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Reg X doesn’t state any exception to the rule listed below. I would contact your attorney to see what options you have available.
1024.41(f)(1) says:
(1) Pre-foreclosure review period. A servicer shall not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process unless:(i) A borrower’s mortgage loan obligation is more than 120 days delinquent;
(ii) The foreclosure is based on a borrower’s violation of a due-on-sale clause; or
(iii) The servicer is joining the foreclosure action of a subordinate lienholder.
And the CFPB has indicated that we can use the definition of delinquency in the prior section of Reg X as guidance for determining delinquency.
1024.40(a)-3. Delinquency. For purposes of § 1024.40(a), delinquency begins on the day a payment sufficient to cover principal, interest, and, if applicable, escrow for a given billing cycle is due and unpaid, even if the borrower is afforded a period after the due date to pay before the servicer assesses a late fee. See the example set forth in comment 39(a)-1.i.
The MLA does not apply to certain transactions. It states, consumer credit does not mean:
(i) A residential mortgage, which is
any credit transaction secured by an
interest in a dwelling, including a
transaction to finance the purchase or
initial construction of the dwelling, any
refinance transaction, home equity loan
or line of credit, or reverse mortgage;
(ii) Any credit transaction that is
expressly intended to finance the
purchase of a motor vehicle when the
credit is secured by the vehicle being
purchased;
(iii) Any credit transaction that is
expressly intended to finance the
purchase of personal property when the
credit is secured by the property being
purchased;
(iv) Any credit transaction that is an
exempt transaction for the purposes of
Regulation Z (other than a transaction
exempt under 12 CFR 1026.29) or
otherwise is not subject to disclosure
requirements under Regulation Z; and
(v) Any credit transaction or account
for credit for which a creditor
determines that a consumer is not a
covered borrower by using a method
and by complying with the
recordkeeping requirement set forth in
§ 232.5(b).
For those transactions MLA would not apply. We recommend that you look at each transaction to determine if one of the exceptions apply and document your findings within the respective loan file. If you determine it is not a covered transaction under MLA not further action would be necessary.I assume either the son owns the home or he owns the home jointly with his parents. If that is the case and the home is his primary residence (even if it is not the primary residence of the other owners) it would be listed as owner occupied.
Reg C, Appendix A:Owner Occupancy. Indicate whether the property to which the loan or loan application relates is to be owner-occupied as a principal residence by entering the applicable Code from the following:
Code 1–Owner-occupied as a principal dwelling
Code 2–Not owner-occupied as a principal dwelling
Code 3–Not applicable
The term “participation fee” is not defined in the final rule. However, it does seem an annual fee for the benefit of maintaining the line of credit would be considered a participation fee.
I think jhoke’s explanation of how this charge can be applied is accurate. The preamble to the final rule (p. 43584) says this when discussing MAPR requirements and applying a participation fee when there is no balance:
Section 232.4(c)(2)(ii)(B) generally
would prohibit a creditor from imposing
a charge in an open-end credit plan for
any billing cycle during which there is
no balance. However, this provision
includes an exception for a participation
fee (which otherwise would be required
to be included under
§ 232.4(c)(1)(iii)(B)) because the
Department concludes that there might
be circumstances in which a creditor
should be allowed to charge a bona fide
fee for maintaining an open-end line of
credit for a covered borrower. Still,
recognizing that a creditor could
structure a high-cost, open-end line of
credit to fit within this exception by
substantially increasing the
participation fee, the Department has
adopted a provision that limits that fee
to $100 per annum, regardless of the
billing cycle in which the participation
fee is imposed. The Department believes
that $100 is the highest reasonable
amount that a creditor could charge as
a bona fide participation fee, during a
billing cycle in which there is no
balance, for the purposes of keeping the
line of credit open to the covered
borrower. Furthermore,
§ 232.4(c)(2)(ii)(B) contains a provision
to clarify that the $100-per annum
limitation on the amount of the
