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It is based on the reason for freezing the account. The regulation (1026.9(c)(1)(iii)) is referring to action taken pursuant to reasons 1026.40(f)(3)(i)and(vi), while the commentary to this part of the regulation is referring to action taken pursuant to reasons in 1026.40(f)(2).
From 1025.9(c)(1)(iii):
(iii) Notice to restrict credit. For home-equity plans subject to the requirements of §1026.40, if the creditor prohibits additional extensions of credit or reduces the credit limit pursuant to §1026.40(f)(3)(i) or (f)(3)(vi), the creditor shall mail or deliver written notice of the action to each consumer who will be affected. The notice must be provided not later than three business days after the action is taken and shall contain specific reasons for the action. If the creditor requires the consumer to request reinstatement of credit privileges, the notice also shall state that fact.Review your contract- it might require more notice than the regulation. Also, you need to consider if this would be adverse action and, therefore, require additional notice under Reg B and FCRA.
In my opinion, the language from the preamble, below, shows the intent is to not to duplicate by giving appraisals that have already been given. Also the definition of extension of credit states “the refinancing or other renewal” so it indicate that a refinance is a form of renewal.
“Extend credit and extension of credit mean the granting of credit in any form (including, but not limited to, credit granted in addition to any existing credit or credit limit; credit granted pursuant to an open-end credit plan; the refinancing or other renewal of credit, including the issuance of a new credit card in place of an expiring credit card or in substitution for an existing credit card; the consolidation of two or more obligations; or the continuance of existing credit without any special effort to collect at or after maturity).”
From the Preamble of the Reg B Valuation Rules: The final rule maintains comment 14(a)(1)-2, pertaining to credit renewals, with minor changes for consistency and clarity. Comment 14(a)(1)-2 clarifies that creditors must provide copies of appraisals or other written valuations prepared in connection with credit renewals requested by the applicant. Whether an applicant has requested a credit renewal, and when such an application is received for purposes of the timing requirements under § 1002.14(a)(2), depend on the facts and circumstances of an individual transaction. The remaining part of comment 14(a)(1)-2, clarifying that the rule does not apply to the use of an appraisal or other written valuation that was developed for a prior extension of credit, is adopted as proposed. Because the creditor in a prior transaction covered by the final rule would already have been required to provide a copy of an appraisal or other written valuation to the applicant, requiring the creditor in the subsequent transaction to provide another copy of that appraisal or other written valuation would be duplicative. The Bureau is therefore finalizing comment 14(a)(1)-2 largely as proposed.
12 CFR 215.3(a)(7) states: a) An extension of credit is a making or renewal of any loan, a granting of a line of credit, or an extending of credit in any manner whatsoever, and includes:(7) Any other similar transaction as a result of which a person becomes obligated to pay money (or its equivalent) to a bank, whether the obligation arises directly or indirectly, or because of an endorsement on an obligation or otherwise, or by any means whatsoever.
Based on this my opinion is that the calculation would be based on the amount the insider would be obligated to pay.
If your borrower renewed the policy for less coverage than is required based on the calculation (the lesser of: the outstanding balance of the loan, the insurable value of the property or the maximum amount of insurance available) and the new coverage limits, you need to begin your force-placement procedures.
You are correct, Regulation B coverage is not limited to consumer credit so if a commercial loan is secured by a first lien on a dwelling the valuation rules will apply.
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Jack’s Compliance Resource MarketplaceThere are three requirements related to counseling.
· Under 1024.20 you are required to provide a list of counselors within 3 business days of application. There is no signature/acknowledgement requirement.· Under 1026.34(a)(5) (i.e. High Cost Mortgage/HOEPA) you are required to obtain certification of pre-loan counseling before making the loan.
· Under 1026.36(k) you are required to obtain certification of pre-loan counseling for negative amortization loans made to first time home buyers.
Here’s a link to the CFPB’s Small Entity Compliance Guide on loan counseling: https://files.consumerfinance.gov/f/201401_cfpb_hoepa-compliance-guide.pdf.
Something else to consider, there is no requirement to obtain an acknowledgement of receipt from the borrower, but most examiners will want evidence that the notice was provided. We would advise that your bank either obtain the consumer’s signature acknowledging receipt of the list or have written procedures that require a certain party provide the disclosure and then complete a checklist indicating that the required action has been taken.
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I agree with your interpretation. In a transaction covered by RESPA, you should give the ABA disclosure for any business that is referred to an affiliate of your bank.
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You can continue your current practice until August 1, 2015. On August 1, 2015 construction-only loans will fall within the scope of the integrated disclosure rules and you will need to give the integrated disclosure on those loans.
Line 2 of revised GFE should be the same as it was on the original GFE. I don’t believe you have much to worry about since you have been giving the customer more benefit (assuming you have honored the extra 10 days).
This is definitely a grey area as I know of nothing that would technically prohibit it. However, you need to be careful that your actions don’t violate the valuation independence requirements, specifically coercion, in Reg Z as well as the valuation independence rules in the Interagency Guidelines.
1026.42(c)(1)(A) states: (i)
Examples of actions that violate paragraph (c)(1) include:(A) Seeking to influence a person that prepares a valuation to report a minimum or maximum value for the consumer’s principal dwelling.
My concern would be that a practice of giving contact information to the buyer’s realtor could be deemed an indirect way of influencing the outcome of the appraisal.
We’ll see if Jack has any additional information.
This question seems familiar and based on the dates provided, I believe we may have answered it before, but a quick search of the forum didn’t turn up anything. But to answer the question, the point Jack was making in his blog article with the “August 8, 2014” date is that this date is 210 days from the effective date, meaning any initial payments due on or after August 8, 2014 would be subject to this disclosure as you would have time to deliver the notice within the 210-240 day required timeframe outline in 1026.20(d). So for initial payments on or after August 8, 2014 you need to comply with 1026.20(d).
This is a unique situation and I don’t believe you’ll find anything in writing that discusses how to handle it, but in my opinion, if both properties were offered as collateral, you began the process based on that and then the property was sold/revoked as collateral, I don’t see a problem with charging the customer the fees that were incurred as a result of that property being pledged. As you know, the file should be documented to reflect the circumstances and why those fees were charged.
Bellisima24, RESPA would apply since it is for consumer purpose. RESPA exemption for business purpose looks to Reg Z’s 1026.3(a)(1) which only looks at the purpose not to whom the loan is made to like 1026.3(a)(2).
S.Bramlett, You must allow the borrower to inspect the HUD Settlement Statement one business day prior to closing. You must also provide the HUD SS at or before settlement unless a waiver or exemption applies. You can find the requirement for delivery in 1024.10 linked here: https://www.gpo.gov/fdsys/pkg/CFR-2014-title12-vol8/pdf/CFR-2014-title12-vol8-sec1024-10.pdf
