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FEMA’s Flood Q&A’s (https://www.fema.gov/media-library-data/20130726-1742-25045-4927/interagency_q_a.pdf),
Section XIV and #’s 71,72, state if the
discrepancy is not resolved, the lender
should send a letter to the insurance
agent and/or the insurance company
reminding them of FEMA’s April 16,
2008, instruction that, in cases of
determination discrepancies, the policy
should be written to cover the higher
risk zone. Beyond that, no further action
by the lender is required. If, for its own
purposes, the lender believes force
placement is appropriate, then it should
consult the guidance on that topic found
in Sections II and X.Keep thorough documentation of your attempts to resolve the issue and ensure you have policy/procedures in place to prevent a pattern or practice of unresolved discrepancies.
The interagency thresholds for requiring an appraisal was recently adjusted. Generally, the appraisal threshold was set at $250,000 meaning any loan at or below that limit could use an evaluation of the property rather than an appraisal. A final rule issued on April 9 of this year changed that threshold for commercial real estate loans to $500,000 meaning loans at that threshold and below are not required to have an appraisal and may rely on an evaluation. If transaction is exempt from the requirement to obtain an appraisal because it meets the threshold you must still obtain an evaluation of the property.
There are instances when you may rely on an existing appraisal or evaluation. However, considering this appraisal is four years old I would be hesitant to do that. Here are links to resources you might want to review:
2010 Interagency Appraisal Guidelines here: https://www.fdic.gov/regulations/laws/rules/5000-4800.htmlInteragency Advisory on Use of Valuations: https://www.federalreserve.gov/supervisionreg/srletters/sr1605a1.pdf
2018 Amendment to Threshold for Commercial Loans: https://www.fdic.gov/news/board/2018/2018-03-20-notice-sum-c-fr.pdf
belandis,
I have discussed this with Jack and we recommend reviewing your contract with the borrower. As you mentioned, Regulation X addresses netting the escrow surplus against the balance of the loan. The question is – what is included in the loan balance. The answer should be determined by a contract review. If the contract states that unpaid amounts, such as late charges and force-placed insurance premiums, are added to the loan balance then netting the surplus from the escrow against the balance of the loan, which includes the unpaid late charges, should be fine. Everything depends on the wording of the contract. If the contract is not clear then you should obtain an opinion from your legal counsel.You would not provide a CD for the permanent phase unless you provide the permanent phase financing.
Under the Ability to Repay rules you have the general rule and the QM rules. The QM rules provide you as the creditor more protections when you comply with the more stringent QM provisions.
The general ATR rules require you to verify income using reliable third party documentation. The tax returns may provide sufficient evidence for you, but you may also request additional documentation. The key is you to “verify” income. See 1026.43(c)(4) which states you can use:
(i) Copies of tax returns the consumer filed with the IRS or a State taxing authority;(ii) IRS Form W-2s or similar IRS forms used for reporting wages or tax withholding;
(iii) Payroll statements, including military Leave and Earnings Statements;
(iv) Financial institution records;
(v) Records from the consumer’s employer or a third party that obtained information from the employer;
(vi) Records from a Federal, State, or local government agency stating the consumer’s income from benefits or entitlements;
(vii) Receipts from the consumer’s use of check cashing services; and
(viii) Receipts from the consumer’s use of a funds transfer service.
Or, although it isn’t required under the general ATR, look to appendix Q for additional information on sources of evidence for verifying compensation/income from a corporation owned by the consumer/borrower (e.g. information from accountant showing ownership percentage along with evidence that the borrower is entitled to compensation, etc.).
For Qualified Mortgage transactions you’ll need to look to Appendix Q for the rules on calculating the DTI. Specifically look at section I-A- I-E for information on the individual income and I-F – I-G for corporate returns, as well as any additional documentation you may need. Appendix Q is available here.
One thing noted in Appendix Q, section I-F, is how to determine compensation from a consumer owned corporation if the information isn’t shown on the tax return. Appendix Q is a good place to start whether you are required to comply with it (QM) or not (general ATR). And you will begin with the gross income when calculating the DTI.
Use the date on which you set the interest rate for the final time before final action is taken.
Comment (a)(12)-5.i states:
i. Rate-lock agreement. If an interest rate is set pursuant to a “lock-in” agreement between the financial institution and the borrower, then the date on which the agreement fixes the interest rate is the date the rate was set. Except as provided in comment 4(a)(12)-5.ii, if a rate is reset after a lock-in agreement is executed (for example, because the borrower exercises a float-down option or the agreement expires), then the relevant date is the date the financial institution exercises discretion in setting the rate for the final time before final action is taken. The same rule applies when a rate-lock agreement is extended and the rate is reset at the same rate, regardless of whether market rates have increased, decreased, or remained the same since the initial rate was set. If no lock-in agreement is executed, then the relevant date is the date on which the institution sets the rate for the final time before final action is taken.This previous post might also be helpful: https://mycomplianceresource.com/forums/topic/rate-spread-rate-lock-date-and-apor/.
