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If I understand correctly, you were using the HUD-1 to itemize fees for your HELOC transactions. As you know, HELOCs are exempt from RESPA and you aren’t required to use the HUD-1. With that said and based on the little information I have, I don’t think you have any reimbursement requirements or violations since HELOCs aren’t subhect RESPA. Your auditor might be concerned with potential liability under UDAAP or state law.
The ARM disclosures (including the CHARM Booklet) required by Section 1026.19(b) are required for all closed-end variable-rate transactions that are secured by the consumer’s principal dwelling and have a term greater than one year. The requirements apply not only to transactions financing the initial acquisition of the consumer’s principal dwelling, but also to any other closed-end variable-rate transaction secured by the principal dwelling. A refinancing is considered a new transaction so the CHARM booklet is required.
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From page D-5 of HMDA Getting it Right (https://www.ffiec.gov/hmda/pdf/2013guide.pdf):
2. Mixed-use property. A dwelling-secured loan to purchase property used primarily for residential purposes (for example, an apartment building containing a convenience store) is a home purchase loan. An institution may use any reasonable standard to determine the primary use of the property, such as by square footage or by the income generated. An institution may select the standard to apply on a case-by-case basis.I believe your interpretation is correct. The proposed definition of dwelling was adopted in the final rule. Here is an excerpt from the proposed rule on what constitutes as dwelling, p.55329:
The Bureau believes the definition of ‘‘dwelling’’ in § 1026.2(a)(19) is consistent with TILA section 103(cc)(5)’s use of the term in the definition of ‘‘residential mortgage
loan.’’ Section 1026.2(a)(19) defines ‘‘dwelling’’ to mean ‘‘a residential structure that contains one to four units, whether or not that structure is attachedto real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.’’ The Bureau interprets the term ‘‘dwelling’’ to also include dwellings in various stages of construction. Construction loans are often secured by dwellings in this fashion. Indeed, draws to fund construction are usually released in
phases as the dwelling comes into existence and secures the draws. Thus, improvement through various stages of construction that will be used as a residence is secured by a ‘‘dwelling.’’ The Bureau proposes to maintain this definition of dwelling.If you are linking to a service provider that is acting on your behalf the speedbump isn’t required.
From interagency guidance on weblinking and its risks:
https://www.occ.gov/news-issuances/bulletins/2003/bulletin-2003-15.html
Footnote 3: This guidance applies to links to third parties that offer products, services, or information directly to financial institution customers. It does not apply to operational links from a financial institution’s website to a third-party service provider that is providing services on behalf of the financial institution, e.g., a link to the institution’s Internet banking service provider.I’m not aware of anything, but I’ll do a little more digging to see if I can find more specific criteria.
To answer your question, if the HELOC is a high cost mortgage loan you are prohibited from taking the closing costs from the first draw/financing those fees. You might want to check Louisiana state law for any prohibitions. Also, from Reg Z regarding statements:
From Reg Z Commentary 1026.7(a)(6)(i) -8 regarding HELOC statements:
8. Start-up fees. Points, loan fees, and similar finance charges relating to the opening of the account that are paid prior to the issuance of the first periodic statement need not be disclosed on the periodic statement. If, however, these charges are financed as part of the plan, including charges that are paid out of the first advance, the charges must be disclosed as part of the finance charge on the first periodic statement. However, they need not be factored into the annual percentage rate. ( See §1026.14(c)(3).)
And this for non-home secured LOCs:
(6) Charges imposed. (i) The amounts of any charges imposed as part of a plan as stated in §1026.6(b)(3), grouped together, in proximity to transactions identified under paragraph (b)(2) of this section, substantially similar to Sample G–18(A) in Appendix G to this part.
(ii) Interest. Finance charges attributable to periodic interest rates, using the term Interest Charge, must be grouped together under the heading Interest Charged, itemized and totaled by type of transaction, and a total of finance charges attributable to periodic interest rates, using the term Total Interest, must be disclosed for the statement period and calendar year to date, using a format substantially similar to Sample G–18(A) in Appendix G to this part.
