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Generally, a creditor is required to obtain a flood hazard determination each it makes, increases, renews or extends a loan. However if the original determination is less than seven years old and the flood maps and zones have not changed the creditor may rely on the original determination.
One additional suggestion – check with the company that provides your deposit account agreements. They may have a pre-authozied transfer agreement that is compatible with your other documents.
The flood zone on the insurance policy must match the flood zone on the flood determination. The only completely acceptable difference is when the preperty has been grandfathered. Grandfathering is granted by the insurance agency. It is not something you apply for.
You need to work with the flood insurance agent and your determination company to resolve the differences. If you are unable to resolve the matter, it must be submitted to FEMA for resolution, and that will cost your customer a fee. You cannot fund the loan until a flood insurance policy in an adequate amount is in place.
You must include an estimate for the cost of the appraisal on the GFE, but you cannot impose the fee or obligate the borrower to pay the fee until the GFE is delivered and you have obtained evidence of the borrower’s intent to proceed with the transaction.
The RESPA Roundup article refers to a total failure to deliver a GFE. We are aware of situations where the examiner has required the a total refund of fees for the failure to deliver the GFE within the required three business day period.
If an examiner orders a refund of excess fees they will expect you to go back to the date of their last examination, just as they do with Truth in Lending reimbursement. Regulation X provides that a violation may be cured at closing or within 30 days after closing. Beyond the 30 day period refunding fees to the customer does not cure the violation; you still have legal liability. But refunding the excess fees will likely appease the examiner.
This issue is not addressed in Regulation X or the Frequently Asked Questions.
The term “private education loan means an extension of credit that:
(i) Is not made, insured, or guaranteed under title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.); and
(ii) Is extended to a consumer expressly, in whole or in part, for postsecondary educational expenses, regardless of whether the loan is provided by the educational institution that the student attends;The term does not include:
(iii) Open-end credit or any loan that is secured by real property or a dwelling; and
(iv) An extension of credit in which the covered educational institution is the creditor if:
(A) The term of the extension of credit is 90 days or less; or
(B) An interest rate will not be applied to the credit balance and the term of the extension of credit is one year or less, even if the credit is payable in more than four installments.Since your loan is secured by real property or a dwelling it is not a private education loan.
You are correct that Regulation Z and RESPA do apply to the transaction. Since the loan is a second mortgage the transaction is not a higher-priced mortgage loan and no escrow is required for taxes or property insurance. Since there isno escrow block 9 in the GFE is blank. The cost of homeowners insurance is generally shown in block 11 of the GFE.
Welcome to the Forum! 😀
You should enter code 1 (one- to four-faimly) for loans on indivudal condominiums. Use Code 3 if the collateral consists of a building containing five or more units.
See page A-1 of the Getting It Right Manual. See https://www.ffiec.gov/hmda/pdf/2010guide.pdf
Of the fees listed in your question only the portion of the total fee that is for preparing documents for the bank, such as the mortgage, must be included in Block 1/line 801 of the GFE and the HUD-1. Regulation X provides that a violation may be cured at closing or within 30 days after closing. Beyond the 30 day period refunding fees to the customer does not cure the violation; you still have legal liability. But refunding the excess fees may appease the examiner.
Moving forward, determine what portion of the total fee is for preparing documents for the bank and properly disclose that item. For the loans disclosed in error in the past, consider refunding the document preparation portion. This action should be taken for all loans upon which the error occurred. Provide the consumer with a revised HUD-1, reflecting the refund. The manual provided at the seminar includes examples of the two methods that may be used to reflect the correction.
I am not aware of an updated guide at this time. If you find one, it will be out of date soon. I work closely one vendor and I know they get requests for an update to their guide every time something changes. But with one change after another they have not been comfortable updating their guide yet.
The disclosures needed for a corporate borrower getting a loan secured by residential property will vary depending on the purpose of the loan. Describe the purpose of the loan, then we can continue this conversation.
Do I understand your program? You will make a loan to a freshman for the cost of the first year of tuition. The loan has a 12 month term. At the end of each 12 month period you refinance the balance of the note, plus accrued interest. At the end of four years payments are deferred for six months. Then is the full balance due and payable or is the loan converted to an amortizing loan?
Confirm that I understand your proposal and then we can discuss documentation options. If I understand your proposal correctly there are a number of easier options that you may choose to pursue, if your systems are capable.
The exemption in Section 3500.5(b)(5) states the regulation does not apply to, “Any loan secured by vacant or unimproved property, unless within two years from the date of the settlement of the loan, a structure or a manufactured home will be constructed or placed on the real property using the loan proceeds. If a loan for a structure or manufactured home to be placed on vacant or unimproved property will be secured by a lien on that property, the transaction is covered by this part.”
You must be sure a structure or a manufactured home will not be constructed or placed on the real property using the loan proceeds. A signed statement from the borrower is one way of demonstrating complaince with the reqauirement.
Regulation Z currently contains a requirement to verify the borrower’s ability to repay for loans subject to Section 32, Section 35 (Higher-priced mortgage loans), and credit card accounts. Under these sections a lender is not required to disclose the highest rate in effect during the first seven years, it is required to verify the borrower’s ability to repay the debt using the highest payment scheduled during the first seven years of the loan. As long as your loan does not fit one of these categories the regulation does not interfere with your ability to make a five-year balloon loan.
Please note the the Federal Reserve recently proposed to revise the repayment ability requirment and expand it to all consumer mortgage loans.
JGo9 provided an excellent answer, but, out of an abundance of caution, I advise that the notice be provided with the adverse action notice. It appears unneeded, since as JGo9 points out – there is no appraisal. But some examiners watch the latter of the law and the regulation states, “A creditor that provides appraisal reports only upon request shall notify an applicant in writing of the right to receive a copy of an appraisal report. The notice may be given at any time during the application process but no later than when the creditor provides notice of action taken under §202.9 of this regulation.”
There is not much to add to JGo9’s excellent answer. There is a discussion in the December 2010 RESPA Roundup that indirectly supports JGo9’s answer. “If a loan originator knows at the time of application that the loan originator will use an existing appraisal or survey that was paid for in a prior transaction, the loan originator must list the appraisal or survey in Block 3 and disclose $0.00 as the charge for that service.”
Regulation Z requires lenders to verify the borrower’s ability to repay loans made under Section 32 and under Section 35 (Higher-priced mortgage loans). There is a similar requirement for credit cards. And proposed regulations will expand the requirement to most loans secured by a dwelling. Under the Sections 32 and 35 the debt to income ration is calculated using the highest payment amount scheduled (the highest payment scheduled, not the higheest possible payment) in the first seven years of the loan.
I am not sure where you came up with the five year period instead of seven years. Effective on January 30, 2011 you should have begun providing the new rate and payment disclosure in the “Fed Box.” It shows paments at origination, at the highest rate in the first five years of the loan, and the payment based on the highest rate during the life of the loan.