participation fee does not apply to a
bona fide participation fee charged to a
credit card account that would be
eligible for the exclusion under
§ 232.4(d).I would agree that this would not be a violation of tolerance based on comment 1026.19(e)(3)(iii)-3 which states:
3. Good faith requirement for non-required services chosen by the consumer. Differences between the amounts of estimated charges for services not required by the creditor disclosed pursuant to § 1026.19(e)(1)(i) and the amounts of such charges paid by or imposed on the consumer do not constitute a lack of good faith, so long as the original estimated charge, or lack of an estimated charge for a particular service, was based on the best information reasonably available to the creditor at the time the disclosure was provided. For example, if the consumer informs the creditor that the consumer will obtain a type of inspection not required by the creditor, the creditor must include the charge for that item in the disclosures provided pursuant to § 1026.19(e)(1)(i), but the actual amount of the inspection fee need not be compared to the original estimate for the inspection fee to perform the good faith analysis required by § 1026.19(e)(3)(iii). The original estimated charge, or lack of an estimated charge for a particular service, complies with § 1026.19(e)(3)(iii) if it is made based on the best information reasonably available to the creditor at the time that the estimate was provided. But, for example, if the subject property is located in a jurisdiction where consumers are customarily represented at closing by their own attorney, even though it is not a requirement, and the creditor fails to include a fee for the consumer’s attorney, or includes an unreasonably low estimate for such fee, on the original estimates provided pursuant to § 1026.19(e)(1)(i), then the creditor’s failure to disclose, or under-estimation, does not comply with § 1026.19(e)(3)(iii).I believe you may have had a changed circumstance under 1026.19(e)(3)(iv)(A)(ii) that would have allowed you to re-disclose and reflect the property taxes.
There is not an exception for vacant land. The definition of consumer credit from the final rule is:
f)(1) Consumer credit means credit
offered or extended to a covered
borrower primarily for personal, family,
or household purposes, and that is:
(i) Subject to a finance charge; or
(ii) Payable by a written agreement in
more than four installments.
(2) Exceptions. Notwithstanding
paragraph (f)(1) of this section,
consumer credit does not mean:
(i) A residential mortgage, which is
any credit transaction secured by an
interest in a dwelling, including a
transaction to finance the purchase or
initial construction of the dwelling, any
refinance transaction, home equity loan
or line of credit, or reverse mortgage;
(ii) Any credit transaction that is
expressly intended to finance the
purchase of a motor vehicle when the
credit is secured by the vehicle being
purchased;
(iii) Any credit transaction that is
expressly intended to finance the
purchase of personal property when the
credit is secured by the property being
purchased;
(iv) Any credit transaction that is an
exempt transaction for the purposes of
Regulation Z (other than a transaction
exempt under 12 CFR 1026.29) or
otherwise is not subject to disclosure
requirements under Regulation Z; and
(v) Any credit transaction or account
for credit for which a creditor
determines that a consumer is not a
covered borrower by using a method
and by complying with the
recordkeeping requirement set forth in
§ 232.5(b).The loan is consumer purpose, is subject to Reg Z, is presumably being made to a covered borrower and doesn’t meet one of the exceptions, so it would be covered under the MLA.
This isn’t addressed in the regulation or the commentary. With that said, based on the requirement in Reg B which states to ” provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling” and considering the definition of valuation which means “any estimate of the value of a dwelling developed in connection with an application for credit” my opinion is that you would need to provide a copy of the certificate of completion since it is assessing the final value of the property.
Do we have to wait three days after receiving the updated appraisal and providing a copy to the borrowers before we can close?
Under the Reg B appraisal/valuation delivery rules you must provide a copy of each appraisal or valuation promptly upon completion or three business days prior to consummation of the transaction whichever is earlier.It’s not a HPML so can we have the customers sign a waiver for the new transaction?