(iii) Fees. Charges imposed as part of the plan other than charges attributable to periodic interest rates must be grouped together under the heading Fees, identified consistent with the feature or type, and itemized, and a total of charges, using the term Fees, must be disclosed for the statement period and calendar year to date, using a format substantially similar to Sample G–18(A) in Appendix G to this part.Jack’s Compliance Resource offers many products including policy and procedure updates, Director/Senior Manager Updates, Training Manuals, Flowcharts, Checklists and more. To access Jack’s Compliance Resource products visit our marketplace by clicking here:
Jack’s Compliance Resource MarketplaceThe final rule applies to most closed-end consumer mortgage loans. The preamble provides some good discussion on these points. It is linked here beginning on page 28: https://files.consumerfinance.gov/f/201311_cfpb_final-rule-preamble_integrated-mortgage-disclosures.pdf
To answer your question, here are some excerpts from the preamble to the integrated disclosure rules linked above:
P. 1351: …the final rule will apply only to mortgage loans obtained by
consumers primarily for personal, family, or household purposes and the final rule will not apply to loans obtained primarily for business purposes.P. 231(regarding construction only): The Bureau notes that, while many construction-only loans may not be for a consumer purpose, only those loans made “primarily” for personal, family, or household purposes are covered by the final rule, consistent with the definition of “consumer credit” in Regulation Z § 1026.2(a)(12).
P. 230 (regarding vacant land): the Bureau believes these loans are covered by the integration mandate, and the Bureau believes that the integrated disclosures would be just as useful to a consumer whose closed-end credit transaction is secured by vacant real estate as they would to a consumer whose transaction is secured by real estate with a dwelling. The Bureau believes covering all real estate-secured closed-end consumer credit transactions (other than reverse mortgages) will facilitate industry compliance.
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Jack’s Compliance Resource MarketplaceThis change to the settlement cost booklet isn’t expected until sometime in 2015. If you are utilizing the detached structure exemption, you might want to consider including this language on a separate disclosure until the change is made to the SCB in an effort to keep your customers informed.
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From page 93 of the September 13th Amendments to the Final Rule (https://files.consumerfinance.gov/f/201309_cfpb_titlexiv_updates.pdf ):
“The Bureau is also not adopting any limitation on the exemption for joining a foreclosure
initiated by a subordinate lienholder. The Bureau does not believe it is appropriate to limit the exemption application to only those situations where the senior and junior liens are held or serviced by separate entities, as was requested. In the case where an entity services both a first and a second lien, the servicer will be required to complete the pre-foreclosure review for the second lien, and will be required to respond to a borrower’s loss mitigation application with respect to the first mortgage as well. Furthermore, the comments did not provide an adequate explanation to persuade the Bureau that servicers are more likely to pursue foreclosure in a manner that evades the 120-day pre-foreclosure review period when the senior and junior lien are held and serviced by the same entity.”I agree with your analysis in scenario 1. Scenario 2 is more complicated because it involves business credit. The discussion in the amendment says there is no limitation to the subordinate lien exemption, but then it assumes that all subordinate liens will be consumer purpose and gives an example of the second lien going through pre-foreclosure review process. Without definitive guidance at this time I would take the cautious approach and wait until the consumer purpose loan reaches 120 days delinquent.
This change to the settlement cost booklet isn’t expected until sometime in 2015. If you are utilizing the detached structure exemption, you might want to consider including this language on a separate disclosure until the change is made to the SCB in an effort to keep your customers informed.
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Jack’s Compliance Resource MarketplaceI agree that you should be consistent with your reporting. If you report information it needs to be accurate. Take a look at the FCRA:
§ 623. Responsibilities of furnishers of information to consumer reporting agencies [15 U.S.C. § 1681s-2]
(a) Duty of Furnishers of Information to Provide Accurate Information
(1)Prohibition(A) Reporting information with actual knowledge of errors. A person shall not furnish any information relating to a consumer to any consumer reporting agency if the person knows or has reasonable cause to believe that the information is inaccurate.
Additionally, if you were to do this frequently for one class/group of borrowers and not for others it could possibly be seen an ECOA issue as it might be seen as the bank influencing what type of credit is potentially offered to a particular class of individuals. It doesn’t sound like this is your situation, but it is just something to consider.Jack’s Compliance Resource offers many products including policy and procedure updates, Director/Senior Manager Updates, Training Manuals, Flowcharts, Checklists and more. To access Jack’s Compliance Resource products visit our marketplace by clicking here:
Jack’s Compliance Resource MarketplaceWithout regulations or regulatory guidance on this topic, I would agree with your interpretation at this point. We might get clarification on this when we have additional information. If a barn is part of residential property securing the loan and it isn’t used as a residence, it appears to be exempt from the requirement. This doesn’t seem to be the case for land only with a barn.
The regulators have said this provision was effective at enactment, but I believe some banks are waiting to utilize this exemption until there is additional guidance – as you know, we don’t have regulations or guidance to give us any additional details. Something to consider as well is the need to insure the structure for safety and soundness reasons.
There was originally a three year requirement in Appendix Q, but it was amended in July of 2013 to eliminate that specific time frame under the stability of income section. You’ll find a discussion of this in the document linked below on page 77 (the discussion begins on page 74).
https://files.consumerfinance.gov/f/201307_cfpb_final-rule_titlexiv.pdf
