Forum Replies Created
-
Replies
-
As you stated, if you will be sending the appraisal electronically then you must comply with e-sign. You do not need evidence that the customer viewed the appraisal or opened the email. An emailed appraisal is considered delivered three days after transmitting the email (like snail mail). If you have evidence of receipt sooner than the third business day after sending (which should be easy with email), then the date that is received is considered the delivery date.
Small Entity Compliance Guide: “Send the copies to the applicant’s last-known physical or electronic address. Delivery occurs three business days after you mail or transmit the copies, or whenever you have evidence indicating that the applicant received the copies.”
35(c)(6)(ii) Timing.
1. “Provide.” For purposes of the requirement to provide a copy of the appraisal within a specified time under § 1026.35(c)(6)(ii), “provide” means “deliver.” Delivery occurs three business days after mailing or delivering the copies to the last-known address of the applicant, or when evidence indicates actual receipt by the applicant (which, in the case of electronic receipt, must be based upon consent that complies with the E-Sign Act), whichever is earlier.1026.14(a)(1)-4.i: For purposes of this timing requirement, “provide” means “deliver.” Delivery occurs three business days after mailing or delivering the copies to the last-known address of the applicant, or when evidence indicates actual receipt by the applicant, whichever is earlier. Delivery to or actual receipt by the applicant by electronic means must comply with the E-Sign Act, as provided for in § 1002.14(a)(5).
I don’t think I can say definitively that is will always be the person closing the loan or that it can always be someone else. You ma have seen it already, but comment 1026.38(r)-6 gives some good guidance. In addition, below is a discussion from the preamble. If you have additional questions after reviewing this please let us know.
p. 1175 Similarly, proposed comment 38(r)-6 would have clarified that the primary contact working at the identified party is the individual who interacts most frequently with the consumer and who has an NMLSR identification number or, if none, a license number, or other unique identifier to be disclosed under proposed § 1026.38(r)(3) and (5), as applicable, and provides examples of the primary contact to be disclosed in a given transaction.
p. 1176 A large bank also requested guidance on whether the primary contact for the creditor must be the loan originator’s name or whether the creditor may designate any individual as its contact.
p. 1177 Regarding the request for guidance on whether a creditor may designate any individual as a contact for the consumer, § 1026.38(r)(4) would have required disclosure of the name of the natural person who is the primary contact for the consumer which, in the case of the creditor is likely to be the loan originator. Section 38(r)(4) would not have permitted designation of a natural person completely unrelated to the consumer’s transaction as the primary contact for the consumer in all instances but there may be situations where, depending on the facts and circumstances, the primary contact for the consumer is not the loan originator.
1. This is largely a contract issue. You may choose to refinance or modify the existing contract. You could require the borrower to start making the full amortizing payments or you could refinance or modify the original transaction. A refinance is a new transaction that requires new disclosures. A modification generally does not create a need for new disclosures. (This is how we answered a similar question on QA document).
2. This is really a procedural type question for the bank to decide. The escrow may be collected beginning at the time of consummation or the bank may wait until the permanent phase of the loan occurs. A one-time close transaction can be disclosed with a single LE and a single CD or can be disclosed with separate LEs and CDs for the construction and permanent phases. If a single LE and CD are used, then the disclosures reflect the escrow. If separate disclosures are used for the construction and permanent phases, and do not collect the escrow deposit until the permanent phase, then the LE and CD for the permanent phase reflect the escrow deposit.
You would need to disclose the estimated property taxes based on your best estimate of the value after construction based on the best information reasonably available. Regulation Z, 1026.37(c)(5) states, for purposes of paragraphs (c)(2)(iii), and (4)(ii) estimated property taxes and homeowner’s insurance shall reflect:
• The taxable assessed value of the real property securing the transaction after consummation, including the value of any improvements on the property or to be constructed on the property, if known, whether or not such construction will be financed from the proceeds of the transaction, for property taxes; and
• The replacement costs of the property during the initial year after the transaction, for amounts identified in § 1026.4(b)(8).3. You could do a modification; however, you will need to consider the ATR rules and whether they would apply.
4. We really don’t have a recommendation. You will want to analyze your system capabilities.
As I’m sure you know, there isn’t anything that specifically mentions this type of situation, but I do believe it would be considered a gift and be disclosed under Adjustments and Other Credits on the LE.
If the building isn’t securing the loan in question, flood insurance wouldn’t be required. Check with an attorney to help you make that determination.
§ 22.3 Requirement to purchase flood
insurance where available.
(a) In general. A bank shall not make,
increase, extend, or renew any designated
loan unless the building or mobile
home and any personal property
securing the loan is covered by flood
insurance for the term of the loan.If you the building doesn’t secure the loan in question then flood insurance wouldn’t be required. You should check with your attorney to make that determination.
§ 22.3 Requirement to purchase flood
insurance where available.
