Forum Replies Created
-
Posts
-
Both the Loan Estimate and the Closing Disclosure do not require signature lines; these may be provided at the creditor’s option only. That being said, if the signature line is being utilized on either the Loan Estimate or the Closing Disclosure or both then proper disclosure must be provided as part of the signature block as stated in 1026.37(n)(1). If there is more than one consumer who will be obligated in the transaction, the first consumer signs as the applicant and each additional consumer signs as a co-applicant.
Keep in mind, if the non-borrowing spouse has an ownership interest in the property then he/she would have the right to rescind (1026.23) the transaction and thus should be provided a copy of the Closing Disclosure. There are no definitive signature requirements under TILA, so signature of the non-borrowing spouse on the Closing Disclosure would be at the creditor’s discretion or applicable state law.
I would consider this an “estimate of terms or costs specific to the consumer”. The regulation states in 1026.19(e)(2)(ii): If a creditor or other person provides a consumer with a written estimate of terms or costs specific to that consumer before the consumer receives the disclosures required under paragraph (e)(1)(i) (Loan Estimate) of this section, the creditor or such person shall clearly and conspicuously state at the top of the front of the first page of the estimate in a font size that is no smaller than 12-point font: “Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan.”
In addition, the interpretation 1026.19(e)(2)(ii) in the regulation states: For example, if the creditor provides a document showing the estimated monthly payment for a mortgage loan, and the estimate was based on the estimated loan amount and the consumer’s estimated credit score, then the creditor must include the statement on the document. In contrast, if the creditor provides the consumer with a preprinted list of closing costs common in the consumer’s area, the creditor need not include the statement. Similarly, the statement would not be required on a preprinted list of available rates for different loan products.
Based on your question above, the consumer is entering a presumed credit score, which in turn, would provide an estimate of closing costs based on that score. In my opinion, because the consumer is entering specific information regarding their credit score and isn’t just a preprinted list of available rates, then it would be considered a written estimate and the proper disclosure must be put on the screen that would be printed in appropriate font. Also, be sure this written estimate doesn’t resemble the Loan Estimate with the same headings, content, format.To answer the first question above: “The property address is one of the required components of an application so how do you issue a LE if the property address is unavailable?”
It would be in your best interest not to issue a Loan Estimate without the property address. You do not have a completed application until ALL six pieces of the application are received including the property address; therefore, the timing requirements of the Loan Estimate are not triggered. Once the property address is received by the borrower, then document receipt of the address and the date received to allow auditors/examiners to understand that the property address was received after the initial application was started and to ensure the Loan Estimate was delivered within the required three days of receipt of the property address.
In the scenario above, if the customer would like an estimate of closing costs, you should follow the rules in 1026.19(e)(2)(ii) that allow for a written estimate to be provided to the borrower prior to delivery of the Loan Estimate. If utilizing this estimate, be sure proper disclosure is provided at the top of the estimate.
The second question: “Could you use a lot# and zip code (LE guidance) on the application as the property address?” Yes, if you are taking an application that hasn’t been provided an address you would utilize a lot# and zip code. This would be considered receipt of the property address and would trigger the timing requirements of the Loan Estimate if the other 5 pieces of information have been gathered at application.
The third question: What would be done in the case where someone might have a general idea of where they want to buy a house (but do not have a particular property address or may be looking at multiple properties) but intend to secure the loan with a different property? Would the property securing the loan be used as the address on the application?
The property that is securing the loan should be the property utilized as the address on the application. Under 1026.19(e)(1)(i): In a closed-end consumer credit transaction secured by real property, other than a reverse mortgage subject to 1026.33, the creditor shall provide the consumer with good faith estimates of the disclosures in 1026.37 (Loan Estimate). Key words here are “closed-end”, “consumer”, and “real property”; as long as it meets those requirements and isn’t a reverse mortgage, you would utilize the requirements in 1026.37.
