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Based on what you’ve described, this seems to be a changed circumstance under 1026.19(e)(3)(iv). If it meets those criteria, you may re-disclose the affected charges.
Just a reminder that in the case of 10% tolerance category charges, the aggregate amount of those charges must increase by more than 10 percent in order to compare the final charge to the revised amount. If it the change doesn’t cause the 10% tolerance category charges to increase by more than 10%, you may still provide a revised LE for the customer’s benefit but you can’t compare the final charge to the revised charge – it would be compared to the charge originally disclosed.
There was an enforcement action from the OCC against Woodforest National Bank back in 2010. Among the many issues listed in the consent order was that the bank charged a consecutive overdraft fee. The consent order stated, “[p]rior to approximately May 15, 2010, accounts that were not brought to a positive balance within seven days were charged a “continuous overdraft fee.” This practice was unfair because, once continuous overdraft fees began, many Bank customers were unable to avoid the assessment of continuous overdraft fees.”
If you provide the customer a way to avoid the continuous overdraft, other than paying the negative balance (I say this because some people won’t be able to pay the overdraft and associated fees, which will only result a larger negative balance and a negative balance they’ll never be able to resolve), it might be more tolerated by the examiners.
https://www.occ.gov/news-issuances/news-releases/2010/nr-occ-2010-122.html
Answer by kowsley:
So in essence you have a “purchase” (manu. Home) and a “refi”(land). The definition of purchase in 1026.37(a)(9) states, To finance the acquisition of the property identified in (a)(6), which is the “property” field. I assume you are listing the land in the “property” field? If so, since the borrower isn’t financing the acquisition of the land, he/she is refinancing the property listed in (a)(6); therefore, I would list it as a “refinance”.I would consider it a changed circumstance and re-disclose if caused any charges to be out of tolerance. If it did not affect any charges it would not need to re-disclose.
I would consider it a changed circumstance and re-disclose if caused any charges to be out of tolerance. If it did not affect any charges it would not need to re-disclose.
I would consider it a changed circumstance and re-disclose if it were to cause a charge to be out of tolerance. If it isn’t affecting any charges, then re-disclosure isn’t necessary.
The Reg Z, 1026.19, discusses corrective action in two instances after consummation – a “clerical error” or an “event occurring after consummation”. From what you’ve described, finding that the APR is inaccurate after the loan has closed would not fit into either of these.
You would look to the Truth in Lending Act sections 1607 and 1640 for cures. In addition, linked here is an interagency joint statement on restitution you may find helpful: https://www.fdic.gov/regulations/laws/rules/5000-300.html. It is a good idea to involve the bank’s attorney when working through the corrective action.
Based on the guidance quoted below from your TRID for Construction Loans manual, a construction only loan with monthly or quarterly interest payments and principal outstanding due at maturity would be disclosed as “interest only”, correct? –
Yes, that is correct according to oral guidance we received from the CFPB. I want to reiterate what was stated in the manual, which is that this is not written in the regulation or commentary nor did we receive official written guidance from the CFPB, but at this point their oral guidance is our best information.
You are correct that if you have an interest only construction loan with a balloon payment that the balloon payment would be disclosed in the Loan Terms table according to 1026.37(b)(5) even though the product may be described as interest only.
Based on the commentary quoted below found in your Understanding and Implementing the New Integrated Disclosures manual, would these loan types be considered “balloon payment”?
– Semi-annual interest payments with principal outstanding due at maturity
– Single payment with all interest and principal outstanding due at maturity
From my understanding of what you are asking and the informal guidance we have received from the CFPB the first scenario would be listed as “interest-only” in the product description and as having a balloon feature under the Loan Terms table. And scenario 2 would be balloon for both.
If the loan is subject to Reg Z, regardless of whether it is an HPML, you would report rate spread. Please see the information from the regulation and HMDA guide, below.
1003.4(a)(12)(i) states: “For originated loans subject to Regulation Z, 12 CFR part 1026, the difference between the loan’s annual percentage rate (APR) and the average prime offer rate for a comparable transaction as of the date the interest rate is set, if that difference is equal to or greater than 1.5 percentage points for loans secured by a first lien on a dwelling, or equal to or greater than 3.5 percentage points for loans secured by a subordinate lien on a dwelling.”
Effective January 1, 2018 this part reads: “For covered loans subject to Regulation Z, 12 CFR part 1026, other than assumptions, purchased covered loans, and reverse mortgages, the difference between the covered loan’s annual percentage rate and the average prime offer rate for a comparable transaction as of the date the interest rate is set.”