(a) In general. A bank shall not make,
increase, extend, or renew any designated
loan unless the building or mobile
home and any personal property
securing the loan is covered by flood
insurance for the term of the loan.Check out this prior Q&A: https://mycomplianceresource.com/forums/topic/when-does-120-day-count-begin-for-foreclosures/
Also, here’s a good article that lays out the information: https://www.mondaq.com/unitedstates/x/396300/Financial+Services/The+120+Days+Before+Foreclosure+Requirement
And here’s the link to the proposal referenced in the article: https://www.gpo.gov/fdsys/pkg/FR-2014-12-15/pdf/2014-28167.pdf
The comment 1026.37(h)(1)(vii)-5 “Adjustments and Other Credits – Proceeds from subordinate financing or other source” states:
Funds that are provided to the consumer from the proceeds of subordinate financing, local or State housing assistance grants, or other similar sources are included in the amount disclosed under § 1026.37(h)(1)(vii).
First, as to who should receive the CD:
In rescindable transactions, the closing disclosure must be given separately to each consumer who has the right to rescind. In transactions that are not rescindable, the closing disclosure may be provided to any consumer with primary liability on the obligation.Second, signatures aren’t required on the CD. For creditors that have a policy of collecting signatures on the CD it is to evidence the disclosure was provided/received by the consumer and in the applicable timeframe. If a signature doesn’t reflect when the consumer was deemed to have received it your file should be documented well enough to show when it was actually provided.
In the situation you gave, there could possibly be an issue if the second set of borrowers had the right to rescind – if your file isn’t well documented as to why there is a discrepancy, it could appear you didn’t provide the disclosures in the required timeframe. Otherwise I don’t think would be a problem. Bottom line – good file documentation is important.
You would need to give the disclosures. I am not sure I’m understanding your question about the second appraisal checklist, but I believe you are asking if you need to complete the checklist for the appraisal. If this is an HPML you would need to determine if the appraisal meets the requirements for HPMLs and the checklist we provided is a way to do that. Also, the loan may qualify for the refinancing exception under the HPML appraisal rules; even if it does there are still disclosure and delivery requirements under Reg B.
You can only reissue the Loan Estimate if you have a changed circumstance. A revised LE would need to reflect only those charges that change as a result if the changed circumstance.
Here are the changed circumstance categories:
(A) Changed circumstance affecting settlement charges. Changed circumstances cause the estimated charges to increase or, in the case of estimated charges identified in paragraph (e)(3)(ii) of this section, cause the aggregate amount of such charges to increase by more than 10 percent. For purposes of this paragraph, “changed circumstance” means:(1) An extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction;
(2) Information specific to the consumer or transaction that the creditor relied upon when providing the disclosures required under paragraph (e)(1)(i) of this section and that was inaccurate or changed after the disclosures were provided; or
(3) New information specific to the consumer or transaction that the creditor did not rely on when providing the original disclosures required under paragraph (e)(1)(i) of this section.
(B) Changed circumstance affecting eligibility. The consumer is ineligible for an estimated charge previously disclosed because a changed circumstance, as defined under paragraph (e)(3)(iv)(A) of this section, affected the consumer’s creditworthiness or the value of the security for the loan.
(C) Revisions requested by the consumer. The consumer requests revisions to the credit terms or the settlement that cause an estimated charge to increase.
(D) Interest rate dependent charges. The points or lender credits change because the interest rate was not locked when the disclosures required under paragraph (e)(1)(i) of this section were provided. No later than three business days after the date the interest rate is locked, the creditor shall provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section to the consumer with the revised interest rate, the points disclosed pursuant to § 1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms.
Based on the comment below, the CD would need to be provided to a non-borrower with a right to rescind. The LE would not.
Commentary 1026.17(d)-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).
Question 1:
Is the Adjustable Payment (AP) Table needed if we have a 12-month fixed-rate construction-only loan with interest-only payments due monthly and a final balloon payment of principal and interest? I ask because the amount of interest-only payments per month may vary. Our LOS vendor is telling me the AP Table would not apply in this circumstance due to it being a fixed-rate loan.We have had recent conversations with the CFPB and have been told the AP table would not be included in these transactions, so your LOS vendor appears to be correct.
Question 2:
If we have a loan with a single annual payment of principal and interest, do we disclose this full balloon payment in the monthly P&I payment section of Loan Terms on page 1 of the LE & CD? Example: $100,000 loan at 5% interest = 1 payment of $105,000 due at maturity. Our LOS is telling me the CFPB has advised them this is how it should be disclosed. I have not heard this anywhere else.What is the term of this loan? Is this a one time balloon payment or does the borrower make one payment of $105,000/year for X years?
That is a good question. Based on the information you’ve given, I think you’d have a difficult task proving it is indeed their new principal dwelling. If this sale were not to go through where would they be, back at their true primary residence? I would give the right to rescind – giving it when there is a small chance it isn’t required is much easier than dealing with a situation of not giving RofR when it is required.
As you have clearly stated, you must look to the primary purpose of the loan to determine if it is covered. If the purpose of the loan is both consumer and agricultural with neither primary over the other, I would take the conservative approach and treat it as a consumer loan in order to avoid any issues later on. (See the commentary below.)
1026.3(a) Business, Commercial, Agricultural, or Organizational Credit
1. Primary purposes. A creditor must determine in each case if the transaction is primarily for an exempt purpose. If some question exists as to the primary purpose for a credit extension, the creditor is, of course, free to make the disclosures, and the fact that disclosures are made under such circumstances is not controlling on the question of whether the transaction was exempt.
