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Take a look at page 8 “Transactions to be Reported – Home Improvement”. https://www.ffiec.gov/hmda/pdf/2013guide.pdf
There isn’t any language that gives an exception for this type of situation, therefore, I recommend including it.
I don’t see a problem with including the correct information. However, I believe it would be a good idea to also include language that states as of December 31, 2015 the one year timeframes are set to revert back to the original 90 days. Also, you’ll have to remember to update this information at year end.
On the other hand, I don’t believe you can be scrutinized for using the form as HUD released it.
You can check with your state’s Department of Financial Institutions and/or your state banking association – they should be able to help.
There are vendors that provide record retention schedules – a quick google search would probably provide some results.
I believe you are referring to 1026.37(b)(2) of the instruction for completing the loan estimate, which states:
“The interest rate that will be applicable to the transaction at consummation, labeled “Interest Rate.” For an adjustable rate transaction, if the interest rate at consummation is not known, the rate disclosed shall be the fully-indexed rate, which, for purposes of this paragraph, means the interest rate calculated using the index value and margin at the time of consummation.”Jack was referring to a transaction in which the loan is an ARM and the interest at consummation is not known when the disclosure is made; in such a circumstance you would disclose the fully-indexed rate.
So if you know what the rate at consummation will be, you should disclose that rate. If you do not know the rate disclose the fully index-rate.
You should begin the force-placement process once the flood insurance expires.
If we can answer any further questions, please let us know.
Response by Jack Holzknecht:
Question 1: There is nothing in regulation Z that specifically prohibits a demand feature on an unsecured line of credit. A demand feature would not work on a HELOC since the Regulation specifically defines the terms of default for that type of credit. If your LOS won’t allow a demand feature then that option appears closed for you.
Question 2: If you tie a LOC to a DDA it is a overdraft line of credit, but as you pointed out, it is not an “overdraft product” for purposes of Regulation E.
Reg Z, 1026.20(d) states that you must deliver the initial rate adjustment notice at least 210, and no more than 240 days before the first payment at the new rate is due.
From the information you’ve given it sounds like you are in compliance, since your disclosure is going out well before the 210 day minimum. As for the rate used, Reg Z 1026.20(d)(2) states:
If the new interest rate (or the new payment calculated from the new interest rate) is not known as of the date of the disclosure, an estimate shall be disclosed and labeled as such. This estimate shall be based on the calculation of the index reported in the source of information described in paragraph (d)(2)(iv)(A) of this section within fifteen business days prior to the date of the disclosure.
Your estimate was based on the index as of the date the disclosure was produced, so it was well within that 15 business day time frame prior to the disclosure.
Based on my understanding of what you’ve stated, it sounds like you’re in compliance.
I agree with your interpretation. This is from the final rule:
“The Bureau did not intend the post-consummation review requirement, as proposed, to
require review of all loans, and the Bureau is making these clarifying changes to address concerns raised by commenters. As noted by industry commenters, a rule that requires review of all loans within a short time after consummation could be impracticable. Similarly, the Bureau did not intend proposed § 1026.43(e)(3)(iii)(C) to require the creditor or assignee to make cure payments for all loans that are found to exceed the applicable points and fees limit.”There seems to be a lot going on in this situation. You need to determine if this is truly a business purpose transaction (https://www.bankersonline.com/regs/12-1026/12-1026-003.html). If it is exempt from Reg Z as a business purpose loan, the collateral will not cause it to become applicable to Reg Z. See the commentary below:
Official Interpretation
Section 1026.23—Right of Rescission
1. Transactions not covered. Credit extensions that are not subject to the regulation are not covered by §1026.23 even if a customer’s principal dwelling is the collateral securing the credit. For example, the right of rescission does not apply to a business purpose loan, even though the loan is secured by the customer’s principal dwelling.
If you have additional information or if you determine this is not a business purpose transaction please let me know.
If this is a bridge loan is will be exempt from the HPML escrow requirements:
1026.35(b)
(2) Exemptions. Notwithstanding paragraph (b)(1) of this section:(i) An escrow account need not be established for:
(C) A temporary or “bridge” loan with a loan term of twelve months or less, such as a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within twelve months;
Otherwise we recommend escrowing for both residences in this specific situation.
Susan,
We will present your request during our CMG meetings this week in hopes of finding other members who may be able to share information with you.
Thank you.Yes, the loan estimate would be required in this situation.
From the preamble of the Integrated Disclosures final rule (p. 230):
…[T]he Bureau believes covering all real estate-secured closed-end consumer credit transactions (other than reverse mortgages) will facilitate industry compliance. Under the final rule, creditors will not have to determine whether the property includes a dwelling or if the loan proceeds will be used to construct a dwelling within two years from the date of the settlement of the loan before or upon receipt of an application to determine whether a Loan Estimate must be provided.