I believe based on the review of your question that your financial institution would be exempt under the small lender exemption. As it states in the Final Rule:
The FDPA, as amended, states that the small lender exception is available only if, on or before July 6, 2012, the institution: (i) was not required under Federal or State law to deposit taxes, insurance premiums, fees, or any other charges in an escrow account for the entire term of the loan, in the case of a loan secured by residential improved real estate or a mobile home; and (ii) did not have a policy of consistently and uniformly requiring the deposit of taxes, insurance premiums, fees, or any other charges in an escrow account for loans secured by residential improved real estate or a mobile home.
As you see further on page 49 of the Final Rule:
Commenters also requested clarification on whether the small lender exception is available if the lender maintains escrows only on a borrower’s request or if the policy of consistently and uniformly requiring escrow accounts comes at the behest of a third party. Regarding the former situation, the Agencies note that the FDPA and the Agencies’ regulations state that the condition is based on a lender having a policy of requiring the escrow accounts. Therefore, if the lender is only maintaining escrows based on borrowers’ requests, the Agencies do not believe this to be a policy of uniformly or consistently requiring escrow. With respect to the situation involving a third party, the Agencies believe that under the FDPA and the Agencies’ regulations, it is irrelevant why the lender is requiring the escrow so long as there is a policy of uniformly or consistently requiring borrowers to escrow.
Because your financial institution is only maintaining escrows for a portion of the loan term for specific mortgages being sold on the secondary market and it is not normal policy to require escrows “consistently and uniformly” then I believe you do qualify under the Small Lender Exemption.A few questions that we considered while reviewing this question:
Is the bank the broker? If the bank is the broker, then the creditor should provide an adverse action notice as a result of the denial. But if the bank is the broker why is the bank providing the LE and the revised LE?
We assumed the bank was the creditor and therefore responsible for the disclosures. If so, then there is a legitimate changed circumstance and that would allow for a reduction in the lender credit:
Changed Circumstance: With respect to whether a changed circumstance or borrower requested change can apply to the revision of lender credits, the Bureau believes that a changed circumstance or borrower-requested change can decrease such credits, provided that all of the requirements of § 1026.19(e)(3)(iv), discussed below, are satisfied.
1026.19 (e)(3)(iv) refers to (iv) Revised estimates. For the purpose of determining good faith under paragraph (e)(3)(i) and (ii) of this section, a creditor may use a revised estimate of a charge instead of the estimate of the charge originally disclosed under paragraph (e)(1)(i) of this section if the revision is due to any of the following reasons:
(A) Changed circumstance affecting settlement charges. Changed circumstances cause the estimated charges to increase or, in the case of estimated charges identified in paragraph (e)(3)(ii) of this section, cause the aggregate amount of such charges to increase by more than 10 percent. For purposes of this paragraph, “changed circumstance” means:
(1) An extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction;
(2) Information specific to the consumer or transaction that the creditor relied upon when providing the disclosures required under paragraph (e)(1)(i) of this section and that was inaccurate or changed after the disclosures were provided; or
(3) New information specific to the consumer or transaction that the creditor did not rely on when providing the original disclosures required under paragraph (e)(1)(i) of this section.
In addition, the redisclosure rules in .19(e)(4) should be followed upon notification of the changed circumstance:
(4) Provision and receipt of revised disclosures. (i) General rule. Subject to the requirements of paragraph (e)(4)(ii) of this section, if a creditor uses a revised estimate pursuant to paragraph (e)(3)(iv) of this section for the purpose of determining good faith under paragraphs (e)(3)(i) and (ii) of this section, the creditor shall provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section reflecting the revised estimate within three business days of receiving information sufficient to establish that one of the reasons for revision provided under paragraphs (e)(3)(iv)(A) through (C), (E) and (F) of this section applies.
This is a tough situation. Was the employee fully versed in the code of conduct and the limit of $100? Did the employee fully disclose to the bank the discount provided by the board member? The FDIC link Robin posted in the above post discusses the following:
The code of conduct should provide that, if a bank official is offered or receives something of value from a customer beyond what is authorized in the bank’s code of conduct or written policy, the bank official must disclose that fact to an appropriately designated official of the bank. The insured state nonmember bank should keep contemporaneous written reports of such disclosures. An effective reporting and review mechanism should serve to prevent situations that might otherwise lead to implications of corrupt intent or breach of trust and should enable the insured state nonmember bank to better protect itself from self-dealing. However, a bank official’s full disclosure evidences good faith when such disclosure is made in the context of properly exercised supervision and control.