Yes, it would be considered a home equity loan under TRID since you are not purchasing or refinancing the real property and it isn’t a construction loan.
1026.37(a)(9)(i)states: “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.””
Property defined in 1026.37(a)(6) is “[t]he address including the zip code of the property that secures or will secure the transaction, or if the address is unavailable, the location of such property including a zip code, labeled “Property.”
I think it would affect your ability to call the account free. Regulation DD, 1030.8 states the following fees charged to account prohibit it from being called free or no cost.
Commentary Section 1030.8 –Advertising
“(a) Misleading or inaccurate advertisements.3. Fees affecting “free” accounts. For purposes of determining whether an account can be advertised as “free” or “no cost,” maintenance and activity fees include:
i. Any fee imposed when a minimum balance requirement is not met, or when consumers exceed a specified number of transactions.
ii. Transaction and service fees that consumers reasonably expect to be imposed on a regular basis.
iii. A flat fee, such as a monthly service fee.
iv. Fees imposed to deposit, withdraw, or transfer funds, including per-check or per-transaction charges (for example, $.25 for each withdrawal, whether by check or in person).”
Assuming you meet the other requirements you could eliminate this fee for this account.
The final rule, p. 29408 linked here provides a good discussion of the expectations: https://www.gpo.gov/fdsys/pkg/FR-2016-05-11/pdf/2016-10567.pdf.
1. The final rule allows you to rely on your existing CIP procedures and also allows you to accept photocopies of ID’s because the BO may not be present. Based on that and reasonable risk management analysis that what you have is still valid I agree with your analysis.
2. I think it will depend on the circumstances. Again, you may rely on CIP procedures and reasonable risk based analysis to verify idenity. The final rule says the following: Under the CIP rules, a financial institution’s CIP must include procedures for responding to circumstances in which the financial institution
cannot form a reasonable belief that it knows the true identity of a customer. These procedures should describe: (A) When the institution should not open an account; (B) The terms under which a customer may use an account while the institution
attempts to verify the customer’s identity; (C) When it should close an account, after attempts to verify a customer’s identity have failed; and (D) When it should file a Suspicious Activity Report in accordance with applicable law and regulation.Yes, based on what you’ve described – a 12 month loan that will be replaced by permanent financing when the initial 12 month loan expires – it seems to be a temporary loan and would be exempt (per 1026.43(a)(3)(ii)) from the ATR requirements of 1026.43(c)-(f).
You need a agreement between both parties. Neither the regulation or commentary specify written, nor does they state verbal is acceptable. Most in the compliance industry (auditor, examiners, compliance officers, consultants, etc.) believe the agreement must be in writing to be able to disclose a rate lock agreement on the LE. I would suggest you do training and enhance your procedure to require rate lock agreements to be signed by both parties.
Reg Z Commentary 37(a)(13) states:
1. Interest rate. For purposes of § 1026.37(a)(13), the interest rate is locked for a specific period of time if the creditor has agreed to extend credit to the consumer at a given rate, subject to contingencies that are described in any rate lock agreement between the creditor and consumer.I agree, you would report the NMLS# of the primary MLO as of the date of action taken.
The HMDA Getting it Right guide states:
If more than one individual associated with a Covered Loan or Application meets the definition of “mortgage loan originator,” as defined in Regulation G or Regulation H, a Financial Institution reports the NMLSR ID of the individual mortgage loan originator with primary responsibility for the transaction as of the date of action taken. A Financial Institution that establishes and follows a reasonable, written policy for determining which individual mortgage loan originator has primary responsibility for the reported transaction as of the date of action taken complies with this reporting requirement. Comment 4(a)(34)-3.You’ll want to look at Treasury regulation 31 CFR 212, Garnishment of Accounts Containing Federal Benefit Payments. SSA payments do have protections under this regulation, but for certain garnishments (from US or state child support enforcement agency) there are exceptions. You’ll be looking for the Notice of Right to Garnish Federal Benefits. Reviewing the regulation and becoming familiar with the requirements will be most beneficial.
See the response here: https://mycomplianceresource.com/forums/topic/regulation-z-advertising/
I would agree “long term” does not meet the definition of a payment period trigger term. The commentary clarifies that a specific period of time or payment term.
Reg Z Comment 1026.24(d)(1)-2 says:
The number of payments required or the total period of repayment includes such statements as:A. 48-month payment terms.
B. 30-year mortgage.
C. Repayment in as many as 36 monthly installments.
