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Section 1003.4(a)(31) requires a covered institution to report the total number of individual dwelling units related to the property securing the covered loan.
The regulation does not define “unit.” There is no discussion of whether below grade units are counted or not. Apparently, someone defined the property to you as a “2 unit.” The Official Interpretations state, “A financial institution may rely on the best information readily available to the financial institution at the time final action is taken and on the financial institution’s own procedures in reporting the information required by § 1003.4(a)(31). Information readily available could include, for example, information provided by an applicant that the financial institution reasonably believes, information contained in a property valuation or inspection, or information obtained from public records.” I would go with “2 unit” unless the applicant or an appraiser defines it as a “three unit.”
Typically lenders require either a homeowners policy or a builders risk policy for a construction loan. Most lenders require that the coverage be in place at the time of closing. Some lenders do not require the coverage until construction actually begins. The amount of the premiums should be included in the Other Costs on the LE and the CD. The amount required to be paid at or before closing are included in Section F. – Prepaids. If the premiums for future periods are escrowed, the initial amount placed in the escrow is reflected in Section G. Premiums for insurance purchased after closing do not need to be disclosed on the LE or on the CD, but can be shown in an separate addendum attached to the LE or the CD.
Comment 34(b)(1) – 1. States, “Section 1024.34(b)(1) does not prohibit a servicer from netting any remaining funds in an escrow account against the outstanding balance of the borrower’s mortgage loan.” Netting is the quick, easy way to handle your situation.
I agree that the purpose should be listed “Purchase” and I like your approach with the sales price and down payment. Another alternative is to show the Estimated Property Value instead of the Sales Price. Comment 37(a)(7) 1. states, “In a transaction that involves a seller, if the sale price is not yet known, the creditor complies with § 1026.37(a)(7) if it discloses the estimated value of the property that it used as the basis for the disclosures in the Loan Estimate.”
Please clarify does you question involve loans, deposit accounts or both? For loans, is the credit open-end or closed-end credit and is it secured or unsecured? Ultimately you will probably need a list of the changes from 2018 to 2021 to determine whether redisclosure is required and how redisclosure is to be accomplished.
You are required to obtain flood insurance on any building or mobile home that secures the loan and is located in a special flood hazard area (100-year flood plain) within a participating community. You would need insurance only on the building slightly located in the flood zone.
I suspect that the other buildings may be in a 500 year flood plain. You are not required to get flood insurance on properties in a 500-year zone, but insurance still makes sense for properties located in that zone. 30% of the flood damage typically takes place in 500-year zones.
Interesting question.
If the dwelling is in an AE zone but is covered by a policy issued for a X zone, several problems could result.
1. Federal regulators could cite a violation and possibly impose civil monetary penalties for a lack of appropriate insurance.
2. If the property floods, FEMA could subtract the unpaid premiums (by your estimate more than $3,800 per year) from the loss payment for the flood damage.If you require a policy with AE coverage now, and later it is determined that X was the correct zone, the borrower will receive a full refund of the excess premiums. There would be no consumer harm since the borrower will obtain a full refund for the excess premiums.
Under the current frequently asked questions it is your responsibility to resolve this dilemma. If the proposed FAQs are finalized as proposed, this problem goes away. You simply note the discrepancy in the file. We believe that the proposed FAQ will have to be revised since FEMA is no longer showing the flood zone on the policy.
You generally don’t have three days for the CHARM booklet/ARM disclosure and the HELOC booklet/disclosure. Those items must be provided at the time you hand the consumer the blank application. They are given before you have an application and long before you make a credit decision. Previously you inquired about an in-person application, an online (web-based) application, or a mailed application. Now you have expanded the inquiry to include phone applications. In an in-person application, the disclosures and booklets are provided at the time the consumer is handed an application. For an online application the disclosure and booklet must be provided at the time the consumer accesses the application. In a mailed application, the disclosure and booklet should be included with the blank application provided to the consumer. In a phone application, as explained above, the disclosures may be delivered or placed in the mail not later than three business days following receipt of a consumer’s application when the application reaches the creditor by telephone.
ARM rules do not address how to handle disclosures for applications denied or withdrawn in the three-day period. The safe answer is to provide the disclosure and the brochure.
For HELOCs, sin situations where §1026.40(b) permits the creditor a three-day delay in providing disclosures and the brochure, if the creditor determines within that period that an application will not be approved, the creditor need not provide the consumer with the disclosures or brochure. Similarly, if the consumer withdraws the application within this three-day period, the creditor need not provide the disclosures or brochure.
It appears the title may have to be transferred twice, once from the estate to child A (to meet the terms of of the estate), then from child A to child B. Be sure to check tax obligations on the transfers.
Neither the law, the regulation, the official interpretations nor the small entity compliance guide addresses this question. In the second transaction it appears that child B is purchasing title for the property securing the loan. The sales price is the amount of debt owed by the estate. If that amount is listed in the contract of sale then it should be shown as Purchase Price.
The debt of the estate could also be viewed as a payoff of additional debt of the seller, in which case the transaction would be listed as home equity, rather than home purchase.
