[jholzknecht]

You got it exactly right. The consumer can make an oral or written request. If you decide to accept an oral request, you still need to document the request. You know that if examiners see that a copy of an appraisal is given less than three days before closing they will evidence that the consumer requested a waiver, I am working on a Appraisal Waiver form. It includes a request for a waiver – I nearby request…. It includes the customer’s name, date of request, received by and date received. Can you suggest anything else we should include?

Thanks for the great question. We are starting a brief new section in our compliance masters group called Best of the Community Forum that will review recent posts that are noteworthy. Your question makes a leading contender for the next meeting. Thanks.

[jholzknecht]

I agree with rcooper’s answer, but relief may be on the way. The CFPB recently proposed changes to the serving rules. The proposed revision clarifies the exemption for institutions with small servicing operations. The proposal clarifies that loans serviced on a charitable basis will not be included. To be eligible you cannot impose fees for servicing the loans.

For more information see my blog article on this topic at https://jholzknecht.wordpress.com/2013/04/22/cfpb-proposes-more-changes-to-the-qm-and-servicing-changes/

[jholzknecht]

Section 12 CFR 1026.36(i) prohibits financing single premium credit insurance for closed-end consumer credit transactions secured by a dwelling and for a home equity line of credit secured by a consumer’s principal dwelling.

[jholzknecht]

A dwelling is a one- to-four-family unit. It may be rental property, but in order for Regulation Z to apply the loan must be for a consumer purpose. A mobile home is a dwelling. When coverage in the regulation targets a principal dwelling the agency drafting the regulations use the term “principal dwelling.”

[jholzknecht]

The requirement to provide a notice regarding the appraisal is required by both Regulation B and Regulation Z. Neither regulation addresses the issue of whether an applicant whose application is denied or withdrawn within the three day period should receive a copy of the notice. The safe answer is to provide the notice.

[jholzknecht]

For a home equity line of credit you should use the appropriate rescission form from Appendix G, which contains forms for open-end credit. While Regulation Z does not refer to the Appendix G forms, the Official Staff Commentary does reference the forms in Appendix G.

[jholzknecht]

You should update your policies and procedures as indicated. There is no data collection required, other than HMDA data, if your bank is subject to HMDA.

[jholzknecht]

1) At one case you inquire about what happens to a balloon loan that is refinanced. In the other you inquire about a balloon note that is renewed. The questions are similar, but the answers are very different. A refinance is a new loan, therefore you must verify the borrowers ability to repay under one of the six different ability-to-repay rules. A renew is not a new transaction therefore it does not have to new e ability-to-repay rules.
2) if the consumer does not meet one of the standards, such as the 43% debt-to-income ratio, then the loan does not meet the standard for a qualified mortgage. In that case you must qualify the borrower under one of the other ability-to-repay options.
3) ARM loans are generally easy to qualify under various ability-to-repay options. For the QM option you must underwrite using the highest rate in the first five years.

To determine whether your loans qualify under the balloon QM rules check the CFPB’s list of rural and undeserved counties. If most of your bank’s lending occurs in such counties you meet that requirement. Your must also look at other factors such as the size of your bank and the volume of originations. You must also hold the balloon loans in your portfolio for at least three years.

[jholzknecht]

The rule prohibits financing premiums for credit insurance. The term credit insurance, includes, but is not limited to credit property insurance. The term “credit property insurance” is not defined, but those that I have discussed this issue with agree that the tm would include VSI/LSI. Several of us have asked the CFPB to clarify the term “credit property insurance.”

So it appears that the issue would affect VSI/LSI in connection with your mobile home loans. Financing a single premium product would be prohibited. Imposing a monthly premium on the borrower would be acceptable. I assume that your blanket policy protects your entire portfolio. Do you pass the cost on to individual borrowers? Does the borrower pay a single premium up front or a monthly charge?

[jholzknecht]

The definition of “credit insurance” does not appear to include force-placed property insurance. The Commentary explains the concept of credit insurance by stating the such insurance “generally insures the consumer in the event of a specific event and the benefit is to make the consumer’s periodic payment.”

[jholzknecht]

A monthly premium is clearly allowed. The borrower’s monthly loan payment would include principal, interest, and the monthly credit insurance premium. The premium would be a pass through item. If you sell a single premium policy the borrower would have to pay the full amount up front.

[jholzknecht]

Thanks for the feedback. I prepared both risk assessments while I was on the road. I use my iPad. Both risk assessments were fine. When I get back to the office I use my desktop computer to put the information in a table format. That is when I screwed up. I set up one risk assessment and then save it. Then I reuse that table, rather than set up a new one, for the second risk assessment. In this case I was setting up the risk assessments the night before and the morning of our meeting last Thursday.

I am just explaining my mistake, not making excuses.

So what is the solution. I am looking at purchasing a new surface tablet for the road. It has full versions of the Office products. That way I can complete projects on the road, rather returning to the office and having a made scramble to get things in the correct format.

I really appreciate that you took the time to help me improve the forms for all of our members.

[jholzknecht]

Excellent question. I am not aware of any federal law that directly addresses this issue. You might have state law concerns. Examiners could cite a UDAAP violation, but the small amount of the overpayment makes that seem unlikely. If a significant number of customers have small loses it is more likely that a violation might be cited.

If the overpayment is the result of an action of the borrower you might consider imposing a fee for issuing a refund check. The fee will either eliminate the refund, or at least compensate you for the effort. Any such fee should be included in your contract. If the overpayment is the result of a bank error it is not reasonable to impose a fee.

Issuing small refunds is a nuisance, but it is clearly the safe course of action.

[jholzknecht]

If you intend for a loan to be a qualified mortgage then you must underwrite according to Appendix Q. If the loan is not intended to be QM them you can, within certain limitations, determine how to treat temporary leave/disability income.

[jholzknecht]

I don’t have a list but you need to select a service provider that has the appropriate systems. Your electronic disclosures must comply with ESign. You must assure the security of the system.

[Author]

Posts