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The need for a disclosure is determined by how you handle the transaction.
If you require the borrower to sign a new note, then the transaction is a refinance. A new disclosure is required for a refinance.
If you keep the same note but modify the terms using a modification agreement, then new disclosures are not required.
The inadvertent error could be corrected by providing a revised loan estimate, or if it is too late to issue a revised LE, then the correction could be reflected on the initial closing disclosure.
You have insurance on both buildings and the contents. The second building is a pavilion. I envision a covered space with no walls. FEMA generally won’t insure a building unless it is walled and roofed. Since it is insured, apparently it has walls.
If the 2nd mortgage is secured by the buildings and the contents, you must make sure the existing policies are adjusted to provide a sufficient amount of coverage.
If the second mortgage is secured by only the buildings, then presumably the existing contents coverage is sufficient to cover the contents securing the first mortgage loan.
If you don’t take a second mortgage, you don’t need to reevaluate the collateral on the first mortgage unless it is increased, renewed or extended.
If you take the new pavilion as collateral for the second mortgage, the value is determined by appraisal, by using the amount of the hazard insurance as a proxy, or, since it is new construction, you can use the construction cost as the value.
When you obtain multiple results the name of the AUS used by the financial institution to evaluate the application and the result generated by that AUS as determined by the following principles.
i. If a financial institution obtains two or more AUS results and the AUS generating one of those results corresponds to the loan type reported pursuant to § 1003.4(a)(2), the financial institution complies with § 1003.4(a)(35) by reporting that AUS name and result.ii. If a financial institution obtains two or more AUS results and the AUS generating one of those results corresponds to the purchaser, insurer, or guarantor, if any, the financial institution complies with § 1003.4(a)(35) by reporting that AUS name and result.
iii. If a financial institution obtains two or more AUS results and none of the systems generating those results correspond to the purchaser, insurer, or guarantor, if any, or the financial institution is following this principle because more than one AUS result is generated by a system that corresponds to either the loan type or the purchaser, insurer, or guarantor, the financial institution complies with § 1003.4(a)(35) by reporting the AUS result generated closest in time to the credit decision and the name of the AUS that generated that result.
iv. If a financial institution obtains two or more AUS results at the same time and the principles in comment 4(a)(35)-3.i through .iii do not apply, the financial institution complies with § 1003.4(a)(35) by reporting the name of all of the AUSs used by the financial institution to evaluate the application and the results generated by each of those systems.
The Commentary for § 1003.4(a)(35) provides examples for each of the principles.
In your situation, the loan was in compliance with requirements for flood insurance without the addition of private flood insurance. The rules regarding private flood insurance apply when the borrower requests the lender to accept private insurance instead of FEMA coverage. The private insurance rules do not appear to apply to your loan.
That said, I would encourage you to apply the private flood insurance concepts to assure the private policy provides the protection your bank seeks. Is the company legitimate and strong? Of course, you want to understand how the private policy addresses property covered, amount, bank as mortgagee, flood zone, and effective date. You also want to understand how the private policy interacts with the FEMA policy? It appears you want the private policy to provide excess coverage beyond the FEMA. Does it?
Your analysis of the timing is accurate. A hearing is scheduled in a couple of weeks. We should know more then, but you are correct, it will be a while before everything is concluded.
Before taking a stab at answering the question I want to make I understand the question.
Are you adding a new applicant? If the application is approved, will the new applicant sign the note? Are you adding the new applicant so they can receive a copy of the disclosures?
For an adjustable-rate mortgage, you may cancel,
i. Based solely on the amortization schedule then in effect for that mortgage, and irrespective of the outstanding balance for that mortgage on that date, is first scheduled to reach 80 percent of the original value of the property securing the loan; or
ii. Based solely on actual payments, first reaches 80 percent of the original value of the property securing the loan.If you choose option i. the amortization schedule is recalculated every time the rate adjusts.
Section 4903(a)(1)(B) of the HPA states that will notify the mortgagor when the cancellation date is reached.
Regulation C requires reporting of open-end lines of credit and closed-end mortgage loans. Both open-end and closed loans must be secured by a dwelling. Your transaction appears to be secured by a dwelling. For purposes of HMDA a refinance is an extension of credit covered by Regulation C, but a renewal is not. You state your transaction is a renewal, which would not be covered. The difference is that in a refinance the existing debt is satisfied and replaced by a new transaction. In a renewal there is no new note; the existing note is modified.
The small creditor QM (1026.43(e)(5)) is NOT scheduled to expire. The temporary GSE QM (1026.43(e)(4)) is due to expire on October 1, 2022.
Some financial institutions keep a copy of a driver’s license for CIP purposes. CIP regulations do not require a copy of a driver’s license. Regulation B does not prohibit the practice of photo copying or digitally storing photo identification, but it does prohibit the collection of certain demographic information. Given that photo identification usually contains this prohibited information, it is a best practice not to retain a copy of the photo identification. However, if a bank chooses to retain a copy of photo identification, it is best if it is segregated from loan files.
The rule requires the financial institution to make the determination, using the definition of a residence. We and many others have sought clarification of the definition since the date of initial publication. Unfortunately, the agencies have not provided the clarification and the interagency proposed definitions do not even address the definition. The safe position is to use the current definition which states that a residence is a structure that is intended for use or actually used as a residence, which generally includes sleeping, bathroom, or kitchen facilities. You institution may, in good faith, determine that the structure is intended for use as a pool house and is not intended for use or actually used as a residence.
If the property included a guest cottage that was used as a pool house once the pool was added, that structure was intended for use as a residence. A structure built for use as a pool house, that is only used as a pool house, is not a residence simply because it has a kitchen and and bathroom.