Yes, you can have the customer sign a waiver, but you must have received it at least 3 business days before consummation.If we can provide the waiver do we still need to give a copy of the updated appraisal when it is received?
Yes, the waiver is only for the timing requirement. If you receive a waiver of the timing requirement you still must deliver the appraisal at or before consummation.Generally an overdraft line of credit would be covered but an overdraft service would not. Exceptions might apply; the definition of “consumer credit” in the final rule (pg. 43579-80) discusses the difference between these two services and what is considered consumer credit under the rule.
If your financial institution doesn’t offer an overdraft line of credit product you will not need to worry about the overdraft fee being a finance charge. If your bank does offer overdraft lines of credit the amount of any overdraft charge that is above what a customer without the overdraft line of credit would pay would be considered a finance charge.
Also, we had a similar question in another forum. Here’s the link to it: https://mycomplianceresource.com/forums/topic/overdraft-lines-of-credit/.
The E-Sign provides that electronic records are as valid as paper documents if certain requirements are met, meaning electronic records can satisfy any statute, regulation, or rule of law requiring information be provided in writing, if the consumer has affirmatively consented to such use and has not withdrawn such consent.
If something is required to be provided to the consumer and you plan to deliver it electronically, you will want to ensure you have met the requirements of E-Sign, including demonstrable consent.
As a reminder, make sure you are delivering electronic documents securely.
A couple of other points to clarify, if the overdraft line of credit was established prior to active duty status then the bank wouldn’t have a covered borrower and the MLA provisions wouldn’t apply. But keep in mind that SCRA limitation of 6% on the interest rate would apply to obligations established prior to active duty status, including an overdraft line of credit.
I would use the items listed to determine the difference in credit terms vs. credit plan, meaning the interest rate, length of maturity, collateral, or amount of down payment. My interpretation of “collateral” used in that section would mean insufficient collateral. For example, a mobile home may not necessarily be insufficient collateral, but you don’t offer a loan product that allows mobile homes to be taken as collateral so that would mean you don’t offer the plan requested. If you do take mobile homes as collateral and the mobile home was insufficient collateral then an AAN would be necessary.
If the lender does not offer the credit product requested (mobile home loans, HELOCs, ARMs, etc.) then an AAN isn’t required, per 1002.2(c)(2)(v).
Based on the “applicability” of the rule, I agree that the coverage would apply to overdraft lines of credit est. during active duty.
(a)(1) Applicability. This part applies to consumer credit extended by a creditor to a covered borrower, as those terms are defined in this part. Nothing in this part applies to a credit transaction or account relating to a consumer who is not a covered
borrower at the time he or she becomes obligated on a credit transaction or establishes an account for credit. Nothing in this part applies to a credit transaction or account relating to a consumer (which otherwise would be consumer credit) when the consumer no longer is a covered borrower.Pages 43579-80 of the final rule have some discussion of overdraft lines of credit: https://www.gpo.gov/fdsys/pkg/FR-2015-07-22/pdf/2015-17480.pdf.
I’m not exactly sure what type of attorney client transaction you’re talking about. If you can explain it further I’ll offer my opinion.
As for a CD/savings account secured loan, those are not permitted under the MLA effective October 3, 2016. See § 232.8(e):
Title 10 U.S.C. 987 makes it unlawful for any creditor to extend consumer
credit to a covered borrower with respect to which:
The creditor uses a check or other method of access to a deposit, savings, or other financial account maintained by the covered borrower [as collateral], except that, in connection with a consumer credit transaction with an MAPR consistent with § 232.4(b), the creditor may:
•Require an electronic fund transfer to repay a consumer credit transaction, unless otherwise prohibited by law;
•Require direct deposit of the consumer’s salary as a condition of eligibility for consumer credit, unless otherwise prohibited by law; or
•If not otherwise prohibited by applicable law, take a security interest in funds deposited after the extension of credit in an account established in connection with the consumer credit transaction.
