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As I am sure you are aware on July 21, 2011 the responsibility for interpreting Regulation X (RESPA) transferred from HUD to the Consumer Financial Protection Bureau(CFPB). So far, the CFPB has not issued any interpretations that change the answer you previously received from HUD.
You may want to consider written procedures that indicate the you REQUEST that the borrower sign the documents at application, but you issue the GFE within three business days of receiving the application, whether the documents are signed or not.
I am also intrigued by the idea. I am no expert on appraisal rules, other than those included in Regulation Z. If you intend to impose the charge it should be a condition established in a contract with the appraiser, or established in an engagement letter accepted by the appraiser.
Let me echo dmurray’s advice. Call the experts. Texas mortgage law is very unique. No other state has the complexity of Texas mortgage law.
If your draw down line of credit qualifies as open-credit, then you must provide open-end disclosures rather than the early disclosures required for closed-end credit.
Federal law generally provides that a bank may not announce, advertise, or publicize the existence of any lottery; or announce, advertise, or publicize the existence or identity of any participant or winner in a lottery. The term “lottery” includes any arrangement whereby three or more persons (the “participants”) advance money or credit to another in exchange for the possibility or expectation that one or more but not all of the participants (the “winners”) will receive by reason of their advances more than the amounts they have advanced, the identity of the winners being determined by any means which includes:
> a random selection;
> a game, race, or contest; or
> any record or tabulation of the result of one or more events in which any participant has no interest except for its bearing upon the possibility that he may become a winner.Since the participants in your contest do not have to advance funds it does not appear to fit the definition of a “lottery.” You should check Montana law. I also suggest running this by your friendly local examiner to may sure they are comfortable with the concept.
The loan is primarily for business purposes, therefore Regulation Z does not apply and you don’t have to worry about the right of rescission.
The term credit card is defined as follows, “(15)(i) Credit card means any card, plate, or other single credit device that may be used from time to time to obtain credit.
(ii) Credit card account under an open-end (not home-secured) consumer credit plan means any open-end credit account that is accessed by a credit card, except:
(A) A home-equity plan subject to the requirements of § 1026.40 that is accessed by a credit card; or
(B) An overdraft line of credit that is accessed by a debit card or an account number.
(iii) Charge card means a credit card on an account for which no periodic rate is used to compute a finance charge.”Your plan qualifies as a “credit card,” but not as a “credit card account under an open-end (not home-secured) consumer credit plan.” The requirements vary for the two terms.
Sorry about the slow reply, but these are some very tough questions. They are not directly addressed in Regulation X or in the Frequently Asked Questions. These are best estimates. You may want to run these by your friendly local examiner.
1. In HUD’s Frequently Asked Questions the following answer appears in Question 32 under the heading GFE-General.
The loan originator must list all required third party services on the GFE and HUD-1 regardless of whether the charge is paid by the borrow, the seller, loan originator or any other party, except for administrative and processing charges. If any party other than the borrower is paying for the service that was on the GFE (such as an appraisal fee), the charge remains in the borrower column on the HUD-1. A credit from the paying party to the borrower to offset the charge should be listed on the first page of the HUD-1 in Lines 204 – 209 and, if the service was paid by the seller, Lines 506 – 509 respectively.
A credit for the appraisal fee (or other fee) could also be offset by a credit disclosed as a negative number in Line A of the GFE and listed as a negative number in Line 803 of the HUD-1.
2. a. GFE disclosed entire settlement fee as paid by borrower – at closing borrower pays half and seller pays half.
The total charge appears on Line 1101 with a credit on page 1 of the HUD-1. The credit to the borrower appears in Line 204 – 209, and a charge to the seller must be listed in Lines 506 – 509.
2. b. The GFE disclosed half of settlement fee as paid by borrower – at closing borrower pays half and seller pays half.