In my opinion, if the employee disclosed the discount and the bank doesn’t feel that it has threatened the integrity of the bank in any way then it wouldn’t violate the Bank Bribery Act because of the above statement. However, if the “Code of Conduct” is a policy established by the Board of Directors then it may warrant an approval of the exception by the Board. At a minimum, it is important that the exception is well documented and truly an exception.
No, there hasn’t been any new guidance or regulations implemented specific to overdrafts.
The CFPB did issue a proposal on December 23, 2014 regarding Prepaid Accounts Under Reg. E and Reg. Z; this proposal does contain elements of overdraft services as it pertains to prepaid accounts. The comment period for this proposal ends on March 23, 2015. The link to the proposal is https://www.federalregister.gov/articles/2014/12/23/2014-27286/prepaid-accounts-under-the-electronic-fund-transfer-act-regulation-e-and-the-truth-in-lending-act
Similar question as above…
We have a balloon loan product that is amortized over 30 years but the balloon payment is due in month 62; this would just be disclosed as “Year 5 Balloon Payment, Fixed Rate”, correct? All of my resources I am using to write my procedures state that the balloon payment should be disclosed as “the year the payment is due”. We wouldn’t break that down to be 5.17 Balloon Payment because the balloon isn’t due until month 62, correct?
California Chrome, Kelly Owsley, Cecilian Bank, Group 3. I let my compliance team pick and that is the one we liked, good post position! Jack, so exciting you have an interest in a horse! That is fantastic! Enjoy your time at Oaks and Derby and drink a mint julep for us!
May need to consider that in our CMG Training material, the Social Security Income section Q-1-B-11 states, “Social Secuirty income must be verified by the SSA or on Federal tax returns”. I went to appendix Q on BOL and it doesn’t state “federal tax returns” that I can see. I think that was the source of some of my confusion.
Thanks so much for your help!!
We currently do pass the cost on to the individual borrowers and currently finance a single-premium; that being said, I assume we will have to either charge monthly or have the customer pay cash for the insurance.
Our bank just went through development of a Vendor Management Program that required us to complete risk assessments on our vendors; we completed them for each individual vendor. It was suggested to us, although all vendors play an important role, some are deemed more critical than others and we need to really address the risk associated with those critical vendors. We completed a thorough risk assessment on all critical vendors and have plans to complete them for other vendors in upcoming months.
I think the third party risk assessment Jack provided is a great start in determining overall third party risk to the bank and then more steps would be taken to further assess the more “critical” vendors that may be driving the “moderate” to “high” categories.
My vote is for 8 — Creative Cause / Harrington / Rosario / 12-1; great post position and odds are looking good!!! For those of you who are not in the state this is an extremely fun time in Kentucky!! Our bank has a “Race for the Pansies” which we did this morning at our main office. Each branch comes up with a theme for their horse, pays an entry fee, and the proceeds go to a charity! It is an absolute blast! Happy Derby and GO CREATIVE CAUSE!!!
Kelly Owsley
This group has just been wonderful for me! With the amount of regulatory information bombarding us each and every day, this group helps me to stay focused on the topics that are at the forefront and not get lost in the small stuff (although equally important!) I definitely would like for the group to remain intact after Dodd Frank (will it really ever end?!) as the information we receive really helps me to organize my compliance management program. I would vote for a name change as well; we discuss so much more than just what is coming out of Dodd Frank. I am not picky regarding a name but do believe Jack’s name should be in it as he puts a ton of work into this group and making us successful!
I have encouraged other compliance individuals to take a look at the free webinar offers that Jack and Amy are providing as this group really has become my “go to” source for compliance knowledge and assistance! Thanks Jack and Amy for all you do! You make our lives much easier in the crazy regulatory world we live in!
