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You will need to talk to your investors to see what they require as I don’t believe they can rely on your exemption.
Closing costs and other costs on page 2 of the CD must be disclosed regardless of who pays them (see 1026.(f) and (g)). There are instructions in 1026.38(t)(5) that allows you to provide separate disclosures and with that you are permitted to omit the consumer paid items in (f) and (g) from the seller’s disclosures but you can’t omit the seller paid items from consumer’s disclosure. In addition, it permits you to omit some of the seller’s information from the consumer’s CD. I recommend you take a look at these sections and also the CFPB’s FAQ (April 12, Question 15) which addresses this question.
I hope this helps. Let us know if you have other questions. Thanks!
After looking at the requirements and discussing this further, we believe the safest approach maybe to include fees paid out of the first draw (this would be in line with the HELOC rules in section 1026.7(a)(6)(i)-8 which is the closest thing we have to insight into what can be on a HELOC stmt).
From Matt Stone:
Record retention issues can be tricky, because unless there are prescribed retention periods (such as under BSA/AML rules or Reg DD, for example), record retention is largely discretionary, and there can be lots of variables, and both pros and cons, involved with retaining certain records for longer or shorter periods of time.With respect to risk assessments for third-party relationships, at a minimum, other than the most current risk assessment of course, it would be advisable to also retain at least those from the prior two years (or such longer period) that will ensure that the FDIC and your state regulator can be provided with a full picture of your bank’s vendor risk assessment activities from one examination to the next.
You may also want to confirm your risk assessment retention approach with your examiners. Additional considerations for longer retention could include whether your bank has been subject to any kind of adverse examination finding (e.g., an MRA) relating to risk assessments and/or your vendor management program generally, or whether your risk assessment process, format, cycle, results, etc.
have been subject to material changes. In each case, it may be helpful to be able to demonstrate the corrective actions and/or the evolution of other changes over a more extended period of time.You’ll also want to adhere to your bank’s record retention policy, and, with advice from internal or external legal counsel as necessary, also consider your state’s various statutes of limitations, as well as the vendor’s performance and the results of the risk assessments for that vendor. For example, if your vendor has, at any point during the relationship, exhibited substandard or otherwise questionable performance, it may be helpful to retain all evidence of such performance (including annual risk assessments) for the term of the agreement and beyond – although this may also depend on the extent of performance reports and other related documentation.
-This response does not constitute legal advice.-
Kathy,
I think you would include the fees based on the language below. I’ll ask Jack to review.
Thanks for your patience!1026.7(b)(6)
(iii) Fees. Charges imposed as part of the plan other than charges attributable to periodic interest rates must be grouped together under the heading Fees, identified consistent with the feature or type, and itemized, and a total of charges, using the term Fees, must be disclosed for the statement period and calendar year to date, using a format substantially similar to Sample G–18(A) in Appendix G to this part.Official Interpretation
7(b)(6) Charges Imposed
1. Examples of charges. See commentary to §1026.6(b)(3**
1026.6(b)(3)(ii) Charges imposed as part of the plan are:(A) Finance charges identified under §1026.4(a) and §1026.4(b).
(B) Charges resulting from the consumer’s failure to use the plan as agreed, except amounts payable for collection activity after default, attorney’s fees whether or not automatically imposed, and post-judgment interest rates permitted by law.
(C) Taxes imposed on the credit transaction by a state or other governmental body, such as documentary stamp taxes on cash advances.
(D) Charges for which the payment, or nonpayment, affect the consumer’s access to the plan, the duration of the plan, the amount of credit extended, the period for which credit is extended, or the timing or method of billing or payment.
(E) Charges imposed for terminating a plan.
(F) Charges for voluntary credit insurance, debt cancellation or debt suspension.
Official Interpretation
Paragraph 6(b)(3)(ii)
1. Failure to use the plan as agreed. Late payment fees, over-the-limit fees, and fees for payments returned unpaid are examples of charges resulting from consumers’ failure to use the plan as agreed.2. Examples of fees that affect the plan. Examples of charges the payment, or nonpayment, of which affects the consumer’s account are:
i. Access to the plan. Fees for using the card at the creditor’s ATM to obtain a cash advance, fees to obtain additional cards including replacements for lost or stolen cards, fees to expedite delivery of cards or other credit devices, application and membership fees, and annual or other participation fees identified in §1026.4(c)(4).
ii. Amount of credit extended. Fees for increasing the credit limit on the account, whether at the consumer’s request or unilaterally by the creditor.
iii. Timing or method of billing or payment. Fees to pay by telephone or via the Internet.
3. Threshold test. If the creditor is unsure whether a particular charge is a cost imposed as part of the plan, the creditor may at its option consider such charges as a cost imposed as part of the plan for purposes of the Truth in Lending Act.
I’m not aware of a particular period of time – I’ll have to look into it and get back to you. I do know we’ve seen enforcement actions with vendors whose issues stretch back more than a decade so it may be prudent to retain records of risk management for the period of the relationship and beyond.
I’ll see what I can find.
Thanks!Even though you state it will be a beneficial change to the customer, I would recommend providing 30 days advance notice for changing the tier structure. While you might not be cited for not providing the notice 30 days in advance, I think you could avoid potential questioning by an examiner (who thinks you should have) if you go ahead and do the advance notice.
Based on the information below I think the joint intent should be obtained.
