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Vicki,
As a general rule, the grace period for a late charge is determined by the law under which you are lending. Usually that is a state law in the state in which your bank operates.
Also as a general rule, Regulation Z requires the disclosure of the amount of the late charge and the duration of the grace period, but does not limit the amount of the charge, or the duration of the grace period. One exception is a high-cost mortgage loan (HCML), subject to the restrictions contained in § 1026.34(a)(8), which limits the amount of the late charge and requires a 15-day grace period.
You need to determine if the loan is a high-cost mortgage loan as defined in § 1026.32. If so, the loan must have a 15 day grace period. If the loan is not a HCML, then you need to ascertain the state lending statute under which the loan was made and use the late charge grace period prescribed by that law.
According to Section 1003.2(p) the term refinancing 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. Your loan appears to meet the definition of refinancing, assuming you have the same borrower on each transaction.
Tressa,
You are correct. After delivery of the LE you discover that a new service is needed that was not disclosed on the LE. The cost of the service is $75. The service falls in the 10% tolerance category. If the original total of the 10% items was $1,000, then the additional $75 is equal to 7.5%. No violation exists since the amount on the CD is within the 10% tolerance limit.
Jack
I agree with Robin’s answers.
Based on your statement”Our renewal process is that we produce a new loan document with a new loan number.” what you call a renewal is a refinance.
Q1 – I agree.
Q2 – You can’t make the loan unless the consumer obtains a flood insurance policy. Force placement is not an option.
Q3 – You can’t do this. See the answer to the previous question.
Q4 – The 45-day notice is not required since force placement isn’t permitted in this transaction.I think both of you are correct, but let’s be sure.
It is not clear whether the loan is open-end credit or not. You state that is a line of credit, but to be a line of credit for HMDA the line must, among other requirements, replenish itself. In other words, as the borrower pays down the balance it becomes available to draw again. If the line is open-end credit and you originate fewer than 500 open-end lines per year the transaction is exempt. If it is closed-end credit and your bank originates more than 25 closed-end loans it is covered, unless another exemption applies.
The loan could be exempt as a business purpose loan (rental property), but even so it would be covered since it is for home improvement purpose. If it is closed-end credit for home improvement, it is covered assuming you originate more than 25 closed-end loans per year.
Dear ADJ0819,
Let’s get the conversation started.
A gift of equity can take several forms. A parent can gift funds to child to offset closing costs. When a seller sells a property for less than the fair market value the difference between the sales price and the fair market value is sometimes referred to as a gift of equity.
In the case of a family gift, the amount is disclosed as an “other credit” in the cost to close section of the Loan Estimate (LE) and the Closing Disclosure (CD).
In the case of a sale for less than market value there are various opinions on the proper method of disclosure. We believe the safest approach is to disclose the contract sales price. The instructions for the LE and CD require the contract sales price be disclosed as “sales price” in a purchase transaction. Consumers purchasing a home for less than the fair market value prefer that the fair market value be shown as the purchase price, since that higher number improves the loan-to-value ratio. Using the higher number results in the “gift of equity.” The TRID regulations and related guidance do not address the disclosure of this arrangement.
Section 1026.19(e)(1)(vi)(C) states, “If the consumer is permitted to shop for a settlement service, the creditor shall provide the consumer with a written list identifying available providers of that settlement service…” The regulation anticipates that you will disclose one or more providers for each services for which the consumer may shop. It does not anticipate that you will list services on the Written List of Providers that are not included in the “Services you can shop for” section of the Loan Estimate. While the regulation does not specifically prohibit including additional items, the practice could create problems with the disclosure being “clear,” as required by Section 1026.5(a).
The best practice is to include On the WLP those services listed in the “Services you can shop for” section of the Loan Estimate.
In my experience lenders generally follow the HPA rules for all transactions, even those secured by second home and investment properties. Arguably not following the HPA rules could be an unfair act or practice.
The Loan Estimate includes costs paid by or imposed on the consumer. If you allow the borrower to shop for a service provider, then the service and cost is disclosed in Section C, Services You Can Shop For, on the Loan Estimate and the service must also be listed on the Written List of Providers (WLP) form. You don’t need to list the pest inspection or the home inspection on the Loan Estimate or on the WLP if the fee is not expected to be paid by or imposed on the consumer. The pest inspection and home inspection charges would appear in Section H, Other, if the charge is required by the sales contract, rather than by the creditor, and the creditor is aware of the requirement.
If the sales contract requires the consumer to pay a portion of the sales commission the cost is to be included in Section H.
I think you already understand that Regulation W is an extremely complicated regulation. Based on the very few details provided it appears the transaction is covered by Regulation W. If that is the case, it appears that the collateral requirements are applicable. The applicable collateral margin requirement appears to be 130%.
There is also a possibility that Section 215.3(f) (Tangible Economic Benefit) of Regulation O (Lending to Insiders) could apply. We suspect that the exemption under 215.3(f)(2) would prevent coverage, but the matter should be explored.
Before moving forward with the loan we suggest that your bank obtain a legal opinion on the applicability of both Regulation O and Regulation W. The potential liability to your bank and your board for a violation of either regulation is considerable.
I am sorry I missed your initial inquiry.
I am not aware of any laws or regulations that create requirements for a loan participation agreement. The document is a contract between two business entities. Generally contracts are signed by all parties to the contract, and the signatures are original signatures. Since your institution is a party to the contract you may insist on original signatures. Your institution can refuse to complete the contract if the selling institution refuses to provide original signatures. Simply do not sign your copy or do not provide the purchase price.
The question is determined by whether Bob Doe is a consumer or not. You are correct that Bob is not a consumer if serving as a guarantor, endorser, and surety. Bob would be a consumer if serving as a joint applicant. If Bob’s sole role is to provide his home as collateral then he is not a consumer and the loan does not need an escrow.
Section 4905(a)(2) of the Homeowner Protection Act (HPA) states that “Lender paid mortgage insurance means private mortgage insurance that is required in connection with a residential mortgage transaction, payments for which are made by a person other than the borrower.” The HPA requirements for lender paid mortgage insurance are very different that for borrower paid mortgage insurance.
