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TRID loan purposes include:
(i) Purchase. If the credit is to finance the acquisition of the property identified in paragraph (a)(6) of this section, the creditor shall disclose that the loan is for a “Purchase.”(ii) Refinance. If the credit is not for the purpose described in paragraph (a)(9)(i) of this section, and if the credit will be used to refinance an existing obligation, as defined in § 1026.20(a) (but without regard to whether the creditor is the original creditor or a holder or servicer of the original obligation), that is secured by the property identified in paragraph (a)(6) of this section, the creditor shall disclose that the loan is for a “Refinance.”
(iii) Construction. If the credit is not for one of the purposes described in paragraphs (a)(9)(i) or (ii) of this section and the credit will be used to finance the initial construction of a dwelling on the property identified in paragraph (a)(6) of this section, the creditor shall disclose that the loan is for “Construction.”
(iv) Home equity loan. If the credit is not for one of the purposes described in paragraphs (a)(9)(i) through (iii) of this section, the creditor shall disclose that the loan is a “Home Equity Loan.”
Starting with the definition of purchase, it doesn’t seem to fit since the daughter has acquired the property through inheritance regardless of/outside of the credit transaction. The definition of refi doesn’t seem to fit either since in 1026.20(a) it says “A refinancing occurs when an existing obligation that was subject to this subpart is satisfied and replaced by a new obligation undertaken by the same consumer.” As strange as it seems, I think home equity is what you would disclose.
I’ll tag Jack to see if he agrees.
The requirements that you’re talking about come the FCRA since we’re talking about a deposit account. The Reg B rules for credit say that if you make a counteroffer amd they accept it is not considered AA; however, the FCRA rules do not state a similar provision in the defintion of AA. Since we’re looking to FCRA, if you are making an offer and it is less favorable than what was requested that would be AA and you would be require to provide the notice.
We published an article on this recently. It does seem to apply to businesses as well as individuals. Based on information from the IRS, it seems to only apply to information obtained from the IRS. Here’s the article: https://mycomplianceresource.com/taxpayers-first-act/.
1) The commentary says that you can generally have a plate and HUD certificate, but that doesn’t mean it always will be there (e.g. it could have been removed). Most of the time you will be able to rely on this, but I also think there are times when it may not be affixed that you might have to do a little more digging to make that determination.
1003.2(l)-2. Identification. A manufactured home will generally bear a data plate affixed in a permanent manner near the main electrical panel or other readily accessible and visible location noting its compliance with the Federal Manufactured Home Construction and Safety Standards in force at the time of manufacture and providing other information about its manufacture pursuant to 24 CFR 3280.5. A manufactured home will generally also bear a HUD Certification Label pursuant to 24 CFR 3280.11.
2) From the HMDA GIR Guide (Section 5.7, p. 70):
4. Cash-out Refinancing. A Financial Institution reports a Covered Loan or an Application
as a cash-out Refinancing if it is a Refinancing and the Financial Institution considered it to
be a cash-out Refinancing when processing the Application or setting the terms under its or
an investor’s guidelines. For example, if a Financial Institution considers a loan product to
be a cash-out Refinancing under an investor’s guidelines because of the amount of cash
received by the borrower at closing or account opening, it reports the transaction as a cashout
Refinancing. If a Financial Institution does not distinguish between a cash-out
Refinancing and a Refinancing under its own guidelines, sets the terms of all Refinancings
without regard to the amount of cash received by the borrower at loan closing or account
opening, and does not offer loan products under investor guidelines, it reports all
Refinancings as Refinancings, not cash-out Refinancings. Comment 4(a)(3)-2.NOTE: Also take a look at the examples in the commentary 1003.4(a)(3)-2
3) Comment 1003.4(a)(8)ii-5 says:
Action taken date—originations. For covered loan originations, including a preapproval request that leads to an origination by the financial institution, an institution generally reports the closing or account opening date. For covered loan originations that an institution acquires from a party that initially received the application, the institution reports either the closing or account opening date, or the date the institution acquired the covered loan from the party that initially received the application. If the disbursement of funds takes place on a date later than the closing or account opening date, the institution may use the date of initial disbursement. For a construction/permanent covered loan, the institution reports either the closing or account opening date, or the date the covered loan converts to the permanent financing. Although an institution need not choose the same approach for its entire HMDA submission, it should be generally consistent (such as by routinely using one approach within a particular division of the institution or for a category of covered loans). Notwithstanding this flexibility regarding the use of the closing or account opening date in connection with reporting the date action was taken, the institution must report the origination as occurring in the year in which the origination goes to closing or the account is opened.Starting on p. 110 of the GIR https://www.ffiec.gov/hmda/pdf/2019guide.pdf, you’ll see that you enter n/a if the loan is not sold within the same calendar that you orignated the covered loan.
