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If this is a charge being paid to you then it would be included as an origination charge and consider it a 0% tolerance category. If it is paid to a third party it would be disclosed in either B or C and fall into the applicable tolerance category.
Depending on your circumstances, it may fit best under “Loan Costs – C”. Also, 1026.37(f)(2) and (3) say that “for any item that is a component of title insurance or is for conducting the closing, the introductory description “Title –” shall appear at the beginning of the label for that item.”
If you allowed the borrower to select the provider before you provided the LE and disclosed the estimate based on that and the borrower has now requested a change I believe that would be a changed circumstance.
In order to avoid this issue, most banks will disclose on the LE the highest fee from their list of providers (since it is a possibility that the borrower will choose that provider and they are subject to a 10% tolerance).
It sounds like the appraisers need to be informed of your requirements under federal law and that in order to meet these requirements and still use their services you will need a schedule of fees. This isn’t to say they are bound by these fees if it is found the property falls into a different category on their fee schedule once they arrive at the property or it found to be a complex property that will cause the appraisal cost to increase (historic home, acreage, unique structure, etc.). If this is the case this is where you have a changed circumstance.
asimp,
Assuming you allow the borrower to shop and you provided a written list (and the provider isn’t an affiliate which would result in a 0% tolerance) then you are subject to the 10% tolerance category. If the borrower decides to use someone that is not on the list then there is not a tolerance threshold and the charge can increase beyond 10%. I may not be understanding all the specifics of the situation, but assuming you disclosed based on your list of providers and the borrower chose a different provider there is no tolerance issue and if the borrower has selected a provider from your list you are subject to the 10% tolerance which I also assume isn’t an issue since your disclosures would have reflected the fees applicable on your list.As for the appraisal, there would have to be a reason for the appraisal cost to have increased in order for it to be a changed circumstance. The regulators assume that you will have knowledge of what the appraisers that you use will charge for a certain type of property. At this point, appraisers should be aware of the need to provide you with a schedule of fees based on types of property.
Example of CC from commentary 19(e)(3)(iv)(A)-1(I): Estimate was based on a single family dwelling, but when the appraiser arrives to the property it is a single family dwelling located on a farm; a different fee applies to a single family dwelling located on a farm so this would be a changed circumstance.
The construction phase (assuming it is 12 months or less) is exempt from the ATR requirements so you would base your calculation on the permanent phase.
Comment 43(e)(2)(iv)-1: For a qualified mortgage, the creditor must underwrite the loan using a periodic payment of principal and interest based on the maximum interest rate that may apply during the first five years after the date on which the first regular periodic payment will be due. Creditors must use the maximum rate that could apply at any time during the first five years after the date on which the first regular periodic payment will be due, regardless of whether the maximum rate is reached at the first or subsequent adjustment during the five year period.
Answer by Don Blaine and Robin Cooper:
We aren’t certain about the details of the situation, but it sounds like you are wanting to freeze funds in the account. For example, a bank can freeze an account likely for suspected money laundering, tax evasion, fraud, kiting, etc. The Account Agreement likely informs the consumer what the bank may, or can, do in such circumstances.
You might also consider placing a hold when funds are deposited. If the account in question is a transaction account subject to Reg CC, the bank must give availability within the legal guidelines of the bank’s policies, depending on which is best for the consumer, unless there is some trump language in the Account Agreement. If the bank wanted to place an exception hold it could have used the Reasonable Cause to Doubt Collectability but would have had to do so at the point of contact or when it learned that the deposited check was going to be returned. An case by case or exception hold can’t be placed for wire transfers. The bank can however wait and give next day availability when the electronic payment is received (that means the receiving bank has received collected funds).
There are no specific requirements for monitoring for deceased customers. To limit liability some banks check obituaries in their areas in order to freeze the account so unauthorized transactions can’t be made and so the bank can promptly return any federal benefit payment received via ACH after the account holder’s death to avoid those funds from being accessed and the bank having liability. (Note: For federal benefit payments that come into the account via direct deposit you must immediately return any post-death Federal benefit payments received and if you learn of the death of a recipient of these payments from a source other than the federal agency, you must notify the agency of the recipient’s death. Return code R14-R15 with date of death in the memo line.)
Something else to consider is that there have been some court rulings that have set a precedent in which a notification of death in a newspaper could be considered notification of death if the bank has a procedure of monitoring newspapers for death announcements. As a result, a bank could be held liable if it had notification of death through its newspaper monitoring procedure and it fails to prevent unauthorized activity on the account (i.e. even if it missed the notification in the newspaper, some case laws sets the precedent that its procedures dictates it was notified). As a result, and because monitoring multiple newspapers daily can be a burdensome and impractical process in some cases, many banks wait for notification of death rather than monitoring death notifications.
You should develop a procedure that fits your financial institution.
These two links have useful information on SSA and other federal benefit payments received by deceased customers as what is considered notification of death:
https://www.ssa.gov/pubs/EN-05-10008.pdf
https://www.fiscal.treasury.gov/fsreports/ref/greenBook/chapter_5.htm (See pl. 5-8)You have a couple of things to consider with this scenario. First you have the rate lock change circumstance which does require you to only disclose changes associated with locking the rate (e.g. interest rate, points, lender credits, etc). The rate lock changed circumstance does not allow you to reset tolerances of fees unrelated to the rate lock.