Great question. Assuming the R/E loan agreement has broad cross collateral language, then in the described scenario, the borrower would have to increase the flood policy from $100,000 to $130,000 before the auto loan could be made.
Under the Military Lending Act a creditor shall provide to the covered borrower the following information before or at the time the borrower becomes obligated on the transaction or establishes an account for the consumer credit:
(1) A statement of the MAPR applicable to the extension of consumer credit;
(2) Any disclosure required by Regulation Z, which shall be provided only in accordance with the requirements of Regulation Z that apply to that disclosure; and
(3) A clear description of the payment obligation of the covered borrower, as applicable. A payment schedule (in the case of closed-end credit) or account-opening disclosure (in the case of open-end credit) provided pursuant to paragraph (a)(2) of this section satisfies this requirement.The disclosures, items (1) and (3) above, but not item (2), must be provided:
• In writing in a form the covered borrower can keep; AND
• Orally.Sending the disclosure by email will suffice for the written disclosure. If you then call the borrower the transaction is toll-free for the borrower. However, the regulation specifically states the oral disclosure, if not provided in person, must be provided through a toll-free telephone number when the covered borrower contacts the creditor for this purpose. Your proposed action is questionable since you would be contacting the borrower, instead of the borrower contacting you, as required by the regulation.
This is a minor point but could lead to a violation.
Kathy,
Your question just made it to me today. I don’t fully understand the question, so let me break it down.
* It starts out with a description of an ARM – “closed-end variable-rate transactions secured by the consumer’s principal dwelling with a term greater than one year”
* Next it refers to 1024.6(a)(1) which is the requirement to provide a special information booklet on a federally related mortgage loan.So, the question is – On an ARM transaction does the RESPA special information booklet also apply to the initial ARM disclosure/CHARM booklet and initial HELOC disclosures/HELOC booklet if the application is denied within three business days when taken in the situations listed below? That is where you lost me – does the RESPA booklet apply to the CHARM and HELOC booklet.
RESPA Section 1024.6(a)(1)generally requires a special information booklet for federally related mortgage loans. The RESPA booklet is not required:
* if a TRID booklet is provided;
* if a copy of the brochure entitled “When Your Home is On the Line: What You Should Know About Home Equity Lines of Credit” is provided for an open-end line of credit.
* for a refinancing transactions;
* for a closed-end loans, as defined in 12 CFR 1026.2(a)(10) of Regulation Z, when the lender takes a subordinate lien;
* for a reverse mortgages; and
* for any other federally related mortgage loan whose purpose is not the purchase of a 1- to 4-family residential property.The RESPA booklet would only be required for a closed-end variable-rate transactions secured by the consumer’s principal dwelling with a term greater than one year, if the transaction was for the purchase of a dwelling. For a closed-end loan the initial HELOC disclosures/HELOC booklet is not required.
When required, the RESPA booklet must be provided not later than three business days (as that term is defined in §1024.2) after the application is received or prepared. However, if the lender denies the borrower’s application for credit before the end of the three-business-day period, then the lender need not provide the booklet to the borrower. This is true for an in-person application, an online (web-based) application, or a mailed application.
When required, a Consumer Handbook on Adjustable Rate Mortgages must be provided at the time an application form is provided or before the consumer pays a non-refundable fee, whichever is earlier (except that the disclosures may be delivered or placed in the mail not later than three business days following receipt of a consumer’s application when the application reaches the creditor by telephone, or through an intermediary agent or broker). This is true for an in-person application, an online (web-based) application, or a mailed application.
As noted previously, the brochure entitled “What You Should Know About Home Equity Lines of Credit” is not required for a closed-end loan. For a HELOC the brochure must be provided at the time an application is provided to the consumer. The disclosures and the brochure may be delivered or placed in the mail not later than three business days following receipt of a consumer’s application in the case of applications contained in magazines or other publications, or when the application is received by telephone or through an intermediary agent or broker. This is true for an in-person application, an online (web-based) application, or a mailed application.
Based on your assertion that information is not shared with the third party, there is no privacy issue. You also indicated that the third party is not an affiliate, so the FCRA affiliate sharing rules would not apply.
The prior approval threshold uses a tiered approach. You calculated 5% of unimpaired capital and surplus. Then compare that number to $25,000. Whichever number is larger is the applicable threshold. For most banks the threshold is 5% of capital. However is 5% of unimpaired capital and surplus exceeds $500,000, then $500,000 is the threshold for prior approval.
Lending limits are a bit complicated as well. The individual lending limit is generally 15% of unimpaired capital and surplus, however there are numerous exceptions that allow higher amounts. There is also an aggregate limit for all insiders of 100% of unimpaired capital and surplus, but as you point out that limit can be increased if a list of conditions, including a board resolution, is in place..
I don’t see any obvious problems. My concerns would be greater if you were making phone calls or sending emails.
You mention that the list includes “geographic area around the bank’s location.” Please assure the list includes all geographic areas, including low- and moderate-income areas, and areas with significant minority population. Examiners would likely want to know what criteria were provided to the third-party upon which the list selection was based.