The separate charge to the seller for conducting the settlement is listed in the seller’s column in Line 802. The borrower’s charge for conducting the settlement is itemized outside the borrower’s column in Line 1102.
3. Generally lender inspection fees appear in Block 1 of the GFE and line 801 of the HUD-1. There are two issues here. Does the fact that a third party performs the service impact the disclosure? Does the fact that the fee is paid after disclosure impact the disclosure?
There is no specific mention of a lender’s inspection fee performed by a third party in HUD’s guidance. But the guidance does mention other services performed by a third party, such as document preparation, that are included in Block 1 and Line 801. It appears that the lender’s inspection would be treated in the same fashion.
Fees paid after closing are generally listed on the HUD-1 as POC. Such fees are not included in the borrower or seller columns but are shown outside the column and indicated as POC (B – borrower, S – Seller).
The HMDA GIR also states that when a loan is both for home purchase and refinance, the loan should be reported as a purchase loan.
Is this product an open-end line of credit? If so the loan appears to be a HELOC, and HMDA reporting is optional. If it is a closed-end credit extension with draws it appears to be a short-term home improvement loan, which is reportable.
Glenn,
This is a contract issue. You may do whatever your contract with the borrower allows. If your states allows you to retain the premium as an offset to the MP3 cost, then you may do so. But unless you have some pretty specifc laanguage that permits you to retain the premiums, you will need to refund the surplus to the customer when you perform the escrow account analysis.
Following are the instructions for completing Section 1100 of the HUD-1:
Lines 1100–1108. This series covers title charges and charges by attorneys and closing or settlement agents. The title charges include a variety of services performed by title companies or others, and include fees directly related to the transfer of title (title examination, title search, document preparation), fees for title insurance, and fees for conducting the closing. The legal charges include fees for attorneys representing the lender, seller, or borrower, and any attorney preparing title work. The series also includes any settlement, notary, and delivery fees related to the services covered in this series. Disbursements to third parties must be broken out in the appropriate lines or in blank lines in the series, and amounts paid to these third parties must be shown outside of the columns if included in Line 1101. Charges not included in Line 1101 must be listed in the columns.
Line 1101 is used to record the total for the category of “Title services and lender’s title insurance.” This amount must be listed in the columns.
Line 1102 is used to record the settlement or closing fee.
Line 1103 is used to record the charges for the owner’s title insurance and related endorsements. This amount must be listed in the columns.
Line 1104 is used to record the lender’s title insurance premium and related endorsements.
Line 1105 is used to record the amount of the lender’s title policy limit. This amount is recorded outside of the columns.
Line 1106 is used to record the amount of the owner’s title policy limit. This amount is recorded outside of the columns.
Line 1107 is used to record the amount of the total title insurance premium, including endorsements, that is retained by the title agent. This amount is recorded outside of the columns.
Line 1108 used to record the amount of the total title insurance premium, including endorsements, that is retained by the title underwriter. This amount is recorded outside of the columns.
Additional sequentially numbered lines in the 1100-series may be used to itemize title charges paid to other third parties, as identified by name and type of service provided.
Processing and administrative services are services to perform origination and title services functions. For the title services function, charges for such services must be included in the title underwriter’s or title agent’s charge and are shown in the total on Line 1101. Examples of processing and administrative services include, but are not limited to, the following: document delivery, document preparation, copying, wiring, preparing endorsements, document handling, and notarization.Courier and overnight delivery fees are considered to be fees for administrative or processing services. Processing and administrative services are part of a primary service, such as the origination service or title service, and may not be separately itemized.
The loan cannot be reported in your CRA data submission as a community development loan if it is otherwise reported as a small business loan.
Construction loans are not HMDA reportable. The issue appears to be whether the note being refinanced is actually for construction or not? The additional collateral does not appear to have any impact on the answer. It is not clear why the additional collateral was obtained. Or, why the loan is being refinanced. But if the loan is actually for construction purposes the transaction appears to be exempt.
