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I have not run into to this scenario before. If you run the loan through DU and you get a DU code (approve/eligible) it appears that the AUS is DU. FHA’s system is TOTAL but their codes are either Accept or Refer. I suggest that you verify with your vendor whether the system is actually using TOTAL or not.
Regulation W require a 130% collateral ratio in a transaction with an affiliate that is secured by real property. It appears that the LLC is an affiliate of the financial institution, but the transaction appears to be with an unaffiliated borrower. However Section 223.16(a) states that, “A member bank must treat any of its transactions with any person as a transaction with an affiliate to the extent that the proceeds of the transaction are used for the benefit of, or transferred to, an affiliate.”
I am not sure I agree with your conclusion regarding Regulation O.
• The loan is not made to any insider.
• There is no indication that the loan is guaranteed by the insiders.
• An extension of credit is considered made to an insider to the extent that the proceeds are transferred to the insider or are used for the tangible economic benefit of the insider. However an extension of credit is not considered made to an insider if:
o The credit is extended on non-preferential terms; and
o The proceeds of the extension of credit are used in a bona fide transaction to acquire property, goods, or services from the insider.Yes, the test is basically a term length based test. The Commentary in Section .43(a)(3)(ii) states, “a temporary or “bridge” loan with a term of 12 months or less is exempt from § 1026.43(c) through (f). Examples of such a loan are a loan to finance the purchase of a new dwelling where the consumer plans to sell a current dwelling within 12 months and a loan to finance the initial construction of a dwelling. Where a temporary or “bridge loan” is renewable, the loan term does not include any additional period of time that could result from a renewal provision provided that any renewal possible under the loan contract is for one year or less. For example, if a construction loan has an initial loan term of 12 months but is renewable for another 12-month loan term, the loan is exempt from § 1026.43(c) through (f) because the initial loan term is 12 months.”
The one thing I do agree on is that “the regulation is not clear on some of these.”
It appears that the delivery fees are ultimately paid to the delivery service and that the borrower is not allowed to shop for the service provider. On the LE the ultimate service provider is not identified, but on the CD you are required to list “the name of the person ultimately receiving the payment.” Section 1026.37(f)(2) (Cannot Shop for) includes “settlement services for which the consumer cannot shop and that are provided by persons other than the creditor or mortgage broker.” Section 1026.37(f)(3) includes “settlement services for which the consumer can shop and that are provided by persons other than the creditor or mortgage broker.”
In my opinion whether processed by the closing agent, the title company or your bank the charge goes in Section B – Services You Cannot Shop For.
The flood insurance regulations come in play when a lender makes, increases, renews or extends a loan secured by a building or a mobile home that is located in a special flood hazard area.
At the time your loan was made it was secured by a deed of trust on the property. If there was one or more building on the property at that time and the building(s) was located in a SFHA then you should have complied with all applicable flood insurance requirements. If there were no buildings at the time of your loan, then no flood insurance was required. At a later date if you increased, renewed or extended your loan and buildings were located on the property at that time you should have complied with all applicable flood insurance requirements.
If another lender made a loan to construct the building and the construction loan is secured by the building, then the construction lender should have complied with all applicable flood insurance requirements.
Each lender is responsible for assuring adequate flood insurance is in place for their loan. FEMA will only issue a single flood insurance policy on the building. The lenders must cooperate to assure that the single policy is in an amount sufficient to protect both lenders.
The E-Sign Act does not indicate how specific the system explanation must be. There are no implementing regulations. You have to guess how specific the judge expects the requirements to be.
If the customer has an older version of Adobe Reader and is unable to open and read the documents, the judge will likely rule against your generic language. So, your generic language might work, but the specific language is safer.
There may be room for discussion but the regulation and the commentary nail it pretty tightly.
Section 1003.4(a) states, “A financial institution shall collect data regarding requests under a preapproval program, as defined in § 1003.2(b)(2), only if the preapproval request is denied, is approved by the financial institution but not accepted by the applicant, or results in the origination of a home purchase loan.”
Comment 4(a)(8)(i) – 5. states, in part, “A preapproval request that is withdrawn is not reportable under HMDA.”
Neither Regulation C nor the Commentary has anything exactly on point, but in my opinion comment 4(a)(10)(iii) – 5 comes closest. It states, “Section 1003.4(a)(10)(iii) requires a financial institution to report the gross annual income relied on in processing the application if a credit decision was not made.
Example: Assume an institution received an application that included an applicant’s self-reported income, but the application was withdrawn before a credit decision that would have considered income was made.
• The financial institution reports the income information relied on in processing the application at the time that the application was withdrawn or the file was closed for incompleteness.”The construction proceeds are included in calculations included in the cash to close section and the summary of the borrower’s transaction sections of the closing disclose. This method provides a disclosure that does not include the construction costs in the Cash For borrower at closing.
Check with your loan origination software vendor for the proper method of entering the data to obtain the correct result on the disclosure.
You can always provide a revised LE, but you can only reset tolerance in one of the five tolerance reset situations, such as a changed circumstance. This situation appears to be a changed circumstance, assuming that at the time the initial LE was prepared your bank was unaware of the two location situation.
Regulation B requires you to state the primary reason for denying the loan. If the reason is the identity of the first lien holder, then report that reason. Since use of the reason is not consistent you are at risk of a fair lending problem. Monitor carefully to determine if there is a pattern of disparate treatment on a prohibited basis.
