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I am not aware of any restrictions on answering consumer’s questions during a pay by phone call. I assure you verify identity to assure that the caller is your customer.
While the Regulation B appraisal rule applies to your transaction, there is an exemption for a transaction to finance initial construction of a dwelling.
There are two regulatory requirements for providing an appraisal notice.
• Regulation B requires an appraisal notice for an application for credit secured by a first lien on a dwelling whether the credit is for a business purpose or a consumer purpose.
• Section 1026.35(c)(2) (Higher Priced Mortgage Loans) requires an appraisal notice for a closed-end consumer credit transaction secured by the consumer’s principal dwelling with an APR that exceeds the average prime offer rate by the applicable threshold.It appears the HPML rule does not apply to your transaction, since your transaction is a business purpose transaction.
It appears the Regulation B requirement does apply to your transaction. It appears your bank is in the first lien position; no other creditor has an interest in the property.
You have a covered HMDA transaction if you have open-end or closed-end loan secured by a dwelling, unless an exemption applies. It appears your loan is secured by a dwelling. None of the exemptions in Section 1003.3(c) obviously applies to the transaction. There is an exclusion for loans made for business or commercial purpose, however a loan made for a business or commercial purpose is covered if it for home purchase or refinance. Although the details are a bit fuzzy, it appears that you loans is either purchase or refinance, which would make it HMDA reportable.
A matrix is contained on page TILA 27 of the Interagency Examination Procedures Manual (https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual_tila-exam-procedures_2021-10.pdf).
The term refinance means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.
* A closed-end mortgage loan or an open-end line of credit that satisfies and replaces one or more existing debt obligations is not a refinancing under § 1003.2(p) unless the existing debt obligation (or obligations) also was secured by a dwelling.
* Section 1003.2(p) provides that a closed-end mortgage loan or an open-end line of credit is not a refinancing unless the same borrower undertakes both the existing and the new obligation(s). Under § 1003.2(p), the “same borrower” undertakes both the existing and the new obligation(s) even if only one borrower is the same on both obligations. For example, assume that an existing closed-end mortgage loan (obligation X) is satisfied and replaced by a new closed-end mortgage loan (obligation Y). If borrowers A and B both are obligated on obligation X, and only borrower B is obligated on obligation Y, then obligation Y is a refinancing under § 1003.2(p), assuming the other requirements of § 1003.2(p) are met, because borrower B is obligated on both transactions. On the other hand, if only borrower A is obligated on obligation X, and only borrower B is obligated on obligation Y, then obligation Y is not a refinancing under§ 1003.2(p).If the borrower on the new note is the borrower on all of the old notes, then the new transaction is a refinancing. If one old note has a borrower other the borrower on the new note, then it appears the transaction is not a refinancing.
If there is more than one consumer who will be obligated in the transaction, the first consumer signs as the applicant and each additional consumer signs as a co-applicant. It appears that the wife is not obligated in the transaction, and the purchase transaction is not subject to the right of rescission, so the wife’s signature is not required on the LE or CD.
We are not familiar with the concept of an “Act of Donation.” It appears that Joe Smith is assuming the debt of ABC Company. An assumption is reported as a purchase loan if there is a written agreement whereby your bank accepts Joe as the obligor on the loan to ABC. We suspect a close analysis will show that the transaction is not an assumption, therefore the loan is not a purchase loan. We agree with your analysis that the loan is not a refinance. There is no indication that the loan is for home improvement.
If the loan is not home purchase, home improvement or refinance, it is reported as “other.”
In my opinion, this is not a violation.
* If the borrower completed a written application and indicates sex as male and transcription error occurred when the data was loaded into the reporting system – an error has occurred and should be corrected.
* In an oral application, if the borrower indicates sex as male and the MLO records it as female – an error has occurred. If the error is detected immediately, it should be corrected. When the application is signed by the applicant, if the error is detected, it should be corrected.
* When auditing at a later date, assuming the entry was incorrect based on the name of the applicant is incorrect. A male applicant named Bill might check sex as female because she identifies as female.Thanks for participating in the four-part webinar. Parts III and IV will be on Tuesday and Wednesday of this week.
The subject of your question is addressed in Lender Credits FAQ 3 (https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/tila-respa-integrated-disclosures/tila-respa-integrated-disclosure-faqs/#lender-credits). The FAQ states, in part, “The TRID Rule does not require disclosure of a closing cost and a related lender credit on the Loan Estimate if the creditor incurs a cost, but will not charge the consumer for that cost (i.e., the creditor will “absorb” the cost). In such cases, the absorption of the cost or charge would not “offset” an amount paid by the consumer. However, a creditor must disclose a closing cost and related lender credit on the Loan Estimate if the creditor is offsetting a cost charged to the consumer. Comment 37(g)(6)(ii)-2.”
“To illustrate, assume a creditor will require an appraisal, credit report, flood determination, title search, and lender’s title insurance policy in connection with a particular mortgage loan transaction. Further assume, that the creditor will incur attorney fees for loan documentation and recording fees in connection with the transaction. If, based on the best information reasonably available, the consumer will only pay an application fee of $500 and the creditor will absorb all other costs, the creditor is not required to disclose the appraisal fee, credit report fee, flood determination fee, title search fee, lender’s title insurance policy premiums, attorney fees for loan documentation, and recording fees on the Loan Estimate. Conversely, if the creditor agrees to provide a lender credit sufficient to offset all of these charges, except the application fee, the creditor must disclose the charges in the Loan Costs table and Other Costs table, as applicable, and include a corresponding total amount in the Lender Credits disclosure on the Loan Estimate.”
It has been a long time I have had a HUD-1 question. According to Appendix A of Regulation X, “a loan originator (other than for no-cost loans), real estate agent, other settlement service provider, or other person pays for a charge that was included on the GFE, the charge should be listed in the borrower’s column on page 2 of the HUD–1, with an offsetting credit reported on page 1 of the HUD–1, identifying the party paying the charge.” Your bank is a loan originator.
Regulation Z requires the disclosure of late charges in the appropriate TIL disclosure form. Whether a late charge can be imposed, the amount of the late charge, and the length of any grace period are issues addressed under state law, and usually are detailed in state usury statutes. Check with your general counsel or with your state banking association regarding the fees allowed in your state.
The regulations require a financial institution to require flood insurance when making, increasing, renewing or extending a loan secured by a building located in a special flood hazard area. It does not appear your loan is secured by a building; it is secured by the note. So, the flood insurance regulations do not apply to the transaction. If the borrower is a financial institution then it should comply with the flood regulations.
It appears that the term “deep discount” has a special meaning to you. The term is not used in TRID. I am not aware of a TRID provision that requires interest to be collected thru the 1st, when payment is due the 1st. Other section os Regulation Z establish rules for collections of payments.
You did not provide enough information for us to determine if there is a problem. An initial rate of 6.5% is not unusual and would not seem to indicate a deep discount. If the index is 6.5% and your are adding a margin of four parentage points, the initial rate would be 10.5%. If that rate is discounted down to 3.5% that is a sizable discount, but it is not clear why the system can’t disclose the correct APR for the transaction. We suggest contacting your loan origination software provider for a better explanation of the warning.
