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The Bank –
Some members have asked if you would be willing to share the name of the vendor. I believe others are looking for electronic delivery vendors and aren’t having much luck.
Thanks.If the third party to which the fee is being paid is not an affiliate based on the definition provided in this section and you are not retaining the fee then it would be subject to the 10% tolerance rather than the 0% tolerance.
The Small Entity Compliance Guide provides this information – a charge is paid to the creditor, mortgage broker, or an affiliate of either if it is retained by that person or entity. A charge is not paid to one of these entities when it receives money but passes it on to an unaffiliated third party.
To calculating the amount to be disclosed under “Calculating Cash to Close/Closing Costs Financed” you would subtract the estimated total amount of payments to third parties that are not otherwise disclosed in the “Total Loan Costs” and “Other Loan Costs” sections (e.g. other mortgage(s) that will be paid off), from the total loan amount disclosed under § 1026.37(b)(1).
*If the result of the calculation is a positive number, that amount is disclosed as a negative number, but only to the extent that it does not exceed the “Total Closing Costs”.
*If the result of the calculation is zero or negative, the amount of $0 is disclosed.
Here’s an example from the premable:
Assume that a mortgage loan amount is $250,000, the estimated amount of all outstanding mortgage loans secured by the real property total $200,000, and the total estimated closing costs disclosed under § 1026.37(g)(6) are $10,000; the amount disclosed under § 1026.37(h)(1)(ii) is -$10,000, since the result of the difference between the mortgage loan amount and the estimated amount of all outstanding mortgage loans secured by the real property is positive $50,000, but since there are only $10,000 in closing costs, the amount disclosed is limited to -$10,000.
Per the above information, determine what the “Closing Costs Financed” amount should be for the loan. If the “Closing Costs Financed” calculation results in a positive number (which would be disclosed as a negative) that exceeds the “Total Closing Costs” (and since the “Closing Costs Financed” can’t exceed the “Total Closing Costs”) that could be one reason it is showing a negative number that matches the “Total Closing Costs”. Or there could be a problem with your software in that it may be automatically inserting that “Total Closing Cost” number under “Closing Costs Financed”.
I recommend testing various loan examples to determine if it is disclosing the information properly.
We also have forums set up for discussions on various LOS. If you don’t see a thread for your LOS vedor feel free to start a new thread – you might get some feedback from other financial institutions that use your LOS and have already dealt with this.
From the FDIC’s Lending Limit Regulation: (https://www.fdic.gov/regulations/laws/rules/8000-7400.html#fdic8000lending32.3)
§ 32.6 Nonconforming loans and extensions of credit.
(a) A loan or extension of credit, within a national bank’s or savings association’s legal lending limit when made, will not be deemed a violation but will be treated as nonconforming if the loan or extension of credit is no longer in conformity with the bank’s or savings association’s lending limit because–
(1) The bank’s or savings association’s capital has declined, borrowers have subsequently merged or formed a common enterprise, lenders have merged, or the lending limit or capital rules have changed;
(2) Collateral securing the loan to satisfy the requirements of a lending limit exception has declined in value; or
(3) In the case of a credit exposure arising from a transaction identified in § 32.9(a) and measured by the Model Method specified in § 32.9(b)(1)(i) or § 32.9 (c)(1)(i) the Current Exposure Method specified in § 32.9(b)(1)(iii), or the Basel Collateral Haircut Method specified in § 32.9(c)(1)(iii) after Model Method specified in § 32.9(b)(1) or § 32.9(c)(1)(i), the credit exposure subject to the lending limits of 12 U.S.C. 84 or 12 U.S.C. 1464(u), as applicable, or this part increases after execution of the transaction.
(b) A national bank or savings association must use reasonable efforts to bring a loan or extension of credit that is nonconforming as a result of paragraph (a)(1) or (a)(3) of this section into conformity with the bank’s or savings association’s lending limit unless to do so would be inconsistent with safe and sound banking practices.
