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aschliebe,
Yes, you are correct. If the affected estimates don’t exceed the tolerance amount for that tolerance category of charges, the revised estimate of those affected charges shouldn’t be used on the comparison chart. Since you would be within tolerance at 9%, I’m assuming you’re wanting to re-disclose as a way to inform the borrower, correct?1. If there are funds in the escrow account, at the time of charge off, do those have to be refunded to the borrower or can they be applied to the charged off loan?
The funds in the escrow account would need to be refunded to the borrower.
2. If there are no funds in the escrow account, does a short year analysis showing negative amount need to be done and sent to the borrower?
If we’re still talking about the charged-off loan, the annual notice requirements do not apply in the case of default, foreclosure or bankruptcy. You would still need to provide notice of a shortage to comply with the requirement in 1024.17(f)(5).
3. Since the borrower doesn’t know the loan is charged off, what would need to be done if they bring in funds to cover all past due payments (which includes escrow)?
From 1024.17(i)(2): If the servicer does not issue an annual statement pursuant to this exemption and the loan subsequently is reinstated or otherwise becomes current, the servicer shall provide a history of the account since the last annual statement (which may be longer than 1 year) within 90 days of the date the account became current.
A signed authorization from the consumer is not required before pulling a credit report in connection with a legitimate business transaction initiated by the consumer (e.g. application for a loan). However, some financial institutions may choose to have a policy in place that requires written authorization.
See section 604 of the FCRA for a list of permissible purposes for pulling credit reports and what is required.
The Protecting Tenants at Foreclosure Act did sunset at the end of 2014. A bill was introduced and referred to the House Financial Services Committee on Friday. Technically, the PTAFA requirements don’t apply since they expired on December 31, 2014. However, with this new bill being introduced these requirements could be renewed and made permanent. I would recommend waiting to see what the outcome is before changing policies and procedures.
The Federal Reserve’s supervision manual discusses renewals and I believe answers the interest rate and fee portion of your question on page 25: https://www.federalreserve.gov/boarddocs/supmanual/cch/til.pdf
As for right of rescission, it would not apply since it is not a new transaction (assuming no new security interest or funds advanced). Under the closed end rules, even if the transaction is a refinancing it is exempt unless there are funds advanced beyond the outstanding principal plus any unpaid finance charge and fees attributed to the cost of the refinancing or consolidation. If there are new funds beyond these amounts in a refinance situation then rescission would apply to that newly advanced amount.
I’m not sure about your balloon loan question. I’ll get Jack’s opinion on that.
I agree with your interpretation – if you aren’t replacing the original note with a new note nor are you adding a variable rate or increasing a variable rate that wasn’t previously disclosed then it wouldn’t be a refinancing under Reg Z.
I also agree that you could need to provide the credit score disclosure if a credit report is used (e.g. exception notice, risk based-pricing and FCRA 609g). And the Reg B appraisal/valuation delivery rules would apply to renewals requests secured by a first lien on a dwelling (assuming you order a new appraisal/valuation and aren’t using an existing one) so you would need to comply with the delivery requirements in 1002.14.
I’ll ask Jack to offer his opinion as well. And I hope some members are able to provide you with information based on their experiences.
I believe you are correct – See below. There isn’t an exception to the rule for appraisals. And I believe it would violate the independence criteria of the Interagency Appraisal and Evaluation Guidelines as well as safety and soundness principles to allow a borrower to select their own appraiser. From p. 77458 of the Interagency Appraisal Guidelines: Independence is compromised when a borrower recommends an appraiser or a person to perform an evaluation.
The CFPB Small Entity Compliance Guide p. 40.
What charges are subject to zero
tolerance? (§ 1026.19(e)(3)(ii))
For all other charges, creditors are not permitted to charge consumers more than the amount
disclosed on the Loan Estimate under any circumstances other than changed
circumstances that permit a revised Loan Estimate, as discussed below in section 8.1.
These zero tolerance charges are:
Fees paid to the creditor, mortgage broker, or an affiliate of either
(§ 1026.19(e)(3)(ii)(B));
Fees paid to an unaffiliated third party if the creditor did not permit the consumer to
shop for a third party service provider for a settlement service (§ 1026.19(e)(3)(ii)(C));
or
Transfer taxes. (Comments 19(e)(3)(i)-1 and -4)There hasn’t been any change to this that I’m aware of. This is the same as it has been for the GFE. If a changed circumstance will cause your disclosures to be out of tolerance then you may provide a revised disclosure reflecting the revised estimate of the charge(s).
1026.19(e)(3)(iv)(A) says you may provide a revised estimate of a charge if 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. It then goes on to define Changed Circumstance.
For those charges in the 10% tolerance category the aggregate increase would need to exceed the 10% tolerance. Otherwise if it was a 0% tolerance charge and it was out of tolerance by any amount it would qualify for re-disclosure if it resulted from a changed circumstance.
I am not aware of a requirement in Reg B or Z for the customer to sign a written acknowledgement indicating receipt of the appraisal(s). Did the auditor provide a citation that would give me more insight as to what they found? Do you document your file to show when the appraisal(s) was given? Do you have written procedures for ensuring you comply with the delivery requirements?
Was this a listed as recommendation or an actual violation of law/reg?
tstrait,
I apologize that we overlooked your question. Jack will be responding to your question soon. Please watch your initial post for the response.
Thanks for your patience.You are correct. It is not factored into the amount in LE or the Final column if it was a service that was not provided. This is a hold over from the current rules. See this Q&A that addresses a similar question as it pertains to the current rules: https://mycomplianceresource.com/forums/topic/respa-roundup-clarification/.
