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A signature isn’t required, but you may obtain it. The con to is could be that it adds an extra step to the tellers process, by adding additional requirements beyond the regulation you are increasing the chances that your staff will violate your internal policy, and if a teller or CSR forgets to get a signature the customer could argue the notice wasn’t provided to them (which would more easily be supported since your process is to obtain the signature). If your current process of collecting signatures is working, however, you may not want to change it. It probably depends on how well your staff follow procedures and what your bank is most comfortable with.
You’ll probably get different opinions from everyone you ask about this. There isn’t clear guidance on this kind of situation. If it’s still a dwelling – in my opinion that would be a home that is still standing and can be repaired – then I would consider it a purchase, because even though the applicant may have planned to demolish it, it would meet the definition of home purchase. If the dwelling is beyond repair, at that point I would not consider it a dwelling. Either way, your conclusion about the structure needs to be well documented.
As you know, there is not a specific requirement on how you should document compliance with the disclosure of the notice. You need to ensure that you processes and procedure adhere to the requirements and that staff are actually complying with your procedures/notice is actually being provided. In addition to your procedures, I would prefer to see documentation in the file that the notice was provided – this could be through a checklist supporting your procedures or it could be a copy of the notice along with copies of other disclosures that were provided (my preferred method). A signature is not required and I don’t believe it is necessary.
It sounds like it might not meet the escrow requirements:
(b) Escrow accounts. (1) Requirement to escrow for property taxes and insurance. Except as provided in paragraph (b)(2) of this section, a creditor may not extend a higher-priced mortgage loan secured by a first lien on a consumer’s principal dwelling unless an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor, such as insurance against loss of or damage to property, or against liability arising out of the ownership or use of the property, or insurance protecting the creditor against the consumer’s default or other credit loss. For purposes of this paragraph (b), the term “escrow account” has the same meaning as under Regulation X (12 CFR 1024.17(b)), as amended.
Consumer is a cardholder or natural person to whom consumer credit is offered or extended.
From what you’ve stated it sound like the consumer’s principal dwelling is not securing the loan (land only is securing the loan) and the mother is not a co-applicant/consumer so the fact that her principal dwelling is being taken as collateral would not meet the criteria for requiring escrow. If she is a co-applicant (meets definition of consumer), then I would say that, yes, you would need to escrow.
If I’ve misunderstood the circumstances please let me know. Hope this helps.
This wasn’t one of our webinars/recordings, correct?
I’m not sure exactly how the presenter stated this, but you can accept a private policy in place of a force place policy if it meets the criteria. Perhaps what this presenter was talking about was the extra work/potential confusion for your staff because often times borrowers only bring you a dec sheet for review, which was acceptable under the previous rules. Review of a dec sheet may not be sufficient for private policies and you would need to conduct the same review as you would if there was not a force placed policy in place.
From p. 20-21 of the final rule:
One commenter was unsure how the mandatory acceptance requirement would affect preexisting force placement requirements
28 that provide for the release of a force placed policy following the presentation of a declarations page by the borrower evidencing the borrower’s purchase of flood insurance. Another commenter asked whether regulated lending institutions are expected to force place insurance if the full policy is not available.The Agencies acknowledge that under existing force placement requirements, a declarations page is sufficient to evidence a borrower’s purchase of flood insurance. However, a declarations page may be insufficient for a regulated lending institution to make a determination that the institution must accept a private flood insurance policy in satisfaction of the flood insurance purchase requirement if the declarations page does not provide enough information for the institution to determine that the policy meets the statutory definition of “private flood insurance.” In these circumstances, the regulated lending institution should request additional information about the policy to aid it in making its determination.
Answer from Eric Collinsworth:
AVM’s themselves (along with the condition reports and photos) would not generally conform or qualify as an evaluation. The results of an AVM are based on a mathematical calculation and do not include human input or logic to conclude an estimated market value. While they can be used as part of an evaluation (as a source for the sales used, for example), they should not be relied up as an evaluation in whole without further support included.
Eric will discuss this and other mistakes you could encounter during while reviewing appraisals and evalutaions in his upcoming program, Identifying Common Mistakes During the Appraisal Compliance Review. For more information on Eric’s webinar click here: https://mycomplianceresource.com/event-registration/?ee=261.
Even if you are exempt from HMDA, Regulation B will still apply to certain transactions. The Reg B monitoring info rules states in 12 CFR 1002.13:
A creditor that receives an application for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling, shall request as part of the application the following information regarding the applicant(s):
(i) Ethnicity and race using either:
(A) For ethnicity, the aggregate categories Hispanic or Latino and not Hispanic or Latino; and, for race, the aggregate categories American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White; or
(B) The categories and subcategories for the collection of ethnicity and race set forth in appendix B to 12 CFR part 1003.
(ii) Sex;
(iii) Marital status, using the categories married, unmarried, and separated; and
(iv) Age
Certain institutions (including those who were or will likely be HMDA reporters) may also collect information under other limited circumstances. You can find that in 1002.5(a) – look at (a)(4) in particular regarding voluntary Reg C reporting, if you reporting HMDA info in the last five year, or if you may be reporting such info in the future.
Please let us know if you have any follow-up questions.
I’m apologize we didn’t see your question sooner. I’d suggest looking at what you’re requiring the customer to do and determine if it meets the definition of lottery. If you were giving money away to the first 15 people who use your ATM, regardless of whether they are a customer or deposit funds, then I don’t think it would; however, with what you’ve stated it seems like it may qualify as a lottery since the individuals will have no way of knowing if they will get the prize. So essentially they will be depositing funds for a chance to win money. Again, review the definition of lottery and the prohibition to see if it applies. https://www.law.cornell.edu/uscode/text/12/25a
You’ll want to consider any tax reporting implications with your accounting/tax advisor. I think it will likely be reported under the 1099 MISC rules if you meet the qualifying amount, but since you are requiring a deposit to be made there is the possibility of the 1099 INT coming into play. Again, talk to your tax advisor to get their take on that.
Trying to understand your situation a little better… Is your institution exempt from HMDA?
Keep in mind Regulation B has requirements for the collection of monitoring information.
I think you should provide a corrected disclosure so the customer has an accurate disclosure of the transaction.
My understanding is that once the original obligation matures a new transaction would be considered a refinancing and would require new disclosures. I’d suggest you talk to your attorney to assist you with this determination.
Based on the information below I would say that it is reportable.
1003.2:
(j) Home purchase loan means a closed-end mortgage loan or an open-end line of credit that is for the purpose, in whole or in part, of purchasing a dwelling(f) Dwelling means a residential structure, whether or not attached to real property. The term includes but is not limited to a detached home, an individual condominium or cooperative unit, a manufactured home or other factory-built home, or a multifamily residential structure or community.
1003.3:
Paragraph 3(c)(2)
1. Loan or line of credit secured by a lien on unimproved land. Section 1003.3(c)(2) provides that a closed-end mortgage loan or an open-end line of credit secured by a lien on unimproved land is an excluded transaction. A loan or line of credit is secured by a lien on unimproved land if the loan or line of credit is secured by vacant or unimproved property, unless the institution knows, based on information that it receives from the applicant or borrower at the time the application is received or the credit decision is made, that the proceeds of that loan or credit line will be used within two years after closing or account opening to construct a dwelling on, or to purchase a dwelling to be placed on, the land. A loan or line of credit that is not excludable under § 1003.3(c)(2) nevertheless may be excluded, for example, as temporary financing under § 1003.3(c)(3).
