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I am not aware of any Federal Reserve interpretations on this issue, and, of course, the Consumer Financial Protection Bureau has not issued any interpretations since they inherited the regulation last July. The question is whether the owner occupies the dwelling as his/her principal dwelling. Since the owners, the parents, occupy the dwelling as their principal dwelling the answer appears to be yes, the property is owner-occupied as a principal dwelling.
You don’t want to have the same person performing a task and reviewing the task. Both the operating and controls functions can occur within the same department, but with different employees performing the tasks.
The best guidance on this topic comes from A Guide to CRA Data Collection and Reporting, and it is a little vague when dealing with affiliated entities such as those described in your questions. I concur with your analysis in both situations.
A Flood Hazard Notice and a 45-day notice should have been provided when you initially notified the borrower of the required insurance. Now that you are escrowing you should provide the initial escrow disclosure required by RESPA. Follow your standard procedures regarding escrow requirements. Does your existing note or escrow agreement address required escrows for additional items such as flood insurance? If not, you may want the borrower to sign an escrow agreement for the flood insurance.
There are several ways to handle disclosures when adding an additional item to an existing account. A big factor in the decision is which option is easiest to accomplish in your system. Oftentimes it is easiest to do a short period statement to end the current escrow year, then give a new initial escrow disclosure that includes all items, including the new one.
I agree with jGo9, this is a bit unusual. Regarding completion of the HUD-1, it appears that the fee should be reflected as POC-L
I have no expertise in IRS reporting requirements, but there may be issues there. Does this reduce reportable income?
There are probably other issues beyond those mentioned here or in JGo9’s post. we would love to hear from other on this.
The practice you describe sounds like an extension/modification agreement. If that is the case, it is very common practice in many states.
Personally I prefer a thoroughly underwritten new note, but extension/modification agreements are recognized by courts as an effective tool. The extension/modification agreement is a two party agreement and therefore should bear the signature of the bank and the borrower. Seek guidance from your legal counsel on whether an unsigned agreement is enforceable.
Recently some examiners have raised an issue regarding using extension/modification agreements on loans that have already matured, but many banks have successfully followed that practice for many years.
The issues raised in the two prior paragraphs are not a concern when a properly completed new note is used.
The Dodd-Frank Act contains the exemption you describe, but we do not have final regulations yet. At this time balloons with a term of less than 7 years continue to be a problem.
While it is permissible to obtain evidence of intent to be a joint applicant from a guarantor, it is not necessary. As noted in the original question, the term applicant includes guarantors. But Comment 7(d)(1)2 states, “The term “joint applicant” refers to someone who applies contemporaneously with the applicant for shared or joint credit. It does not refer to someone whose signature is required by the creditor as a condition for granting the credit requested.” Generally a guarantor does not apply contemporaneously with the applicant, and therefore would not be a joint applicant.
HMDA defines a “refinance” as a new obligation that satisfies and replaces an existing obligation by the same borrower, in which both the existing obligation and the new obligation are secured by a lien on a dwelling. With cross-collateral language, the collateral for one loan is also collateral for another loan. So, in your situation, if both the old loan and the new loan are secured by the dwelling, the loan is reported as a refinance.
If both existing loans are secured by a dwelling and either note is refinanced, and the refinanced note is secured by both dwellings, the loan is reported as a refinance. If the original loan is for home purchase, then you should report property location information for the property that secures the loan. Since you have multiple securing properties you may select either property for reporting location information or you may report both properties, using two lines on the LAR. In the later situation be sure to use unique loan numbers for each line and to allocate the loan amount between the two lines.
Thanks to one and all for the input. I have some work to do on this material before our next meeting. Before I chime in on Kelly’s questions I would like to see some input from you all. Let her know how you handle some of these issues in your bank.
I hope all of you are subscribers to my blog; it’s free. I posted an article today that we will discuss on Friday. It appears that the big stuff is about to start flowing out of the CFPB. Check out the article at: https://jholzknecht.wordpress.com/2012/02/07/cfpbs-semi-annual-report-to-the-president-and-congress/
I am a little “rusty” on my early withdrawal penalty rules, but I believe your interpretation is accurate. Hopefully others will voice an opinion 0n this post.
I agree with the answer provided by JGo9. If you make a loan in 2011 you have no idea at the time that loan is made if it will be modified or extended in the years to come. If the borrower requests action in 2012 and as a result you decide to modify or extend the loan, you may, to the extend allowed by state law, impose a fee at that time. Generally a new disclosure is needed when you refinance a loan, not when the loan is extended or modified. If no disclosure is provided at the time of extention/modification then the fee is still not disclosed. As observed by JGo9, examiner’s often expect a disclosure for an extension/modification when a fee is charged or when more extensive changes are made.
In your state you can probably charge the fee, depending on which state statute you have chosen to lend under. Check the statute you have selected to assure the fee is legal and then you should have the borrower sign a statement agreeing to the fee. The statement could be part of the extension/modification agreement.
You indicate the type of entity to which a loan is sold only when the loan is originated in a given year and then is sold to another entity in the same year; otherwise enter code 0.
