Forum Replies Created
-
Replies
-
According to the Regulation:
Tiered-rate accounts. Each interest rate, along with the corresponding annual percentage yield for each specified balance level (or range of annual percentage yields, if appropriate), must be disclosed for tiered-rate accounts. (See appendix A, Part I, Paragraph D.)
Examples of model forms for tiered accounts can be found here:https://www.consumerfinance.gov/rules-policy/regulations/1030/b/#43f4618ba52b0abdb36d110affd8f53a20adb8b5c739e8860093dc71
But reviewing the sample form it does appear you would be required to provided the minimum balance for each tier.
(iv) Tiered-Rate Accounts
Tiering Method A
• If your [daily balance/average daily balance] is $__ or more, the interest rate paid on the entire balance in your account will be __% with an annual percentage yield of __%.• If your [daily balance/average daily balance] is more than $__, but less than $__, the interest rate paid on the entire balance in your account will be __% with an annual percentage yield of __%.
• If your [daily balance/average daily balance] is $__ or less, the interest rate paid on the entire balance will be __% with an annual percentage yield of __%.
Tiering Method B
• An interest rate of __% will be paid only for that portion of your [daily balance/average daily balance] that is greater than $__. The annual percentage yield for this tier will range from __% to __%, depending on the balance in the account.• An interest rate of __% will be paid only for that portion of your [daily balance/average daily balance] that is greater than $__. The annual percentage yield for this tier will range from __% to __%, depending on the balance in the account.
• If your [daily balance/average daily balance] is $__ or less, the interest rate paid on the entire balance will be __% with an annual percentage yield of __%.
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646 and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
There is no formal guidance on filtering. However, you must consider UDAAP, Fair Lending and Fair Banking when you utilize filters to narrow down marketing. For example using home value and income standards are a sure way to have a CRA and fair lending issue. Using Age (except for legal contract age), gender, and marital status are protected class categories which will cause fair lending and fair banking issues. In some cases using households with children could also cross the fair lending line.
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646 and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
Based on the information provided it sounds like a purchase transaction. Not a refinance, based on the details its unclear as to why there would be a right of recission? As far as the LE/CD this is a difference between TRID and HMDA. TRID and HMDA have different purpose options and different purpose definitions, the same loan may have one purpose under HMDA but that same loan would have a completely different purpose under Regulation Z (and TRID). HMDA provides for four different purchase options: 1) purchase, 2) refinance or cash-out refinance, 3) home improvement, or 4) other. TRID provides for four slightly different purpose options: 1) purchase, 2) refinance, 3) construction, and 4) home equity loan. The LE/CD will need to align with TRID purposes:
TRID loan purpose can be defined as follows:
Purchase Loan Purpose. A purchase is defined as credit to finance the acquisition of the property that secures or will secure the transaction. Since bare land loans are subject to TRID, this means that a purchase loan will often include either a purchase of bare land or the purchase of a dwelling.
Refinance Loan Purpose. A refinance is defined as credit that will be used to refinance an existing obligation that is secured by the property that secures or will secure the transaction. A refinancing is a new transaction requiring new disclosures to the consumer and occurs when an existing obligation that was subject to Regulation Z is satisfied and replaced by a new obligation undertaken by the same consumer.
Construction Loan Purpose. A construction purposes is one where the credit will be used to finance the initial construction of a dwelling (not renovations to an existing dwelling) on a property that secures or will secure the loan. TRID Loan Purpose Hierarchy, a construction loan purpose will only be used when an applicant already owns the land they are building on and they are not refinancing that land with the construction loan.
Home Equity Loan Purpose. A home equity loan is a credit that is not a purchase, refinance, or construction loan. These loans are often debt consolidation loans, second mortgages (new money), or other loans where an applicant owns a home free and clear.
The TRID loan purpose waterfall (hierarchy) is as follows: One, purchase; two, refinance; three, construction; and four, home equity loan. When determining which purpose to disclose, a creditor must look at the waterfall of four possible purposes in the order that they appear in Section 1026.37(a)(9) of Regulation Z and select the first one that applies to the loan.
