Forum Replies Created
-
Posts
-
1) This could be fine depending on the circumstances. Section 8 of RESPA permits educational activities that are not conditioned on the referral of business and that do not involve the defraying of expenses that otherwise would be incurred by persons in a position to refer settlement services or business. If you are subsidizing the cost they would normally incur for continuing education is would be considered a referral fee. (1024.14(g)(1)(vi))
2) You can’t require the borrower to use any particular provider except an attorney, credit reporting agency, or real estate appraiser. (1024.15(b)(2))
First off, we believe that general and specific lender credits should be disclosed on the closing disclosure as described in my previous reply.
As to which fees you apply a general credit, Regulation Z does not state that the lump sum must be applied to any particular fees. If a general credit will be covering a finance charge, and as a result the borrower isn’t obligated for that fee (see commentary below) you would exclude it from the APR. This is cleaner for specific credits where the fees is allocated toward specific fees. For general credits we believe the safest and most cautious approach would be to apply the general credit first to non-finance charges and then any remainder to the fees that are finance charges (which, from my understanding, is what you said you have typically done).
Regulation Z, Paragraph 4(c)(5)
1. Seller’s points. The seller’s points mentioned in §1026.4(c)(5) include any charges imposed by the creditor upon the noncreditor seller of property for providing credit to the buyer or for providing credit on certain terms. These charges are excluded from the finance charge even if they are passed on to the buyer, for example, in the form of a higher sales price. Seller’s points are frequently involved in real estate transactions guaranteed or insured by governmental agencies. A commitment fee paid by a noncreditor seller (such as a real estate developer) to the creditor should be treated as seller’s points. Buyer’s points (that is, points charged to the buyer by the creditor), however, are finance charges.2. Other seller-paid amounts. Mortgage insurance premiums and other finance charges are sometimes paid at or before consummation or settlement on the borrower’s behalf by a noncreditor seller. The creditor should treat the payment made by the seller as seller’s points and exclude it from the finance charge if, based on the seller’s payment, the consumer is not legally bound to the creditor for the charge. A creditor who gives disclosures before the payment has been made should base them on the best information reasonably available.
You as the lender can not assign the lump sum credit to specific credits in order to reduce the APR.
If the seller is paying specific fees you would disclose those in the seller paid column.
If the seller credit is a general credit (not applicable to specific charge) it would be disclosed as lump sums per 38(j)(2)(v) and 38(k)(2)(vii).
I apologize we overlooked your question earlier.
This sounds like a transitory space which would not constitute a dwelling under HMDA.
Jack was likely referring to the HMDA Platform, a web-based data submission and edit-check system, which is expected to streamline the HMDA submission process and reduce burden on HMDA filers.
Here are a couple of links that give information on the HMDA Platform:
https://www.consumerfinance.gov/data-research/hmda/des-update-2017
https://www.consumerfinance.gov/data-research/hmda/tech-previewThe CFPB has not indicated when the Platform will be released.
Also, here is an article we posted in January on the LAR Formatting Tool:
https://mycomplianceresource.com/another-piece-of-the-hmda-puzzle-released/. It is intended to assist small volume financial institutions to create an electronic file that can be submitted to the HMDA Platform.We have an webinar on April 10, HMDA Implementing the New Rules Part 2 – Completing the Revised LAR, that you might want to check out. Information is available here: https://mycomplianceresource.com/event-registration/?ee=107.
Under the new rule effective 1-1-18, 1003.4(a)(1)(I)(B)the ULI must include up to 23 additional characters to identify the covered loan or application, which:
(1) May be letters, numerals, or a combination of letters and numerals;
(2) Must be unique within the financial institution; and
(3) Must not include any information that could be used to directly identify the applicant or borrower…
If your system consistently adds a character to the end of the original loan number both on your core and for HMDA that should be fine. If the number doesn’t change on your core, but is changed (character added) for HMDA reporting it does not seem to meet the requirement that the number be unique within your financial institution since you are using the same number for the purchase and refi on your core.
We are hosting a HMDA webinar that will cover this on April 10. It is HMDA Implementing the New Rules Part 2 – Completing the Revised LAR and is accessible by clicking here.
Your financial institution and your subsidiary mortgage company would determine coverage independently.
Your financial institution will follow the coverage rules under Reg C, 1003.2, for a bank, savings association, or credit union.The subsidiary would follow the coverage rules for a “for-profit mortgage lending institution” in Reg C under 1003.2.
The 50% limitation applies only to purpose credit. However, you may be required to complete form U-1. (See link to FRB Reg U Compliance Guide and an excerpt.)
https://www.federalreserve.gov/bankinforeg/regucg.htm
What are the responsibilities of a bank lender under Regulation U?
Regulation U has two important requirements for bank lenders:
The bank lender must obtain from the borrower, and complete, a purpose statement (form U-1) for each loan secured by margin stock if the loan exceeds $100,000.
The bank lender must adhere to margin requirements (currently 50 percent) for all purpose loans secured by margin stock.
What is a nonpurpose loan under Regulation U?
A nonpurpose loan is a loan made for any purpose other than purchasing or carrying margin stock.
What are the requirements of Regulation U for a nonpurpose loan?
If the loan is secured directly or indirectly by margin stock, form G-3 or form U-1 must be completed as described above. If the loan is not secured directly or indirectly by margin stock, no form need be completed. Regulation U places no restriction on the amount of credit that may be extended on nonpurpose loans secured by margin stock.What are forms G-3 and U-1?