The second issue is the title work. First, since you are allowing the borrower to shop for the service and providing them with a list of providers, if they select a provider not on the list the charge is not held to either the 0% or 10% tolerance category – that fee can change. So you don’t have to worry about having to reimburse if there is a change since the borrower selected a provider not on the list.
For informational purposes (not to reset the tolerance), we believe you can include on the LE the change to the amount of the title work that you become aware of. The proposed amendments to the TRID rules explain that you may reissue LE for informational purposes (even if it won’t reset a tolerance), which we advocate. Specifically it states:
Comment 19(e)(3)(iv)(A)–1.ii states that
§ 1026.19(e)(3)(iv) does not prohibit the
creditor from issuing revised disclosures
for informational purposes, even in
situations where the creditor is not
resetting tolerances for any of the
reasons stated in § 1026.19(e)(3)(iv)(A)
through (F).
See page 54333 of the proposed changes linked here: https://www.gpo.gov/fdsys/pkg/FR-2016-08-15/pdf/2016-18426.pdf.Keep in mind, the regulation is clear that no other fees except those associated with the rate lock may be changed when you are providing a revised LE due to a rate lock (you would need an applicable CC to change any other fees). Since you will be including this on the same revised LE that you are issuing due to locking the rate you will need to document your file that the change in the title fees are not associated with the rate lock and are not for purposes of resetting a tolerance, but for informational purposes only (document why the fees changed from what was disclosed and the fact that they aren’t held to a tolerance and why, so it is clear you didn’t include the revised fee as a means to reset the tolerance).
I believe you would need to supply a copy of the appraisal pertaining to the land. It could be argued that it isn’t required under the HPML rules, because those rules are specifically talking about appraisals of the structure. However, under Reg B you must provide an applicant a copy of all appraisals/valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. Since this loan will be secured by a first lien on the dwelling and it says “all” I believe it should be given.
Answer by Kowsley and Rcooper:
We’ve heard differing opinions on this, but we believe it would fit the definition of refinancing.
Refinancing means a new obligation that satisfies and replaces an existing obligation by the same borrower, in which:
(1) For coverage purposes, the existing obligation is a home purchase loan (as determined by the lender, for example, by reference to available documents; or as stated by the applicant), and both the existing obligation and the new obligation are secured by first liens on dwellings; and
(2) For reporting purposes, both the existing obligation and the new obligation are secured by liens on dwellings.
If this was a construction/perm loan or permanent financing to replace a construction-only loan, Reg C commentary says it would be a purchase.
Application of payments is covered to some degree in 1026.36. The main source of guidance on the issue should be the note. It should outline whether extra or partial payments are allowed, and if so, how they will be applied. Generally extra payments should be applied to principal. Applying any portion of an extra payment to escrow is likely to result in a surplus in the escrow account, which, in turn, results in extra work to complete year-end escrow processing.
Whether the note dictates the acceptance of partial payments, the Closing Disclosure allows the lender to inform the borrower how partial payments are handled in the loan product.
If accepting partial payments, the financial institution may apply the partial payment to the loan in the posting order dictated by the note; i.e. interest, principal, escrow, fees, etc. or may hold the partial payment in an suspense account until the entire payment is received from the borrower and then apply it to the loan. In either situation, acceptance of partial payments shouldn’t result in an escrow surplus but rather a possible escrow shortage, which would be determined at annual escrow analysis.
Any additional payments or amounts made above the required payment would be applied to principal rather than to the escrow account to prevent a surplus in the escrow account. It may benefit the financial institution to discuss the possibilities of handling partial payments and/or additional payments with their core accounting software provider before making any decisions regarding handling of these payments.
This is a new interpretation of how an ARM product should be disclosed that we haven’t heard. I believe the confusion is in the poorly worded commentary that uses the term introductory period and introductory rate interchangeably and these terms aren’t clearly defined.
We received feedback late last year from a CMG member that uses LaserPro. He said his product was the same as you described and it was being disclosed as 5/1 in LaserPro, his auditors argued it should be a 0/1. He went to LaserPro and D+H Senior Compliance Counsel provided him with a written response that it should be disclosed as a 5/1.
There seems to be definite confusion over this portion of the commentary and how ARM products should be disclosed. We have reached out to the CFPB for clarification and will update this post once we have more information.
This would not be a refinancing since it is not made to the same borrower and it would not qualify as a purchase since the title of the property is not being transferred to the LLC so we do not believe this loan would be reportable.
There is no clarification of the “same borrower” in the current regulation or Commentary.The 1/1/18 rule clarifies the concept of “same borrower.” While not mentioning an entity as a borrower, the guidance states, “On the other hand, if only borrower A is obligated on obligation X, and only borrower B is obligated on obligation Y, then obligation Y is not a refinancing under§ 1003.2(p).” This seems to apply to your question as of 1/1/18. There is no current guidance that contradicts this.
It sounds like your system tracks the expiration so you can begin withholdings if you don’t have a current W-8BEN on file. If you do not have Form W-8BEN in your files, you are required to withhold taxes on interest paid.
I don’t believe there is any required language for a notice to your customer. I recommend you consult with your accountants or tax advisors to for language to explain the IRS requirements and consequences of not having a current W-8 on file.
