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Required disclosures can vary among states. Check to see what disclosures the state requires, when and by whom they are required to be given. Reg Z, 1026.28 discusses its effect on state law.
Answer by Jack Holzknecht:
“APR – The APR is separately disclosed and it is also used to determine HPML and the HCML rate status. Regardless of who pays the discount points and regardless of the duration of the buydown the reduced rate lowers the APR. When the buydown is a temporary buydown a “composite” APR calculation is required. Discount points paid by the borrower are included in the finance charge, which increases the APR. Discount points paid by someone other than the borrower are not included in the finance charge.Total Points and Fees – The Total Points and Fees are used to determine the HCML high fee status and to determine the Ability to Pay. The total finance charge, less interest, is included in the calculation of the Total Points and Fees. Borrower-paid discount points may be excluded from the Total Points and Fees calculation if certain conditions in Section 1026.32(b)(1)(E) and (F) are met.”
Note: Under the ATR/QM rules there are points and fees limitations for QMs and the QM safe harbor vs. presumption of compliance is determined based on whether or not the loan is a HPCT under the ATR rules.
It is expected that lenders know the new rate when the disclosures go out. The regulation doesn’t address how to handle a situation like you’ve described.
Why is the discount being given now this late in the process? My concern is that it would set a precedent for similar actions in the future. Please share any additional information that will help me understand the situation better.
The closing disclosure rules require that you disclose the “closing date”. In my opinion, you would need that date before you can make the disclosure. Also, if you implemented a procedure that consistently created inaccurate APR disclosures that needed to be re-disclosed, I believe examiners would likely take issue with it.
If the APR exceeds the allowable tolerance threshold in Reg Z you would need to re-disclose and wait 3 business days to close.
The APR tolerance is generally:
1/8 of 1 percent above or below the actual APR for regular transactions;
1/4 of 1 percent above or below the actual APR for irregular transaction;
and
There’s a couple of additional tolerances rules for mortgage loans to consider that are related to an incorrect finance charge. This over simplifies it, but if an incorrect APR is the result of an incorrect finance charge, where the finance charge is still considered accurate under Reg Z, the APR would also be considered accurate. (The APR tolerance standards are under 1026.22.)This question was also asked in the Flood Disaster Protection Act forum. Click here to see the question and answer.
pcorder – thanks for the question.
It sounds like you will have a building, as defined under the flood regulations, as collateral and if it sits in a flood zone, flood insurance would be required. Unless you plan to carve out the section of land with the well house from your collateral (not that I’m advocating this because it isn’t practical and in most cases would diminish the collateral) you would need to pull a SFHDF.
And since it isn’t part of a residential property the detached structure exemption would not apply.
mdunker:
It looks like we missed your question when you posted it. If you still an answer we’re happy to help. I just need clarification on a few points. First, I want to confirm your margin is 2.39%? Second, am I correct in thinking your initial rate of 2.94% is an introductory rate and not your index plus your margin (fully indexed rate)? Finally, you mentioned the 1% annual rate cap, is there a rate floor?
From member PCorder: We do not monitor hazard insurance coverage after the loan closes. Our blanket insurance will cover us for any losses.
We apologize for overlooking your question earlier.
You may begin using the new URLA on January 1, 2017 but it is not required. Collection of the expanded HMDA information is required as of January 1, 2018. The CFPB published a notice of approval allowing the collection of the new expanded HMDA data in 2017 which means you can use the new URLA beginning January 1, 2017. You can access the CFPB’s notice here: https://www.federalregister.gov/documents/2016/09/29/2016-23555/status-of-new-uniform-residential-loan-application-and-collection-of-expanded-home-mortgage.
Jack also issued a blog article in this topic. You can access the article here: https://mycomplianceresource.com/regulation-b-and-the-new-uniform-residential-loan-application/.
If you are selling loans to investors you should check with the investor to see if they will accept the new application prior to the mandatory compliance date of January 1, 2018.
1. Is an auto loan refinance exempt from MLA because the transaction is not financing the “purchase” of the automobile?
A transaction to refinance the purchase of an automobile does not meet one of the exceptions and, therefore, would be a covered transaction under the MLA.
2, Does MLA applicability differ if the borrower owns the automobile free and clear versus paying off another lender with the auto loan refinance?
If the borrower already owns the automobile and it putting it up as collateral for a loan (vehicle title loan) that would be covered transaction under the MLA.
If you are making a consumer credit transaction to a covered borrower other limitations and requirements apply beyond the 36% MAPR cap (see post above), so yes, you will still need to determine if you have a covered borrower. There are safe harbor options for making that determination.
I apologize we overlooked your question.
I agree with you cosborne. There are other requirements and limitations beyond the 36% MAPR that you will need to comply with if you have a covered borrower (e.g. disclosure requirements in 232.4 and other limitations in 232.8). You will need to know if you have a covered borrower in order to apply these requirements.
What vendor are you using?
A demand feature generally means the loan can be demanded to be paid by the lender at any time. Based on the information above it looks like your consumer note does have a demand feature and therefore the disclosure is accurate. I hesitate to make an assumption about your RE note.
Since you have questions I suggest you talk to an attorney to determine what is in your note or walk through how the note is set up in your loan origination software and what you have and have not included (e.g. demand feature). That might help you determine what is included.
