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I apologize for the delay in responding.
You don’t have to worry about a HOEPA violation since it didn’t meet the threshold and there aren’t any rules against lowering rates to avoid HOEPA. If it is your policy to lower rates for everyone to avoid HOEPA you should have no fair lending concers either.
You do need to track loan policy exceptions. If another similarly situated borrower were not given the same discount/you don’t lower rates across the board to avoid HOEPA, it could result in a fair lending issue. Your FI should track all exceptions to policy and you should review those as part of a fair lending review.
jeffcumbee,
I’m having trouble finding exactly what you are talking about in relation to the tax, insurance and assessments information from page 1 of the CD (1026.38(c)(2) says there needs to be a reference to (l)(7) which is page 4). Can you provide me with the full citation for the language you are looking at in the regulation? That should help me answer your question.Thanks.
Freezing the account doesn’t eliminate your requirement to comply with the flood rules.
I think following the advice in the rescinded Mandatory Purchase Guidelines would be fine; I don’t know of any recent agency guidance that contradicts that particular information.
The CFPB announced yesterday that they finalized October 3, 2015 as the effective date. We posted an article in the blog this morning cover this – please check it out.
We have heard back from two of the agencies who issued this rule (FDIC and FRB). Both say this practice would preclude you from utilizing the small lender exception under the new flood rules.
They commented that the intent of the escrow portion of the new flood rules is to have as many creditors escrowing for flood insurance as possible.
From Consumer Compliance Outlook 2 Qtr, 2011 (https://consumercomplianceoutlook.org/2011/second-quarter/hmda-and-cra-data-reporting/):
4) Do we report short-term home improvement loans that have a documented take-out commitment?
If a home improvement loan is set up like a construction-permanent loan, the loan should be reported, as explained in comment 203.2(h)-5. This section states that a construction-permanent home purchase loan is not considered a temporary loan and should be reported for HMDA purposes. If the short-term home improvement loan will be replaced with permanent financing of a much longer term, the bank would report the permanent take-out loan but not the short-term temporary loan.
This is something our staff has been discussing quite a bit lately. We have the same thought as you, but we also have concern that creditors are required to maintain the escrow on for the term of the loan unless the borrower requests termination at the applicable threshold.
We have reached out to the agencies for their opinions and we hope to be able to offer you clarification soon.
I reviewed your state law pertaining to this fee. You can find it here: https://www.in.gov/legislative/ic/archive/11620/ic/2010/title27/ar7/ch3.6.pdf. This is a unique fee since it is required by the state, but paid to the title insurance company which retains a portion and passes the remainder on to the state. Additionally, there is a disclosure requirement in the state statute.
With all this in mind and since they have probably already had this question arise, I suggest you contact Indiana’s Department of Financial Institutions for their advice on how you should disclose this fee on the integrated disclosures. Please let us know what you find out or if they aren’t able to help you.
I agree that the tax service fee would be included in the APR for closed-end credit. For HELOCs look to 1026.14(c) and its commentary. Also consider 1026.7(a)(6).
After discussing this with Jack, we both agree that from the information you’ve given the arrangement appears more as a paid referral than a joint ad. If you intend to proceed we suggest a call to your federal regulator and/or to the CFPB. Caution is needed though, if the regulators realize that this is an active arrangement both of the existing participating banks and the realtor could end up on the wrong end of an enforcement action and penalties if the regulators deem it a prohibited referral.
I am guessing what you are talking about is that most lenders require verification documents for issuing preapprovals. Currently under RESPA, and soon to be Reg Z, you can’t require verification documents for issuing a GFE/loan estimate. I believe there has been some concern that lenders can’t obtain the verification documents and therefore can’t issue a pre-approval. I believe the general consensus is that as long as you don’t have all six pieces of information that constitute an application then you don’t have an application then you don’t have application for TRID purposes and therefore the LE isn’t triggered. In that case you could ask for verification documents for the pre-approval, but if the potential borrower has provided you all six pieces of information it becomes an application for TRID purposes and you can’t require verification documents in order to issue the LE.
There is some discussion on this in the commentary and preamble to the integrated disclosure rules (located on the CFPB’s website). You can also google “TRID and preapproval” and find a lot of information.
Keep in mind that even though you may not have an application per the TRID rules you may still have an application under Reg B and you may need to follow those rules accordingly.
Hmm…that sounds like you would be paying them for a referral. I’m asking Jack to offer his thoughts, so you should hear from him soon.
Thanks for your patience.
If you proceed with this I recommend you have documentation from the web-company sellingn the advertising showing the percentage of advertising split between all parties and what the fair market value is for each percentage.
If I’m reading your question correctly, you would still be making a change to the loan product (the information you disclosed under 37(a)(10)), which is a change that would require a new waiting period. I don’t see anywhere in the regulation that there is an exception to the rule if the product change is in the customer’s favor.