To illustrate use of the waterfall, if the loan meets the definition of purchase because the consumer intends to use the credit to purchase the property that will secure the loan, the creditor must disclose the purpose as purchase even if the loan also meets any other definitions appearing later in the waterfall. A creditor must disclose the purpose as refinance if the consumer intends to use the credit to construct a dwelling on real property that the consumer already owns and to satisfy an existing loan secured by that real property. If the credit will be used to finance the initial construction of a dwelling on the property and will not be used for any purchase or refinance purpose, the creditor must disclose the purpose as construction. Even if the loan is secured by real property being purchased and disclosed as a purchase on the Loan Estimate, if the loan is also financing the construction of a dwelling, the provisions of Section 1026.17(c)(6)(ii) still apply. So the loan’s purpose as disclosed on the Loan Estimate does not impact the applicability of other construction-specific provisions of Regulation Z.”
Based on the waterfall example provided by the CFPB your LE/CD will need to align with those requirements. Since you asked about a right of recission I’m assuming some of the land still has a loan?
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646 and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
It sounds as if you are placing a building on property in a SFHA. Flood insurance does not just apply to residential structures. So using a detached structure exemption may not apply here. Just because it is not a residence will not exempt it from flood requirements. There are specific standards in the Flood FAQs from may of 2022 that need to be followed to use the detached building exemption. Not knowing enough about the transaction leads me with the following thoughts –
Couple of things need to be considered:
1. What is the primary purpose of the shop?
2. Are either parties trying to circumvent the regulation of requiring flood insurance?
3. if there was a flood would this cause harm to the borrower and/or the institution?NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646 and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
This question is best answered by your FIs attorney. IMO, anytime restitution/rate change is being discussed you would want a legal opinion to ensure both the FI and Customer are properly covered and protected.
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646 and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
There has been no guidance on what is “an acceptable level”. The only information that has been mentioned has been in enforcement actions where it was cited as having been a significant portion of an institutions fee income collected. Using the word significant is a subjective term without defining it for the industry, but unfortunately it hasn’t been. Do you belong or have a compliance networking group that you could pose this question to? They maybe able to provide some guidance if they have had conversations about this with their regulator. If you have a good relationship with your EIC you could also pose this question to them and see if they could provide guidance as well.
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646 and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
In general, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires creditors to provide to applicants free copies of all appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling, and require creditors to notify applicants in writing that copies of appraisals will be provided to them promptly.
In most cases the purpose of appraisal is to determine the fair market value of the property, while an inspection determines the condition of the home and identifies any items in need of repair.
In the case of a new build the inspection would be to determine if everything was completed on the property. In some cases, especially, in the Midwest you will see property inspections come back requiring an escrow account to be created for the sod on winter builds. They will still value the property like the appraisal it just indicates there are still minor things needing to be completed. If your inspection is for this purpose than it would be excluded from disclosure requirements.
If the valuation were to change a homes value then yes it would be considered a disclosure event and would follow the appraisal requirements in Reg. B.
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646 and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
For CD advertisement or anything account earing interest for that matter. Reg DD states:
RATES AND YIELDS
Section 230.8(b) restricts the use of rates in advertisements. First, if an advertisement states a rate of return, the rate must be identified as an “annual percentage yield” (using that term). No other term can be used except for “interest rate,” provided it is stated in conjunction with the annual percentage yield. The abbreviation “APY” may be used if the term “annual percentage yield” is stated at least once in the advertisement. Often, advertisements will use the abbreviation in the text of the advertisement and direct the consumer to the bottom of the advertisement for the expansion of the abbreviation. Second, if the annual percentage yield is stated in an advertisement, §230.8(c) requires that the following additional disclosures be made clearly and conspicuously:
• Variable rates. For variable-rate accounts, a statement that the rate may change after the account is opened.
• Time annual percentage yield is offered. The period of time the annual percentage yield will be offered or a statement that the annual percentage yield is accurate as of a specified date.
• Minimum balance. The minimum balance required to obtain the advertised annual percentage yield. For tiered-rate accounts, the minimum balance required for each tier shall be stated in close proximity and with equal prominence to the applicable annual percentage yield.
• Minimum opening deposit. The minimum deposit required to open the account, if it is greater than the minimum balance necessary to obtain the advertised annual percentage yield.
