[jholzknecht]

I agree with Robin. The note requires the borrower to reimburse you for future unanticipated events. As Robin stated, “It is not a settlement cost.”

The addendum does not allow you to be reimbursed for the cost of the second appraisal required for an HPML flip.

[jholzknecht]

I am curious about the expectations at the end of the 12 month term. Is the loan to paid in full by then? Is there a balloon due at the end of 12 months? (That would be a problem because of the 60/61 month minimum term for a balloon.) Will the loan be refinance into a new loan of much longer term?

A bridge is designed top be paid from the sale of the old dwelling. A construction loan is generally to be paid from a refinance of much longer term.

[jholzknecht]

I assume that an appraisal is part of the information that your bank regularly obtains and considers in evaluating applications for the amount and type of credit requested; therefore you did not have a complete application. A notice of action taken is not required until you have a completed application.

I agree with Robin’s conclusion that this should be handled as a withdrawn application.

[jholzknecht]

Based on the facts presented in your question it appears your loan is a construction loan. Some constructions loans are exempt from RESPA. The disclosures for a construction loan generally are estimated using the guidelines contained in Appendix D to Regulation Z. It is not clear from your question whether your systems are using Appendix D. The issue of your concern shouldn’t occur if you are using Appendix D.

[jholzknecht]

The following, from the Introduction to Appendix Q, is less than fully helpful, but it makes clear that when Appendix Q is lacking detail you may use guidance from other sources,(i.e.; FNMA, etc.). If you can’t find support for the source of income then you must exclude it from Appendix Q consideration. You would also have the option of making the loan under another ATR option that does not require use of Appendix Q.

Where guidance issued by the U.S. Department of Housing and Urban Development, the U.S. Department of Veterans Affairs, the U.S. Department of Agriculture, or the Rural Housing Service, or issued by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) while operating under the conservatorship or receivership of the Federal Housing Finance Agency, or issued by a limited-life regulatory entity succeeding the charter of either Fannie Mae or Freddie Mac (collectively, Agency or GSE guidance) is in accordance with appendix Q, creditors may look to that guidance as a helpful resource in applying appendix Q. Moreover, when the following standards do not resolve how a specific kind of debt or income should be treated, the creditor may either (1) exclude the income or include the debt, or (2) rely on Agency or GSE guidance to resolve the issue. The following standards resolve the appropriate treatment of a specific kind of debt or income where the standards provide a discernible answer to the question of how to treat the debt or income. However, a creditor may not rely on Agency or GSE guidance to reach a resolution contrary to that provided by the following standards, even if such Agency or GSE guidance specifically addresses the particular type of debt or income but the following standards provide more generalized guidance.

[jholzknecht]

A couple divorces. She purchases his interest in the house they previously owned jointly. Is this reported as a purchase or a refinance?

If the deed is changed I view it as a purchase loan.

What are your thoughts?

[jholzknecht]

I recently received the following question, “Does the requirement to wait five years, instead of one year to cancel an escrow apply to new loans or to new and previously existing loans?”

Answer: The rule is effective June 1, 2013. Its requirements apply to transactions for which creditors receive applications on or after that date

[jholzknecht]

I believe Q.3. and Q.6. provide the correct interpretation. I hope that this is the CFPB’s position when they make this official. But it is not official until it is published. I would follow this informal advice only with the consent of your bank’s counsel. See the following:

§ 1024.4 Reliance upon rule, regulation or interpretation by the Bureau.
(a) Rule, regulation or interpretation.
(1) For purposes of sections 19(a) and (b) of RESPA (12 U.S.C. 2617(a) and (b)), only the following constitute a rule, regulation or interpretation of the Bureau:
(i) All provisions, including appendices and supplements, of this part. Any other document referred to in this part is not incorporated in this part unless it is specifically set out in this part;
(ii) Any other document that is published in the Federal Register by the Bureau and states that it is an “interpretation,” “interpretive rule,” “commentary,” or a “statement of policy” for purposes of section 19(a) of RESPA. Except in unusual circumstances, interpretations will not be issued separately but will be incorporated in an official interpretation to this part, which will be amended periodically.
(2) A “rule, regulation, or interpretation thereof by the Bureau” for purposes of section 19(b) of RESPA (12 U.S.C. 2617(b)) shall not include the special information booklet prescribed by the Bureau or any other statement or issuance, whether oral or written, by an officer or representative of the Bureau, letter or memorandum by the Director, General Counsel, or other officer or employee of the Bureau, preamble to a regulation or other issuance of the Bureau, Public Guidance Document, report to Congress, pleading, affidavit or other document in litigation, pamphlet, handbook, guide, telegraphic communication, explanation, instructions to forms, speech or other material of any nature which is not specifically included in paragraph (a)(1) of this section.

[jholzknecht]

You are not over-thinking anything. I am not aware of anything in HMDA, Regulation C, the HMDA Guide that directly addresses this issue. I agree with your analysis – none of the loans individually satisfies and replaces the existing loan, but as a group they do meet the definition. IMO these loan are refinances, but my opinion doesn’t really count. You may want to run this by your examiner.

[jholzknecht]

When you make a loan under an open-end clause in the mortgage, that new loan is generally closed-end consumer credit and since it will be secured by real property the new Integrated Mortgage disclosures and rules should be followed.

[jholzknecht]

Lexegay,

Thanks for attending the program and for submitting your question. Robin has very succinctly answered your question

[jholzknecht]

There is a fine line between coercion and providing reasonable assistance to the appraiser. The Dodd‐Frank Act states: The requirements of subsection (b) shall not be construed as prohibiting a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, consumer, or any other person with an interest in a real estate transaction from asking an appraiser to undertake 1 or more of the following:
(1) Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support an appraisal.
(2) Provide further detail, substantiation, or explanation for the appraiser’s value conclusion.
(3) Correct errors in the appraisal report.

The buyer’s agent might be inclined to try to reduce the value in order to get a lower sales price. The seller’s agent might want the opposite result. The seller’s agent presumably has the most information about the property.

There is nothing that requires or prohibits you from sharing appraiser contact information from either agent. You should adopt a policy on this matter with only limited exceptions to the policy. You may inquire why the agent needs to contact the appraiser.

[jholzknecht]

Susan,

Thanks for responding to the question and for sharing your information. This is how we envisioned the Community Forum working.

[jholzknecht]

Section 20(a) of the Federal Deposit Insurance Act prohibits bank participation in a lottery. The definition of lottery involves people paying money for the possibility of receiving a larger amount of money. For more information: https://www.fdic.gov/regulations/laws/rules/1000-2200.html

It is not clear if you program constitutes a lottery or not. Even if the program is permissible under federal law have your counsel check state law.

I am unaware of any disclosures related to this type of activity.

[jholzknecht]

The presence of the cross-collateral clause in a game-changer in this conversation. Assume the following.

Total loan amounts $200,000 (2 loans at $100,000 each)
FEMA’s Max Coverage $1,000,000 ($500,000 on the building and $500,000 on the content)
Insurable value $350,000 (Building – $150,000, contents $200,000)

You need insurance in the amount of $200,000. The coverage would be split between the building and the contents, for example $150,000 on the building and $50,000 on the contents.

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