Forum Replies Created
-
Posts
-
I am not aware of any other restrictions.
Offering a five-year balloon under the temporary balloon QM rules is a great option for all consumer credit transactions secured by a dwelling after the January effective date. The HOEPA balloon restrictions (seven years) expire at that time.
The loan must have a term of 61 months or longer under Section 1026.43(c)(2) (the general ability to repay rules. Under section 1026.43(e)(6) (the temporary balloon payment QM) the term must be five years (60 months) or longer.
Obviously the amount of the initial deposit should be consistent from document to document. You need to determine why the differences exists. I agree that the difference appears to be attributed to something other than rounding. I suspect an entry error. Your big concern concern is consistency from the GFE to the HUD-1, but the amount of the initial deposit is allowed to change. I don’t see any need to reprint, and since neither document requires a signature, there is no need to resign.
Regulation B does not have appraisal rules for subordinate lien transactions. But remember if the transaction is a higher priced mortgage loan under regulation Z you have a very similar requirement to provide a notice regarding the appraisal and to give a copy of the appraisal that applies to both first and subordinate lien transactions.
It is OK to report a loan twice. When you refinance a home purchase loan you report the loan twice. Here you have a reportable home improvement loan that is later refinanced.
The original Appendix Q has been revised. I have pretty much completed a review and update of the materials previously provided to the CMG. We will distribute to CMG members upon completion.
The final regulations give you quite a bit of flexibility in verifying income. You may use a transcript, but you may also get a copy of the tax return that was filed with the federal or state government directly from the consumer. The proposed regulations took a stricter stance on this issue, but the CFPB lightened up with the final rule published earlier this year. This doesn’t remove your responsibility to determine that the information is reasonably reliable.
Regulation X contains detailed instructions for completing the HUD-1 and the HUD-1A. Additional guidance is provided in the Frequently Asked Questions. It appears that the forms were not completed according to the instructions in the examples you describe. There is no upside to deviating from the instructions.
As you point out the new ability-to-repay rules also specifically mention that you can consider bankruptcy. The rules are effective in January 2014. Hopefully the CFPB will address this apparent inconsistency between now and then. You may want to begin a dialogue with the bank’s legal counsel in the event that the CFPB drops the ball again.
Keep in mind that there are seven ability to repay standards. The 43% DTI ratio appears in some but not all of the ATR options. for example under the Eight Factors there is no limit on the DTI% other than the bank’s own standards. I doubt that bank policy allows a debt-to-income ration of 63%.
The GFE contains an error, but that is unavoidable at this point. The safest course of action is to close on Friday using the rate disclosed on the GFE. If you intend to charge a higher rate then the burden to prove that you did not lock the rate is on you.
Section 1026.43 offers 7 options for verifying the borrower’s ability to repay. The small creditor portfolio option that you are attempting to use requires that you consider the consumer’s debt-to-income ratio at or before consummation according to the rules in Section 1026.43(c)(7). That section does not establish a cutoff ratio. You should follow the guidance in your own policy, so if 55% exceeds the limits established in your bank’s policy and procedures then you cannot make the loan.
Your situation does not involve a new loan, it involves a “renewal.” If your renewal involves a new obligation that satisfies and replaces an existing transaction then you must meet the ATR rules. If you are merely extending the term of the loan with a modification or extension agreement the transaction does not have to meet the ATR rules.
I agree with your HMDA analysis. The loan appears to be a HMDA reportable refinance.
Your jump from HMDA to Call Report instructions confuses me; the two are not related.
My call reporting skills are very rusty, but I believe that code 1b is the appropriate code. Hopefully someone with real call report skills can provide a more definitive answer.
New appraisal rules appear in both Regulations B and Z. Your transaction appears to be covered by Regulation B, which requires delivery of a copy of the appraisal promptly upon completion, or three business days prior to consummation of the transaction, whichever is earlier.
Section 1026.36 prohibits financing credit insurance, directly or indirectly. Your plan involves direct financing. That’s a problem.
On May 10th the CFPB announced they were delaying this section beyond the June 1, 2013 effective date and making changes to the monthly payment provisions. There was no detail on the changes. Keep an eye on my Blog. When anything further is published I will address it in an article. You may get lucky and find some relief.