I don’t see a problem with this since it will be the recipient of the funds. If you don’t have the information on the other company then you would of course just list the title company. As to whether this would affect your tolerance catetgory because the electronic filing fee recipient, from your example, wasn’t on the shopping list, it should not since your borrower was given the option to shop and selected the title company which utilized this other party.
I’d talk with the bank’s attorney in regards to the note and DOT. It may be possible, but you may decide the best course of action for the bank is to do a new transaction. Recognizing all of the issues involved will help your bank make the best decision. 1026.20(a) is where you’ll find the requirement to provide new new LE and CD disclosures for refinancings (existing obligation that is satisfied and replaced by a new obligation or increasing the rate based on a variable-rate feature that was not previously disclosed or adding a variable-rate feature). If it isn’t a refinancing under 1026.20(a) you would not be required to provide new TIL disclosures. Also, keep in mind, the flood rules apply if you make, increase, renew, or extend a loan… doesn’t matter if it is a modification or refinancing – if it is a MIRE event the flood rules are triggered.
I agree, the detached structure exemption wouldn’t apply since it isn’t part of a residential property where there is also a residential structure. Something to consider is the insurable value of the structure and what would insurance pay; you want to avoid under-insuring but you also want to avoid over-insuring (requiring the borrower to purchase more insurance than they would be paid for the property) which could easily happen on a non-residential farm structure. Q&A #9 from the 2011 Flood Q&As talks about this to some extent. 2009 Flood Q&A question #10 discusses alternative approaches for this type of building but that was rescinded in the 2011 version and solely address in #9.
2011: https://www.fema.gov/media-library-data/20130726-1742-25045-5644/interagency_q_as.pdf
2009: https://www.fema.gov/media-library-data/20130726-1742-25045-4927/interagency_q_a.pdf• Effective December 28, 2019 and summary:
From Thomas Reuters (https://tax.thomsonreuters.com/news/president-signs-taxpayer-first-act-fixing-effective-date-of-various-provisions/ )“Limit on re-disclosures of consent-based disclosures. Effective for disclosures made after Dec. 28, 2019 (180 days after the date of enactment), the Act provides that persons designated by the taxpayer to receive return information must not use the information for any purpose other than the express purpose for which consent was granted and must not disclose return information to any other person without the express permission of, or request by, the taxpayer. (Code Sec. 6103(c), as amended by Act Sec. 2202)”• IRS form 4506 – T “Request for Transcript of Tax Returns” allows for requesting business transcripts in the instructions of the form which says “Line 1b. Enter your employer identification number (EIN) if your request relates to a business return.” https://www.irs.gov/pub/irs-pdf/f4506t.pdf. However, it seems to no longer be sufficient to allow you to use the transcripts without consent to specific use, which is where the new form comes in.