• Effect of fees. A statement that fees could reduce the earnings on the account.
• Features of time accounts. For time accounts:
o Time requirements. The term of the account.
o Early withdrawal penalties. A statement that a penalty will or may be imposed for early withdrawal.
o Required interest payouts. For noncompounding time accounts with a stated maturity greater than one year that do not compound interest on an annual or more frequent basis, that require interest payouts at least annually, and that disclose an APY determined in accordance with section E of Appendix A of the regulation, a statement that interest cannot remain on deposit and that payout of interest is mandatory.Recognizing Reg DD doesn’t address when no rate is used, but UDAAP and UDAP speak to unfairness and is a foundation to Fair Banking. I can see your concern with no rate. Because the question in my mind is someone getting quoted something different? Why can’t the rate and APY be in the add? etc.
Ultimately, this would be a business decision. But I agree it needs to be looked at through a UDAP lens.
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646 and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
Thank you PParks for jumping in and answering this! As follow up to the last question in the post, I has always been my understanding that you would use code 9 when the loans do not fit in any of the other options. I personally have not seen code 9 used but would be interested in seeing if any of our Banks have used it in the past.
Thank you for your question. Since this is very state focused question, we recommend that you reach out to an attorney. Our focus as a National training company is Federal Regulations and Law
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646 and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
The rules are written as follows:
According to the final rule, “a structure that is part of a residential property” refers to a structure used primarily for personal, family, or household purposes and not used primarily for agricultural, commercial, industrial, or other business purposes. In instances in which certain structures are used for both residential and business purposes, the exemption applies only to structures with a primary residential purpose. A structure is “detached” if it stands alone, meaning it is not joined by any structural connection to the residential structure. Furthermore, the detached structure may not “serve as a residence.”
Based on how I’m understanding your questions:
1. The house would be required to have insurance because it is used as a residence.
2. The fact that is not a personal residence of the borrower would not exempt it from insurance.
3. The rules do not speak to a limit on structures – only to being used as a residence.
4. Neither the garage or the storage buildings sound as if they are used as a residence.NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
________________________________________1. Yes, if you are notified that the flood maps have been updated you are required to notify the borrower that the flood maps have been updated they need to get insurance. If they do not obtain it then you are required to forceplace it. At the time property it is released you would then need to follow the proper requirements to remove the insurance.
2. Yes, if there is any building in a flood plain regardless of use or condition it will require flood insurance per the regulations. As with the prior answer you are required to required to notify the borrower that the flood maps have been updated they need to get insurance. If they do not obtain it then you are required to forceplace it.
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
If there is a barn (any building) in a flood plain regardless of use it will require flood insurance per the regulations. If the FI, using risk based decisions, will allow any deviation from the law requirement it would need to be documented in a policy etc. However, the law does require insurance on any budling in the flood plain.
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
Line increases were included in both the proposal and the final rule as being a trigger for the data collection. As such, I would not remove them from your origination count when determining the tier. In the final rule line increase is now a collection point in the credit purpose category. Additionally, being CRA reportable does not exclude loans from 1071 reporting. The only exception they gave in the final rule is for HMDA reportable loans. CRA reportable loans will be on both the CRA and Small Business Data Collection LARs.
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
I would caution excluding loans just because you didn’t consider the GAR. The CFPB clearly stated what ever process you use to determine the FIs tier should not circumvent collection of information (or tier determination). The expectation is that you use a reasonable methodology to determine what tier your FI would fall into. IMO, just because it wasn’t’ collected or asked for would not fall into reasonableness. However, it would need to be a Management or BOD decision as to the practices you use to determine the FI tier.
NOTICE: This email message, including any attachments, is intended only for the addressee, and may contain confidential and privileged information either as protected work product or confidential client information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, do not read, copy, retain, or disseminate this message or any attachment, and please contact the sender by reply e-mail or at 888.760.5646and destroy all copies of the original message and attachments. Neither the transmission of this message or any attachment, nor any error in transmission or misdelivery shall constitute waiver of any applicable legal privilege.
THIS EMAIL AND ITS ATTACHMENTS DO NOT CONSTITUTE LEGAL ADVICE
