but there is an outside chance that they may.
I believe this is more of a legal question than a compliance one. You should probably contact the Bank’s legal counsel.
You may not be able to correct the issue but you could produce the TIL with the date of when then loan was closed and that would at least show an effort to address the issue.
The Affiliate Business Arrangement disclosure is address under RESPA 3500.15. If RESPA doesn’t apply then it doesn’t either.
Here is the section of RESPA that covers exemptions:
§ 3500.5 Coverage of RESPA.
(a) Applicability. RESPA and this part apply to all federally related mortgage loans, except for the exemptions provided in paragraph (b) of this section.
(b) Exemptions. (1) A loan on property of 25 acres or more.
(2) Business purpose loans. An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by Regulation Z, 12 CFR 226.3(a)(1). Persons may rely on Regulation Z in determining whether the exemption applies.
(3) Temporary financing. Temporary financing, such as a construction loan. The exemption for temporary financing does not apply to a loan made to finance construction of 1- to 4-family residential property if the loan is used as, or may be converted to, permanent financing by the same lender or is used to finance transfer of title to the first user. If a lender issues a commitment for permanent financing, with or without conditions, the loan is covered by this part. Any construction loan for new or rehabilitated 1- to 4-family residential property, other than a loan to a bona fide builder (a person who regularly constructs 1- to 4-family residential structures for sale or lease), is subject to this part if its term is for two years or more. A “bridge loan” or “swing loan” in which a lender takes a security interest in otherwise covered 1- to 4-family residential property is not covered by RESPA and this part.
(4) Vacant land. Any loan secured by vacant or unimproved property, unless within two years from the date of the settlement of the loan, a structure or a manufactured home will be constructed or placed on the real property using the loan proceeds. If a loan for a structure or manufactured home to be placed on vacant or unimproved property will be secured by a lien on that property, the transaction is covered by this part.
(5) Assumption without lender approval. Any assumption in which the lender does not have the right expressly to approve a subsequent person as the borrower on an existing federally related mortgage loan. Any assumption in which the lender’s permission is both required and obtained is covered by RESPA and this part, whether or not the lender charges a fee for the assumption.
(6) Loan conversions. Any conversion of a federally related mortgage loan to different terms that are consistent with provisions of the original mortgage instrument, as long as a new note is not required, even if the lender charges an additional fee for the conversion.
(7) Secondary market transactions. A bona fide transfer of a loan obligation in the secondary market is not covered by RESPA and this part, except as set forth in section 6 of RESPA (12 U.S.C. 2605) and § 3500.21. In determining what constitutes a bona fide transfer, HUD will consider the real source of funding and the real interest of the funding lender. Mortgage broker transactions that are table-funded are not secondary market transactions. Neither the creation of a dealer loan or dealer consumer credit contract, nor the first assignment of such loan or contract to a lender, is a secondary market transaction (see § 3500.2.)
If you are not taking their principal dwelling as collateral then ROR does not apply. It sounds like you are not taking the principal dwelling to me.
If you are wanting to know the legal ramifications, you need to be asking your Bank’s attorney. From a compliance stand-point it is not a violation but I would think you would have to abide by it if you disclose it.
It may appear to Examiners that you really don’t know what you are doing by over disclosing in this case, so be careful.
There is not a regulatory requirement to have them in your files. Having them in your files is not a bad idea, but not necessary in my opinion if you have it in your policy.