• In addition to that, the Taxpayer First Act (https://www.congress.gov/116/plaws/publ25/PLAW-116publ25.pdf) amends IRS law 26 USC 6103(c) to include the following language:
“Persons designated by the taxpayer under this subsection to receive return information shall not use the information for any purpose other than the express purpose for which consent was granted and shall not disclose return information to any other person without the express permission of, or request by, the taxpayer.”o Under 26 USC 6103(c), the term “taxpayer” means any person subject to any internal revenue tax. (26 USC 7701(a)(14))
o The term “person” shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation. (26 USC 7701(a)(1))
So, again, based on this information I would say it does apply to businesses; and since this is also the safest approach (obtaining consent from business customers) that is what I would recommend. If I come across additional information that indicates otherwise I will pass it along.
It seems like it would qualify and Reg W would be applicable. If you are comfortable doing so, since this is a unique situation and the transaction hasn’t been completed yet (still time to comply), it might be a good idea to run this scenario by your regulator to get their input.
I think the best place to look is your loan contract for what is permissible. In general, since these are separate accounts, I think you would need to refund the customer and if they choose to apply it to the new loan they can certainly do that. Reg X has rules regarding refunding surpluses in escrow accounts if an escrow account is involved.
It’s definitely a scenario I don’t think the regulators anticipated. However, in looking at the exception language I don’t see anything that would preclude it from applying. With that said, you can always require insurance if you choose to do so. And of course, reaching out to your regulator is always an option in situations where you feel like they are open for interpretation.
From what you’ve described it seems to check all the boxes (in bold): c) Any structure that is a part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence. For purposes of this paragraph (c):
(1) “A structure that is a part of a residential property” is a structure used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes;
(2) A structure is “detached” from the primary residential structure if it is not joined by any structural connection to that structure; and
(3) “Serve as a residence” shall be based upon the good faith determination of the FDIC-supervised institution that the structure is intended for use or actually used as a residence, which generally includes sleeping, bathroom, or kitchen facilities.
It sounds like it could meet the exemption. Is it part of the residential property securing the loan? Is it detached from the residence? Have you confirmed it is not being used as a residence? Based on the information you’ve given, if you answer yes to all of those then it seems as though it could be excluded. If you don’t have a security interest in the mobile home flood insurance wouldn’t be required.
(a) In general. An FDIC-supervised institution shall not make, increase, extend, or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan. The amount of insurance must be at least equal to the lesser of the outstanding principal balance of the designated loan or the maximum limit of coverage available for the particular type of property under the Act. Flood insurance coverage under the Act is limited to the building or mobile home and any personal property that secures a loan and not the land itself.
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(c) Any structure that is a part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence. For purposes of this paragraph (c):(1) “A structure that is a part of a residential property” is a structure used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes;
(2) A structure is “detached” from the primary residential structure if it is not joined by any structural connection to that structure; and
(3) “Serve as a residence” shall be based upon the good faith determination of the FDIC-supervised institution that the structure is intended for use or actually used as a residence, which generally includes sleeping, bathroom, or kitchen facilities.
From the Interagency Flood Q&A #40:
If a loan is secured by Building A,
which is located in an SFHA, and
contents, which are located in Building
B, is flood insurance required on the
contents securing a loan?Answer: No. If collateral securing the
loan is stored in Building B, which does
not secure the loan, then flood
insurance is not required on those
contents whether or not Building B is
located in an SFHA.You may also want to look at Q&A #39: https://www.fema.gov/media-library-data/20130726-1742-25045-4927/interagency_q_a.pdf.
As a lender, you may want to consider requiring insurance, if available, on your collateral even if it isn’t required by the flood rules.
Great question. I think there’s potential for disparate impact with your process. It’s possible that a protected class may be less likely to afford bringing the extra funds to closing; because of that they’re charged a higher rate/results in a higher yield for your bank than borrowers who can bring additional funds. If that is the case, I think that has the potential to have a disparate impact to a protected class.
I’m going to see if our Board of Advisors CMG members can give you any feedback based on their processes.
Thanks for your patience!