(c) A national bank or savings association must bring a loan that is nonconforming as a result of circumstances described in paragraph (a)(2) of this section into conformity with the bank’s or savings association’s lending limit within 30 calendar days, except whenjudicial proceedings, regulatory actions or other extraordinary circumstances beyond the bank’s or savings association’s control prevent it from taking action.Here also is a link to the OCC’s regulation: https://www.gpo.gov/fdsys/pkg/CFR-2004-title12-vol1/pdf/CFR-2004-title12-vol1-sec32-6.pdf.
You would continue to provide the disclosures as you currently do. The format of the disclosures has changed, but they are still required to be delivered to the consumer(s) and the definition of consumer hasn’t changed.
If you aren’t locking the rate you should check “no” under the Rate Lock section of the LE.
If you do lock the rate, I am not aware of anything that says it has to be 90 days. Can you tell me where you found that information?
*Kowsley – I’m not sure if this answers your question. If it doesn’t let me know.*
If the consumer is allowed to shop and is given a list of settlement service providers and the borrower then chooses a provider from that list or doesn’t choose one at all then the fee would be included under “Loan Costs/Block B” and subject to the 10% tolerance.
If the consumer is allowed to shop and is given a list of settlement service providers but chooses a provider that is not on the list then the fee would be included under “Loan Costs/Block C” and would not be subject to a tolerance.
Comment 19(3)(ii)-3 gives a good example:
If, in the disclosures provided pursuant to §§ 1026.19(e)(1)(i) and 1026.37(f)(3), a creditor discloses an estimated fee for an unaffiliated settlement agent and permits the consumer to shop for that service, but the consumer either does not choose a provider, or chooses a provider identified by the creditor on the written list provided pursuant to § 1026.19(e)(1)(vi)(C), then the estimated settlement agent fee is included with the fees that may, in aggregate, increase by no more than 10 percent for the purposes of § 1026.19(e)(3)(ii). If, however, the consumer chooses a provider that is not on the written list, then good faith is determined according to § 1026.19(e)(3)(iii).The only thing that is clear is that there are conflicting opinions on this topic. I can see both sides of this argument. Because of that and knowing that examiners may have similar interpretations, I think it may be best to take the conservative approach, which is to not revise charges due to changed circumstances after the closing disclosure is issued and to reimburse any tolerance violations.
I’ll ask Jack to offer his thoughts. He might have a different opinion.
If you plan to deliver the disclosures electronically you must comply with E-SIGN.
Assuming you comply with E-SIGN, if you electronically deliver the disclosures the consumer is considered to have received them 3 business days after they are sent. You are not required to determine whether or not the consumer has opened or reviewed the disclosures.
You may also rely on evidence that the consumer received the emailed disclosures earlier. For example, if the creditor emails the disclosures at 1 p.m. on Tuesday, the consumer emails you with an acknowledgement of receipt of the disclosures at 5 p.m. on the same day, the creditor could demonstrate that the disclosures were received on the same day.
Is this document prep fee charged only to those customers who finance the vehicle or is it charged to cash customers as well?
Are you referring to the “Monthly Principal and Interest” in the Loan Terms table per 1026.37(b)(3)? If so, I agree that the regulation and commentary to 1026.37(o)(4) states that an amount is not permitted to be rounded unless 37(o)(4) specifically requires an amount to be rounded. 37(o)(4) does not mention rounding of the “Monthly Principal and Interest” to be disclosed per 1026.37(b)(3).
Paragraph 37(o)(4)(i)(C) and its commentary does allow rounding of the total monthly payment (under the Projected Payments Table) in some circumstances. See the commentary below:
Section 1026.37(o)(4)(i)(C) requires the total monthly payment amount disclosed under § 1026.37(c)(2)(iv) to be rounded if any of its components are rounded. For example, if the total monthly payment disclosed under § 1026.37(c)(2)(iv) is composed of a $2,000.49 periodic principal and interest payment required to be disclosed by § 1026.37(c)(2)(i) and a $164.49 periodic mortgage insurance payment required to be disclosed by § 1026.37(c)(2)(ii), the creditor would calculate the total monthly payment by adding the exact periodic principal and interest payment of $2,000.49 and the rounded periodic mortgage insurance payment of $164, round the total, and disclose $2,164.
Yes, that’s correct. Here a link to a similar Q&A:
