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A fee that the creditor requires as part of the transaction would go under the Loan Costs section as you described.
You’re correct, you only need to verify only what is relied on to determine the borrower’s ability to repay.
If a customer is simply wanting pricing information can’t you provide the range of rates and associated pricing without pulling a credit report? I would be hesitant to pull a credit report for someone requesting rate information.
FCRA says as long as you have a legitimate business purpose you may pull a credit report. Look to 604.a(3). It sounds like this might be a verbal application or prequalification/preapproval request. You may need to review your bank’s policy/procedures to determine when you are permitted to pull credit reports. Also, review your contract with the CRA determine what it allows. If you don’t have something in writing (application or permission from consumer) you need to document when you received the request from the consumer and why it constitutes a legitimate business purpose. Also, there may be situations when an AAN would need to be sent. All of this will need to be tracked and documented – you need to determine if your financial institution has controls in place to do this outside of your normal application process.
Answer by Jack Holzknecht:
First make sure the loan is a higher priced mortgage loan (HPML). Is the transaction covered by Regulation Z? Is the loan secured by a first lien on a consumer’s principal dwelling? A temporary loan is exempt.
A creditor may not extend a HPML secured by a first lien on a consumer’s principal dwelling unless an escrow account is established before consummation. Your loan was apparently illegal when made. Your options to resolve this situation are limited.
•The terms of the note or mortgage may allow you to demand immediate repayment of the loan. Have bank counsel carefully review the terms of your loan documents before considering this action.
•You could lower the borrower’s rate to a level that assures the loan is no longer a HPML.
•You can live with the violation. If detected by examiners or auditors they would likely require a “cure,” probably in the form of a lower rate to eliminate the HPML status.You were required to establish the escrow before consummation. The initial escrow disclosure required by RESPA can be delivered at closing or on a delayed basis.
Answer by Jack Holzknecht:
First make sure the loan is a higher priced mortgage loan (HPML). Is the transaction covered by Regulation Z? Is the loan secured by a first lien on a consumer’s principal dwelling? A temporary loan is exempt.
A creditor may not extend a HPML secured by a first lien on a consumer’s principal dwelling unless an escrow account is established before consummation. Your loan was apparently illegal when made. Your options to resolve this situation are limited.
•The terms of the note or mortgage may allow you to demand immediate repayment of the loan. Have bank counsel carefully review the terms of your loan documents before considering this action.
•You could lower the borrower’s rate to a level that assures the loan is no longer a HPML.
•You can live with the violation. If detected by examiners or auditors they would likely require a “cure,” probably in the form of a lower rate to eliminate the HPML status.You were required to establish the escrow before consummation. The initial escrow disclosure required by RESPA can be delivered at closing or on a delayed basis.
You are correct. The appraisal notice under Regulation B would still need to be given for transaction secured by a first lien on a dwell even if the loan is denied within 3 business days of application and no LE is provided.
Also keep in mind that there is an appraisal delivery notice under Reg Z related to applications for HPMLs.
If the loan is temporary financing (plan to replace with longer term financing) you would not report the temporary loan. If it not temporary you would report it as a purchase.
A consumer loan secured by a dwelling is subject to the ability to repay rules in 1026.43. There isn’t an exception for taking collateral out of an abundance of caution. If you are trying to meet the ATR requirements you will have to consider the balloon payment if the term is less than 5 years after the first payment (61-62 months); for a QM it must be between 5 and 30 years. You can find these rules in 1026.43.
You as the creditor decide if you will require signatures on the LE and CD. You are only required to give a copy of the disclosures to the primary obligor, so you wouldn’t be required to give the disclosure to the co-signer. See 17(d)(2) below. If your bank chooses to obtain signatures we believe it is prudent to obtain the signatures of all obligors.
1026.17(d)(2):
2. Multiple consumers. When two consumers are joint obligors with primary liability on an obligation, the disclosures may be given to either one of them. If one consumer is merely a surety or guarantor, the disclosures must be given to the principal debtor. In rescindable transactions, however, separate disclosures must be given to each consumer who has the right to rescind under § 1026.23, although the disclosures required under § 1026.19(b) need only be provided to the consumer who expresses an interest in a variable-rate loan program. When two consumers are joint obligors with primary liability on an obligation, the early disclosures required by § 1026.19(a), (e), or (g), as applicable, may be provided to any one of them. In rescindable transactions, the disclosures required by § 1026.19(f) must be given separately to each consumer who has the right to rescind under § 1026.23. In transactions that are not rescindable, the disclosures required by § 1026.19(f) may be provided to any consumer with primary liability on the obligation. See §§ 1026.2(a)(11), 1026.17(b), 1026.19(a), 1026.19(f), and 1026.23(b).The disclosure of the APR alone wouldn’t trigger a statement about the payment. However you may have other information in your advertisement that would require more detail. You should review 1026.24(f) and its commentary.
An institution may rely on a previous determination when it increases,
extends, renews, or purchases a loan. Subsequent transactions by the same
institution with respect to the same property, such as assumptions,
refinancings and junior lien loans, are considered renewals and you may use the an existing determination if:
1) The previous determination is not more than seven years old; and
2) No new or revised flood map has been issued in the interim; and
3) The determination was recorded on the SFHDF.Assuming you have life of loan coverage, you would likely have have been notified of a map change. In addition, loans for which you will use an existing determination you need to consider life of loan when the original loan is paid off before the secondary loans (ask your flood determination provider if there is a way to continue LoL for that property).
Have you tested the software to see if it actually itemizes the transfer taxes on the LE or if it is just asking for that information for comparison purposes with the CD and actually disclosed the sum on the LE? I am not understanding why itemizing on the CD is causing it to be out of tolerance.
If I am misunderstanding something please let me know.
Please see below. You may pay a bonus over the 10% limit if #2 below applies. If they are a LO then the 10% limit under #1 would apply. You base the 10 or fewer determination on the 12 month period prior to when you make the determination to pay the bonus. The SECG breaks down the examples in an easy to read format: https://files.consumerfinance.gov/f/201503_cfpb_2013-loan-originator-rule-small-entity-compliance-guide.pdf.
SECG:
“You may pay compensation under a non-deferred profits-based compensation plan to an individual loan originator if the compensation is not based on the terms of that individual loan originator’s transactions and either:
1) The compensation paid does not, in the aggregate, exceed 10 percent of the originator’s total compensation corresponding to the time period for which the compensation under the non-deferred profits-based compensation plan is paid (the “10-percent total compensation limit” or “10-percent limit”).
2) The individual was a loan originator for 10 or fewer transactions consummated during the 12-month period preceding the date of the compensation determination.”From the information you’ve given it sounds like you are converting from an open end to a closed end transaction or you have a completely new transaction. Based on these assumptions closed end disclosures would be required and TRID would apply. Take a look at 1026.40-5(iii). Also you may want to review 1026. 40(f).
