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Gwen,
The “not applicable” argument may be a good defense if an examiner asks why you left the settlement agent blank. As Brent explained above, “The regulation does not require the disclosure, nor does it prohibit the disclosure.” In Patti’s situation her examiner told her to disclose the bank as a settlement agent. She should follow the examiner’s instructions. I can not suggest that for every situation. Patti is in Kentucky. As far as I am aware, Kentucky does not prohibit a bank from servicing as the closing agent. Some states do have such a prohibition, so disclosing the bank as the settlement agent could have serious ramifications.
Life would be much easier if the CFPB would add a definition statement of the rule in the Official Staff Commentary; but they haven’t done so.
If you decide to leave the settlement agent line blank and an examiner challenges your action, use your “not applicable” defense. If the examiner persists, respectfully request a citation for the section of the regulation that supports their position that a bank can serve as its own agent.
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. It appears that the 2018 construction was not HMDA reportable since it was temporary financing. The 2020 loan appears to be HMDA reportable as a purchase loan. You indicate that the 2018 participation agreements remain in effect, most likely through language that explains the agreement covers extensions, renewals, and refinancings. Since participations in the 2020 loan were sold to several institutions in 2020 you should enter the type of purchaser, as follows.
Paragraph 4(a)(11)- 1. states, “A financial institution that originates a covered loan, and then sells it to more than one entity, reports the “type of purchaser” based on the entity purchasing the greatest interest, if any. For purposes of § 1003.4(a)(11), if a financial institution sells some interest or interests in a covered loan but retains a majority interest in that loan, it does not report the sale.”
I agree that the permanent loan that replaces temporary financing is generally reported as a “purchase,” if it involves the same borrower. Since this is not the same borrower it is not a “purchase” in this situation.
A “purchase” loan includes a closed-end mortgage loan or an open-end line of credit that is for the purpose, in whole or in part, of purchasing a dwelling. I think this loan qualifies as a purchase in this scenario. If John Doe was purchasing the newly constructed home from the builder, it would be a “purchase” loan. The fact that the purchaser is not John Doe, but is a related entity, shouldn’t change the result.
A Balloon-Payment QM must have a term of 60 months or longer.(12 CFR 1026.43(f)(1)(iv)). A balloon loan with a term of 36 months is generally not allowed under the Ability-to-Pay rules. The loan would be allowed only if the debt to income ratio, calculated using the full balloon payment divided by the consumer’s monthly income, meets the standard set by your bank. If the loan amount is $100,000 and the borrower’s monthly income is $5,000, the debt-to-income ratio would be 2,000%. Your standard is probably in the range of 40%.
There are lot of issues involved in your question. To determine the amount of insurance required you need the loan amount, FEMAs maximum and the value of the improvements. I assume your loan amount is greater than the calculated replacement cost, or else the amount of insurance would be higher than proposed.
The appraiser could be more helpful by providing a replacement cost figure. In the future you may want to add to your list of approved appraisers appraisers who are willing to complete that part of the appraisal. It would eliminate a lot of guesswork.
The information provided by the insurance agent appears confusing. Much of the mystery could be cleaned up by obtaining and reviewing a copy of the policy, as suggested by Robin.
Small business loans are defined as those whose original amounts are $1 million or less and that were reported on the institution’s Call Report as either “Loans secured by nonfarm or nonresidential real estate” or “Commercial and industrial loans.”
Loans secured by nonfarm residential real estate used to finance small business must be reported as “loans secured by real estate” when the real estate collateral taken is greater than 50 percent of the principal amount of the loan at origination unless the security interest in the nonfarm residential real estate is taken as an abundance of caution and where the loan terms as a consequence have not been made more favorable than they would have been in the absence of the lien or liens. If the estimated value of the real estate collateral is 50% or less of the loan amount, the loan should be reported in another category based on the purpose of the loan (such as Commercial and Industrial).
I am not aware of any guidance that requires evaluating residential real estate separately from commercial real estate.
Robin’s advice is sound. When a loss occurs the insured must submit the estimated ACV. If FEMA disagrees with the insured estimate then FEMA submits an ACV figure. If the insured disagrees, then both parties obtain appraisals. The ACV change from loan inception to the time of the loss. Deprecation will increase over time, unless improvements are made to the property in the interim.
Your job is much easier when the appraiser provides the needed value up front.
Annmichele – The short answer from The Bank appears accurate. It is not clear which regulation you are evaluating. If you are looking at Regulation Z, Comment 3(a)-5 states, “5. Owner-occupied rental property. If credit is extended to acquire, improve, or maintain rental property that is or will be owner-occupied within the coming year, different rules apply:
i. Credit extended to acquire the rental property is deemed to be for business purposes if it contains more than 2 housing units.
ii. Credit extended to improve or maintain the rental property is deemed to be for business purposes if it contains more than 4 housing units. Since the amended statute defines dwelling to include 1 to 4 housing units, this rule preserves the right of rescission for credit extended for purposes other than acquisition. Neither of these rules means that an extension of credit for property containing fewer than the requisite number of units is necessarily consumer credit. In such cases, the determination of whether it is business or consumer credit should be made by considering the factors listed in comment 3(a)–3.”
The loan is covered by regulation Z unless there are more than two units.
Your partial payment policy is disclosed on your TRID Closing Disclosures. If the policy changes between delivery and closing a revised CD may be needed.
The instructions for completing the demographic data cover a variety of scenarios, but, of course does not address the one you describe. The action of circling “Cambodian” indicates intent to enter that option. Your side note also indicates intent to select “Cambodian.” The instructions for the Asian free form field indicate that the lender should select the other Asian race, if provided by the applicant or borrower or any co-applicant or co-borrower. The applicant made two efforts to indicate “Cambodian.” In my opinion entering code 27 and entering Cambodian in the appropriate action.
A small elaboration on the periodic statement issue raised by Robin. Regulation Z requires a statement for each billing cycle. The term “billing cycle” is defined by the regulation as, “(4) Billing cycle or cycle means the interval between the days or dates of regular periodic statements. These intervals shall be equal and no longer than a quarter of a year.”
You may also want to check with your core processing system to determine if the system can handle a schedule of three payments per year.
