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Sorry about the delay in getting involved in this discussion. Vacation got in the way.
1. The revised late charge and grace period apply to Section 32/High Cost/HOEPA loans for which an application is received on or after January 10, 2014. In the seminar we discussed the need to code loans that are Section 32/High Cost/HOEPA loans to assure the proper late charges and grace period are applied. Many banks have already coded loans as Section 32/High Cost/HOEPA loans. If they continue to use the existing code for new Section 32/High Cost/HOEPA loans they may not be able to discern which loans resulted from applications received on or after January 10, 2014. An easy solution is to apply the revised late charge and grace period to new and existing Section 32/High Cost/HOEPA loans. Most banks have few of these loans, and have a low delinquency ratio, so the lower late charge and longer grace period would have minimal impact on earnings.
2. I concur with Robin, there is no requirement to track re-disclosures. From the management perspective it may be helpful to know the frequency of re-disclosure and what created the need to re-disclose.Your memory is good. As I am sure you recall, Regulation Z grants the right to rescind to any consumer if a security interest is or will be retained or acquired in a consumer’s principal dwelling. The Truth in Lending Act grants the right to rescind to any obligor if the transaction is secured by a dwelling he or she occupies as a principal dwelling.
Under Regulation Z the borrower in your example does not have the right to rescind; he does not have an ownership interest. But, under the TILA the borrower does have the right to rescind; the loan is secured by the dwelling they occupy as a principal dwelling.
You should review the Official Interpretations to Section 1026.35(a)(1) of Regulation Z, which clarify who is and who is not a loan originator. Just making a referral does not cause an employee to become a loan originator or a mortgage loan originator. Asking probing questions and then referring a customer to a specific originator makes an employee a loan originator.
You must obtain three forms of information for certain loan originators – a criminal background check, a credit report and answers to the NMLSR questions. You must also provide specific training, which is broader than just Regulation Z, based on the loan originators duties.
Compensation paid to a loan originator who is an employee of the creditor is not included in the total of points and fees.
You have options:
1) You may “let it ride” and deal with the shortage/deficiency at the end of the escrow year; or
2) You may close the existing escrow year early, generate an annual escrow statement that reflects the shortage, and start a new escrow year with the correct payment amount.Let me add to Robin’s answer. The initial rate adjustment is an estimate. The estimate is sent 210 to 240 days prior to the first scheduled payment at a new level. At the time you prepare the initial notice you have no idea if the rate will actually change or not, but you provide the estimate anyway.
Foreclosure is a state law process. If under the law of your state the Demand Letter is the first notice, then it cannot be sent until the consumer is 120 days past due.
If the borrower makes a legal payment (in U.S. Dollars and meets any other requirement you may impose) the bank must accept the payment and credit the payment as of the date of receipt, unless other payment conditions have been established.
It is hard to image this scenario becoming common. Apparently the consumer has the ability to make a monthly payment, but chooses to remain delinquent thereby destroying his or her credit history and paying continuing late charges.
The ability to repay rules do not specifically address preferred rate loans. Robin’s reply provides a safe course of action for General Rule QMs. If you utilize one of the other ability-to-repay options the response may be different.
There are certain hardship modification/refinance programs offered by the federal government and some offered by specific banks that include the provisions mentioned in your question. I am not aware of any specific requirement that applies to all banks engaging in hardship modifications/refinances.
New RESPA rules related to loss mitigations include an appeal option, but those rules apply to RESPA-related mortgage loans secured by a borrower’s principal dwelling.
I assume that the loan was closed and the escrow account was established on November 20, 2012. The first payment on the loan was due in January 2013. If these assumptions are correct then the escrow year ended on November 20, 2013. The analysis should show activity through the end of the escrow year, November 20, 2013. The history should show the actual activity during the escrow year, which apparently did not include the payment of taxes. The payment of 2013 taxes would appear on the next annual statement for the period November 20, 2013 to November 20, 2014.
Nothing in the guidance for small creditor portfolio loans addresses deferred payments. Appendix Q addresses when the deferred payments are included in debt. It assumes that the deferred debt has scheduled payments once the payments begin. I am curious how you arrived at 15 years and 5%. Are those the numbers used in the contract for the deferred debt?
Remember foreclosure is still primarily a state law issue. This section of RESPA overrides state law on this single issue. Robin’s advice to discuss other options with your attorney is sound.
WHen you lower the customer’s rate from 4.25 to 4.15 are you reducing the margin for the entire life of the loan or are you just discounting the initial rate for a period of time, such as one year?
If you are discounting the rate, as stated above, the presence of the discount constitutes a different program, but the amount of the discount does not. A reduced margin does not constitute a different program. For the margin you use a representative example, an actual margin you used recently.
1. The total loan amount is the amount financed less certain charges that are both included in the points and fees and financed by your bank. Those charges include:
– 1026.32(b)(1)(iii)- items listed in 1026.4(c)(7) unless e charge is reasonable and neith your bank or any affiliate receives the fee;
– 1026.32(b)(1)(iv)- credit life and related insurance; and
– 1026.32(b)(1)(v)- prepayment penalty.2. The initial escrow deposit is excluded if the charge is reasonable and not paid to your bank or an affiliate. The homeowners insurance is excluded as long as you disclose that the insurance may be obtained from an agent the consumer chooses.
I believe the best advice for your team is to provide honest answers without elaboration. Most examiners ask questions to gather information needed to thierr job, without intention to deceive. It is also helpful if team members report any conversations with examiners to compliance so mitigation efforts can begin, when needed.
For example: the examiner asks, “When is uthe application disclosure for an ARM loan provided.” The team member responds, “At application.” The answer is truthful and contains no elaboration, but the more correct answer would have been, “We provide the disclosure at the time we provide the applicant with the application form.” Follow up with the examiner to clarify the exact timing might prevent a problem.
