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My interpretation of the KRS is that the disclosure is required when insurance of any kind is required in connection with a loan. Also, if your financial institution sells insurance then you would be required to give the notice anytime you offer or sell insurance in connection with a loan at your FI.
I’m going to run this by the group here to see if they have the same interpretation.
I assume you are requiring the service and it is being paid to a third party so it must be itemized on the loan estimate.
1026.37(f)(2):
Services you cannot shop for. Under the subheading “Services You Cannot Shop For,” an itemization of each amount, and a subtotal of all such amounts, the consumer will pay for settlement services for which the consumer cannot shop in accordance with § 1026.19(e)(1)(vi)(A) and that are provided by persons other than the creditor or mortgage broker.
Also, the October 2014 CFPB webinar addresses the requirement to itemize fees paid to their parties in a question about fees that might have been rolled into the origination charge.Neither the regulation nor the commentary specifically state how you must document joint intent; it says it must be evidenced at the time of application. If you are taking a application over the telephone it is reasonable to evidence the intent to apply jointly by documenting the intent, whom it was given by and who received it. It may be acceptable to employ this method for certain written applications, and it will depend in part on what your bank’s policy is for loan applications (e.g. signatures and joint intent either are or are not required on written apps). I believe it would cause fewer problems down the road if all written applications were handled consistently.
1002.7(d)(1)-3
3. Evidence of joint application. A person’s intent to be a joint applicant must be evidenced at the time of application. Signatures on a promissory note may not be used to show intent to apply for joint credit. On the other hand, signatures or initials on a credit application affirming applicants’ intent to apply for joint credit may be used to establish intent to apply for joint credit. (See Appendix B.) The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information. For example, signatures on a joint financial statement affirming the veracity of information are not sufficient to establish intent to apply for joint credit.The agencies did update their exam procedures to cover the new TRID rules, but there isn’t a checklist specifically for TRID which is what I’m guessing you are looking for. If you search the web for TRID audit tools/checklist I believe you will have some sources pop up.
Answer by Don Blaine:
Great question Santana. The rule and Preamble are very clear in that you need to obtain new CIP information (name, address, SSN, etc) at the time of account opening for each new account and can’t rely upon already obtained information or documents. However, the verification of identify issue isn’t articulated as clearly in either the new rule or in the Preamble but I think there is enough guidance in the Preamble that will allow us to reach a conclusion. My short answer is that your bank must both obtain beneficial ownership information and verify information at the time of account opening for each new account and cannot rely upon previously obtained CIP identity verification documents or information such as driver’s license information.Listed below is my supporting information:
The relevant beneficial ownership requirements of FinCEN’s regulation in 1010.230(b)(1) and (b)(2) is set forth below and under the identification prong (b)(1) clearly states that the bank should “identify the beneficial owner(s) … AT THE TIME A NEW ACCOUNT IS OPENED (emphasis added). The 230(b)2) verification requirement doesn’t contain the same degree of specificity and simply requires the bank to ‘verify the identity of each beneficial owners …. according to risk based procedures to the extent reasonable and practicable.”
Most of the guidance in the Preamble relates to ownership or identification rather than verification as evidenced by use of the following statements: “”FinCEN believes that beneficial ownership information must be at the time of account opening, both (1) current; and certified to the best of the consumer’s knowledge at that point in time. “FinCEN declines to permit reliance solely upon previously gathered alternate sources of beneficial ownership information.”
1010.230(b) (1)Identification and verification. With respect to legal entity customers, the covered financial institution’s customer due diligence procedures shall enable the institution to: Identify the beneficial owner(s) of each legal entity customer at the time a new account is opened, unless the customer is otherwise excluded; and (2) Verify the identity of each beneficial owner identified to the covered financial institution, according to risk-based procedures to the extent reasonable and practicable.
There were several questions submitted in response to the Notice of Proposed Rulemaking on your issue where guidance was sought on “whether a financial institution must identify and verify a legal entity customer’s beneficial owners each time it opens a new account …or whether the requirement applies only to the first time an account is opened.” FinCEN responded by stating: “…the opening of a new account is a relatively convenient and otherwise appropriate occasion to obtain current information regarding a customer’s beneficial owner”. Again, FinCEN’s response was primarily directed to obtaining identification information rather than verifying identification information.
The record retention requirement for validation information (Driver’s License) info is 5 years after the “record is made”. This would create administrative issues if the original driver’s license you relied upon was obtained 6 years ago as the record retention period would have expired. Additionally, like CIP you have to ensure the documentary evidence, such as a driver’s license, is not expired at the time of bank review.
I hope my answer was responsive to your question.
Patty,
If the difference is due to rounding that is required on the loan estimate then you would not need to reimburse. See comment 1026.38(i)-2.from kowsley: There are multiple notice requirements under the open-end (not home secured) rules in Reg. Z but requiring a notice each time the borrower accesses the line is not a requirement. If you are utilizing a 3rd party vendor (credit card) it could possibly be a requirement for them?
Are you talking about the Qualified Mortgage requirements in Reg Z, 2016.43? If so, home equity lines of credit (open end) are exempt from the requirements. There are repayment ability verification requirements in HOEPA rule under 1026.34 for High Cost HELOCs.
Under the HPML escrow requirement there is an exception for temporary financing:
A temporary or “bridge” loan with a loan term of twelve months or less, such as a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within twelve months.And under the HPML appraisal rules there is exception for:
A loan with maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer’s principal dwelling.See 1026.35(b)(2)(c) and (c)(2)(v):
https://www.gpo.gov/fdsys/pkg/CFR-2016-title12-vol9/pdf/CFR-2016-title12-vol9-sec1026-35.pdfYou would need to know who your borrower (i.e. the consumer) is before you can proceed with the transaction, including issuing disclosures. A loan to an LLC would not be made to a natural person and therefore not covered by Reg Z. Reg Z (1026.3 commentary) does tell us that loans to certain trusts are considered made to a natural purpose and covered by Reg Z.
timob1973,
Here is the link to the applicable portion of the TILA:
https://www.law.cornell.edu/uscode/text/15/1635.And here’s a q&a in which Jack’s explains the discrepancy: https://mycomplianceresource.com/forums/topic/rescission-intended-for-jack/
I recommend you seek advice from your bank’s attorney on what steps you need to take for this transaction.
Per 12 CFR 339.4 (FDIC) the flood regulations state that flood insurance isn’t required on:
Any structure that is a part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence. For purposes of this paragraph (c): (1) ‘‘A structure that is a part of a residential property’’ is a structure used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes;and
From page 25 of the final flood rules (https://www.fdic.gov/news/board/2015/2015-06-16_notice_sum_c_fr.pdf):
“The Agencies believe detached structures used for commercial, agricultural, or other business purposes should be protected adequately by flood insurance as collateral given their value to the borrower and lender, and should not be covered by the detached structures exemption.”I am assuming this is a laundry facility that charges residents. If so, then I would consider it a building that is for commercial use. As a result, it would not qualify for the detached structure exemption.
We had a similar question on this recently. You can the question and our answer linked here: https://mycomplianceresource.com/forums/topic/late-le/.
I agree this seems incorrect. The “Date Issued” should be the date that the disclosures are mailed or delivered. Since the consumer never consented to receive the disclosures electronically you did not deliver them electronically; rather you issued paper copies on a different date. As a result, the date they were issued electronically isn’t the actual “date issued”. Relying on a date that they were delivered electronically is not the same as the date they were actually issued (since ESign compliance wasn’t met). It would be worth a call to your LOS vendor to see if there is a way to resolve this.
I’ll forward this to Jack for any additional comments he might have.