1002.7(d)(1)-3.
Evidence of joint application. A person’s intent to be a joint applicant must be evidenced at the time of application. Signatures on a promissory note may not be used to show intent to apply for joint credit. On the other hand, signatures or initials on a credit application affirming applicants’ intent to apply for joint credit may be used to establish intent to apply for joint credit. (See Appendix B.) The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information. For example, signatures on a joint financial statement affirming the veracity of information are not sufficient to establish intent to apply for joint credit.1002.2(f) Application means an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested. The term application does not include the use of an account or line of credit to obtain an amount of credit that is within a previously established credit limit.
(j) Credit means the right granted by a creditor to an applicant to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment therefor.
If the primary purpose of the loan is a refinance of the principal residence then you would collect GMI. See below.
1002.13(a) Information to be requested. (1) 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):
Official Interpretation 1002.13(a)-5:
Transactions not covered. The information-collection requirements of this section apply to applications for credit primarily for the purchase or refinancing of a dwelling that is or will become the applicant’s principal residence. Therefore, applications for credit secured by the applicant’s principal residence but made primarily for a purpose other than the purchase or refinancing of the principal residence (such as loans for home improvement and debt consolidation) are not subject to the information-collection requirements. An application for an open-end home equity line of credit is not subject to this section unless it is readily apparent to the creditor when the application is taken that the primary purpose of the line is for the purchase or refinancing of a principal dwelling.Assuming you are complying with the appraisal regs/guidelines and your internal policy, and as long as the appraisal and completion report are required as part of the construction loan (regardless of whether you were doing the permanent financing), I don’t see a problem with this process.
If the loan is approved but not accepted and Reg Z disclosures were given you would enter a rate spread based on the last disclosure provided.
You would only report NA on denials or if Regulation Z disclosures aren’t required to be delivered.
A Guide to HMDA Reporting:
Enter “NA” for:
Covered loans that are assumptions, reverse mortgages, purchased loans, or are not subject to Regulation Z, § 1003.4(a)(12)(i); Comment 4(a)(12)-7;
Applications that did not result in an origination other than approved but not accepted,Where an application or a preapproval request is an Application under Regulation C, but for which no disclosures are required under Regulation Z, the Financial Institution reports that the data is not applicable.
My understanding is that it would be left blank if they don’t have an ID number.
5. License number or unique identifier. Section 1026.38(r)(3) and (5) requires the disclosure of a license number or unique identifier for each person (including natural persons) identified in the table who does not have a NMLSR ID if the applicable State, locality, or other regulatory body with responsibility for licensing and/or registering such person’s business activities has issued a license number or other unique identifier to such person under § 1026.38(r)(3) and (5). The space in the table is left blank for the disclosures in the columns corresponding to persons who are not subject to the issuance of such a license number or unique identifier to be disclosed under § 1026.38(r)(3) and (5); provided that, the creditor or settlement agent may omit the column from the table or, if necessary, replace the column with the contact information for an additional person.
None of the regulations refer to a bank’s internal loan number accounting method as an indicator of a refinance versus a renewal. You are looking at whether you have legally replaced an existing obligation with a new obligation (see definitions below). It sounds like your process has historically relied on the definitions in the regulations; I’d recommend you keep that process/criteria.
HMDA/Regulation C:
1003.2(p) Refinancing means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.And Regulation Z, 1026.20(a) defines refinancing as:
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. A refinancing is a new transaction requiring new disclosures to the consumer. The new finance charge shall include any unearned portion of the old finance charge that is not credited to the existing obligation. The following shall not be treated as a refinancing:(1) A renewal of a single payment obligation with no change in the original terms.
(2) A reduction in the annual percentage rate with a corresponding change in the payment schedule.
(3) An agreement involving a court proceeding.
(4) A change in the payment schedule or a change in collateral requirements as a result of the consumer’s default or delinquency, unless the rate is increased, or the new amount financed exceeds the unpaid balance plus earned finance charge and premiums for continuation of insurance of the types described in §1026.4(d).
(5) The renewal of optional insurance purchased by the consumer and added to an existing transaction, if disclosures
The issue is that the KRS, 286 or 198A, does not define borrower or homeowner for purposes of this requirement and further confuses the issue by assuming that the borrower is always the owner of the collateral (i.e. the homeowner). See KRS 198A.400.
Based on the required disclosure language below, my understanding and I think the safe approach is to provide the disclosure to any homeowner, even if he/she/they are not the borrower.
286.2-020 Required disclosure of services provided by Kentucky Homeownership
Protection Center.
(1) “Kentucky Homeownership Protection Center” means the center established in KRS
198A.400.
(2) At the time of closing and together with the final signed loan documents, if the
Kentucky Homeownership Protection Center is operational as provided in KRS
198A.400, a mortgagee shall provide to the homeowner any brochure, pamphlet, or other brief document prepared or approved by the Kentucky Housing Corporation that describes the services provided by the Kentucky Homeownership Protection Center.
Effective: April 24, 2008
History: Created 2008 Ky. Acts ch. 175, sec. 2, effective April 24, 2008.I agree with that assessment. See commentary below:
Paragraph 3(c)(3)
1. Temporary financing. Section 1003.3(c)(3) provides that closed-end mortgage loans or open-end lines of credit obtained for temporary financing are excluded transactions. A loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time.