Forms G-3 and U-1 are often referred to as “purpose statements.” Each is a two-page form wherein the borrower must disclose (1) the use to which the loan proceeds will be put, (2) the amount of the loan, and (3) the collateral for the loan. The collateral need not be listed for nonpurpose loans. The form must be signed by both the borrower and the lender. The form is not filed with the Federal Reserve, but it must be kept in the lender’s records for at least three years after the termination of the credit.Response by Don Blaine:
I think this meets the definition of a bonus in Regulation DD because it’s a gift given to a consumer for opening a new account even though there are other stipulations such as Direct Deposit and a card transaction. If the bank was paying existing customers to add a direct deposit service then the “bonus” requirements would not apply since the purpose is to get the consumer to add a new service to an existing account rather than to open a new account. Since it’s a bonus, the plan would trigger account opening disclosures related to bonuses in 1030.8(d) which was also part of the inquiry.The 1030.4 account opening disclosure does not need to be provided until “requested” by a consumer but must be given before the account is opened. If a consumer simply saw the ad with the bonus information and called or visited the bank inquiring about the interest rate, APY or fees associated with the account that inquiry did not trigger the need to give written account disclosures. But if the consumer specifically asks for more information in writing or for the specific account disclosures this action would trigger the bank’s need to provide the initial account disclosures. Those initial account disclosures must also state the amount or type of bonus, when the bonus will be provided and any minimum balance and time requirements to obtain the bonus.
Suggestions – use the term “new money” in the ad versus “new account”. Otherwise, current accountholders will want to close their existing account and transfer to the new promotion to earn the $150. Timeframes must also be set forth, such as the timeframe in which a consumer must apply to obtain the bonus or the timeframe that the signature based card transaction must be conducted. Ad likely would need to say that the signature based transaction must be conducted within a certain period of time such as 90 days. Ad would also need to say when this bonus program ends such as “offer valid until xx/xx/xx” or bonus program will never end. Ad should say when bonus will be deposited into the consumers account such as within 30 days after meeting signature based transaction requirement and xx number of months of having direct deposit into an account unless simply setting up the direct deposit is all that the bank is after. Bank would also need to set forth any stipulations where it is able to debit account for bonus amount after bonus credited.
I agree its misleading to say that bonus will be provided at account opening if there are conditions that the consumer will need to meet such as a signature based card transaction.
Kmeade,
The confusion with this comes in because the statute wording is more ambiguous than the regulation. From reading the statute (15 USC 1635) it would seem to apply regardless of ownership interest. On the other hand the regulation gives us more detail and tells us ROR applies to a consumer whose principal dwelling will be used as collateral and that consumer has ownership in that collateral (see below). Based on the law you can offer ROR to those who use the collateral as their primary residence and don’t have ownership interest, but if you comply with the regulation it should not be an issue and you will be deemed to be in compliance with Regulation Z and the rescission rules.1026.23(a) states:
Consumer’s right to rescind. (1) In a credit transaction in which a security interest is or will be retained or acquired in a consumer’s principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction, except for transactions described in paragraph (f) of this section.I would agree with your examiner. The language places requirements on the customer that the regulation does not allow, which is that the bank may require the customer to first dispute errors with merchants (not permitted under Reg E). Perhaps it is trying to state for disputes that do not qualify as errors under Reg E (such as customer is unsatisfied with product) that the customer may need to dispute it with the merchant. Either way, I think this language is an issue.
I have a contact at JH. I’ll reach out to him to get his take on the form and ask about additional forms they might have. I know contacting the vendors can be time consuming and frustrating, but I suggest you reach out to your contact at JH to relay the issue.
A financial institution shall collect data regarding applications for, and originations and purchases of, home purchase loans, home improvement loans, and refinancings for each calendar year. Based on your comments about the loan it does not qualify as a home purchase, home improvement, or refinancing as defined below under HMDA and as a result would not be reportable.
Home improvement loan means:
(1) A loan secured by a lien on a dwelling that is for the purpose, in whole or in part, of repairing, rehabilitating, remodeling, or improving a dwelling or the real property on which it is located; and
(2) A non-dwelling secured loan that is for the purpose, in whole or in part, of repairing, rehabilitating, remodeling, or improving a dwelling or the real property on which it is located, and that is classified by the financial institution as a home improvement loan.Home purchase loan means a loan secured by and made for the purpose of purchasing a dwelling.
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.My opinion would be that it would not be permitted since the person would have to be a customer (or open an account) to win/utilize the prize. If you want to donate a savings bond I that would be fine.
In terms if federal law allows you to host an “like us to win” contest on facebook it is unclear how regulators view these “like us to win” contests. Many banks offer these types of promotions on their facebook pages and the regulators have not, to my knowledge, given any clear guidance on the topic. There is the chance that they interpret that you are requiring consumers to advance something of value with the “like”.
If this is something you decide to do I would suggest you check your state law for any restrictions and disclosure requirements, review facebook’s rules on promotion (https://www.facebook.com/page_guidelines.php#promotionsguidelines), make your official rules available via link on in the post and clarify that no purchase is necessary to win. And finally it would be a good idea to run this by your regulator to get their opinion since they can have differing opinions with these somewhat grey areas.
