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Without details regarding the homeowners warranty (HOW) program it is difficult to reach an opinion. I have UDAAP on the brain today. I published a blog article this morning warning of potential problems with add-an products. Please review that article in the blog section of our website. HOW programs are generally a very legitimate product. Just be sure that the product is truly beneficial to your customer.
Let me know if have specific questions about HOW.
“A servicer shall not make the first notice of filing required by applicable law for any judicial or non-judicial foreclosure unless: (iii) The servicer is joining the foreclosure action of a subordinate lienholder.”
The guidance in 1024.41(f)(1)iii is very precise. It does not mention a subordinate lienholder joining the first lienholder in an action. It does not address a matured HELOC.
We can speculate on the answers to these vary valid questions, but unfortunately the only answers that count come from the CFPB or the courts.
For purposes of calculating the debt-to-income ratio in§ 1026.43(e)(2)(vi), creditors must include in the definition of “debt” a consumer’s monthly housing expense. This includes, for example, the consumer’s monthly payment on the covered transaction (including mortgage-related obligations) and on simultaneous loans.
Section 1026.43(e)(2)(v)(B) requires creditors to consider and verify the consumer’s current debt obligations, alimony, and child support. For purposes of this requirement, the creditor must consider and verify, at a minimum, any debt or liability specified in appendix Q.
So the creditor must consider and verify all of the consumer’s debts, but only certain of those debts are included in the debt-to-income ratio.
• This appears the case with a balloon, that is not a simultaneous loan, coming due in 12 months. You must consider the impact of that debt on the borrower’s ability to repay. For example a consumer that has applied for a covered transaction could have an acceptable debt-to-income ratio of 40%, and the ability to pay the regular monthly payments on a loan with a big balloon coming due in a few months, which payment is not included in the debt-to-income ratio. If the creditor has reason to believe that the balloon may not be refinanced a reasonably conclusion would be to not make the loan.
• If the loan is a simultaneous loan that is:
o A higher-priced covered transaction then the balloon must be considered in the debt-to-income ratio;
o Not a higher-priced covered transaction, but has term of 61 months or longer, then the regular monthly payment amount is used in the debt-to-income ratio; or
o Not a higher-priced covered transaction, but has term of less than 61 months, then the balloon payment amount is used in the debt-to-income ratio.Click here for some really detailed guidance on the first notice. It is from the Preamble to the Final RESPA rule (starting on page 88). While it is great guidance it is not state law specific.
One of our Tennessee members recently submitted the following questions. Anyone with expertise in TN state law please help us out.
QUESTION: We would like clarification on some State & Federal Foreclosure Regulations to determine if we are following proper procedures for delinquent 1-4 family residential borrowers under the new RESPA Mortgage Servicing Final Rule that was effective January 10. We want to ensure our procedures are current and determine a time-frame for proceedings from first delinquency to foreclosure. We are prohibited from Sending 1st Notice unless the borrower is 120 days delinquent (12 CFR 1024.41 (f)(1)) – We would like to know if this refers to the notice in Tenn. Code Ann. § 35-5-101 and if not, what is the notice being referenced?
That is a very long-winded reply, but we really would like to get your input on our plans for the coming months.
Thanks.
This is Robin’s response to the question:
From the information you’ve given it sounds like this loan would be exempt from RESPA/Reg X due to the acreage, but that would not affect coverage under Reg Z. It doesn’t seem to meet any of the Reg Z exemptions; therefore, Reg Z would apply meaning you would need to test for the specific items you mentioned below – section 32, 35, 43 and apply RofR.
What’s up with Bob Costas, the glasses and swollen red eyes? The official explanation is at: https://www.washingtonpost.com/news/olympics/wp/2014/02/11/matt-lauer-replaces-bob-costas-on-tuesday-nights-nbc-broadcast/.
I told you the FSB would take care of the problem. Matt Lauer better speak carefully.It is interesting watching the network trash Russia, its president, the decision to locate the Olympics is Sochi and much more. I figure one of the reporters will get “disappeared” by the FSB (formerly know as the KGB).
My granddaughter Maison reached the ripe old age of 1 month this past weekend. She also got a great report from her pediatrician today.
Marie,
As always, your very vigilant eye for detail is appreciated. The oversight has been corrected and will be distributed to all CMG members at our next meetings on February 20 and 21.
You raise an excellent question. It appears you are referring to a balloon loan; any other loan would be paid in full or nearly paid in full by the maturity date and then a work-out would make a lot more sense than a foreclosure.
Unfortunately, Section 1026.41(f)(1) does not address the issue raised in your question. As a result the safe course of action is to wait until the borrower is more than 120 days past due. If you want to begin foreclosure sooner you should seek an interpretation from the Consumer Financial Protection Bureau or a legal opinion from your bank’s counsel.
If you obtain an interpretation from the CFPB please share that information with us in this Forum. I sure others would benefit from your findings.
This is a fairly low risk violation for two reasons:
1) This situation does not arise very often; and
2) Even though you bank is violating the law, you are in compliance with the regulation, which provides a great defense if your bank gets sued.I would keep it on your TO DO list, but eliminate higher risk concerns before you take on this item.