Also when looking at the Guide to HMDA Getting it Right it discusses when and what to disclose on p. A-8: https://www.ffiec.gov/hmda/pdf/2013guide.pdf
It sounds like you have been disclosing it correctly on page 2 under Closing Cost Details/Borrower Paid Before Closing. The Calculating Cash to Close would then show under Closing Costs Paid Before Closing. See the CFPB’s CD example, linked below, showing the credit report paid by borrower before closing.
https://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25B.pdf
I don’t believe it would be disclosed as a deposit under L. since doesn’t fit the definition of what a deposit is, described in the regulation, and it would not be listed under Other Credits because it was already disclosed in section “f” and “h”. Again, look at the closing disclosure linked above and follow the credit report fee that is paid before closing by borrower and how that is disclosed (the credit report fee is omitted from section K.3 on page 3).
If you are allowing the borrower to shop for the settlement agent then you would be providing them with the list of providers and, assuming the borrower chooses a provider from your list, the fee would be subject to the 10% tolerance threshold. If you aren’t allowing the borrower to shop or do allow the borrower to shop and didn’t give a list of providers, the fees would be subject to the 0% tolerance threshold. Finally, if you allow the borrower to shop and give the list of providers and the borrower selects a provider not on the list then the fee is not subject to any tolerance threshold.
It sounds like you are allowing the borrower to shop for the settlement agent, so I am assuming you are providing a list of providers. If so, you are fine to disclose a fee from a provider on that list. If the borrower selects someone not on that list then the fee is not subject to any tolerance. If they do select someone on the list the fee is subject to the 10% tolerance rule.
The answer is yes to both of your questions assuming you have a legitimate changed circumstance. You can find this in 1026.19(e)(4)(ii).
I haven’t heard this and don’t believe Reg Z allows for use of a different form/format. I look to 1026.19(f)(4)(i) for the requirement to provide the CD to the seller. And then to 1026.38(t)(3) and its commentary for the format requirements and 1026.38(t)(5)(v)-(vi) for permitted variations for seller disclosures.
I tried searching for information from ALTA that might describe or support what your closing agent told you. During that search I found a blog article (https://blog.alta.org/mortgage-disclosures/) which states: “In transactions involving a seller, the settlement agent is required to provide the seller with the Closing Disclosure reflecting the actual terms of the seller’s transaction no later than the day of consummation.”
Has the closing agent provided you with information or citations that they are basing their interpretation on. If so, I’d be interested in hearing that so we can consider their interpretation further.
You would compare the CD charge to the actual, non-rounded estimate that would have been disclosed on the Loan Estimate under § 1026.37(h) if it had been shown to two decimal places rather than a whole dollar amount. The comment below discusses this issue.
Comment 38(i)-2:
Statements of differences. The dollar amounts disclosed under § 1026.38 generally are shown to two decimal places unless otherwise required. See comment 38(t)(4)-1. As a result, any “Final” amount that is disclosed in the “Calculating Cash to Close” table under § 1026.38(i) is shown to two decimal places unless otherwise required. Pursuant to § 1026.38(t)(4)(i)(C), however, any “Loan Estimate” amount that is disclosed in the “Calculating Cash to Close” table under § 1026.38(i) is shown rounded to the nearest dollar amount, and thus matches the corresponding estimated amount disclosed on the Loan Estimate’s “Calculating Cash to Close” table under § 1026.37(h), which is shown rounded to the nearest whole dollar pursuant to § 1026.37(o)(4)(i)(A). For this reason, a “Final” amount shown to two decimal places could be a larger number than its corresponding “Loan Estimate” amount shown rounded to the nearest whole dollar, when, in fact, the apparent increase is due solely to rounding. Therefore, for purposes of § 1026.38(i)(1)(iii), (2)(iii), (3)(iii), (4)(iii), (5)(iii), (6)(iii), (7)(iii), and (8)(iii), each statement of a change between the amounts disclosed on the Loan Estimate and the Closing Disclosure is based on the actual, non-rounded estimate that would have been disclosed on the Loan Estimate under § 1026.37(h) if it had been shown to two decimal places rather than a whole dollar amount. For example, if the “Loan Estimate” amount of “Total Closing Costs” disclosed under § 1026.38(i)(1)(i) is $12,500, and the “Final” amount of “Total Closing Costs” disclosed under § 1026.38(i)(1)(ii) is $12,500.35, then even though the table would appear to show a $0.35 increase in “Total Closing Costs,” no statement of such increase is given under § 1026.38(i)(1)(iii) so long as the actual, non-rounded estimate (i.e., the estimated amount of “Total Closing Costs” that would have been shown on the Loan Estimate to two decimal places) is equal to $12,500.35.
