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1. I don’t see an exemption for older loans so my interpretation is that it would apply to all High Cost Mortgage loans on your books.
2. I’ve never heard of a requirement to track re-disclosures. Make sure your file is well documented.
Jack Holzknecht responded as well:
1. The revised late charge and grace period apply to Section 32/High Cost/HOEPA loans for which an application is received on or after January 10, 2014. In the seminar we discussed the need to code loans that are Section 32/High Cost/HOEPA loans to assure the proper late charges and grace period are applied. Many banks have already coded loans as Section 32/High Cost/HOEPA loans. If they continue to use the existing code for new Section 32/High Cost/HOEPA loans they may not be able to discern which loans resulted from applications received on or after January 10, 2014. An easy solution is to apply the revised late charge and grace period to new and existing Section 32/High Cost/HOEPA loans. Most banks have few of these loans, and have a low delinquency ratio, so the lower late charge and longer grace period would have minimal impact on earnings.
2. I concur with Robin, there is no requirement to track re-disclosures. From the management perspective it may be helpful to know the frequency of re-disclosure and what created the need to re-disclose.Jack’s Compliance Resource offers many products including policy and procedure updates, Director/Senior Manager Updates, Training Manuals, Flowcharts, Checklists and more. To see our Reg Z products click here:
Reg Z MarketplaceTake a look at this post: https://mycomplianceresource.com/forums/topic/e-sign/.
I believe most banks that email disclosures/information have a vendor (i.e. online banking provider or possibly your forms vendor) that sets up electronic verification and maintains record of compliance with e-sign.
Here’s a link to the E-SIGN Act: (7001(c) is where you’ll find the steps you need to take in order to comply.
https://www.bankersonline.com/regs/esign/esign.html#7001
tstrait responded:
“I understand what I need to do to comply with E-Sign for consumers. I recently ran across some articles that said we don’t need to do all this for businesses.The E-Sign Act defines consumers as:
(1) Consumer
The term “consumer” means an individual who obtains, through a transaction, products or services which are used primarily for personal, family, or household purposes, and also means the legal representative of such an individual.A lot of the language in the act refers to “consumer.” I was trying to determine what had to be done when dealing with a business.”
E-sign only applies to disclosures to consumers. That being said, the Reg B valuation delivery rule doesn’t clarify that point. There are differing opinions out there on whether the e-sign rules should be followed for business applicants covered by this part. The conservative approach is to comply with e-sign for all applicants. The preamble to the rule states: “The Bureau believes that it is appropriate to allow creditors to provide applicants with copies of appraisals and other written valuations in electronic form if the applicant consents to receiving the copies in such form[,]” and then goes on to discuss compliance with e-sign. Since e-sign only only applies to consumers then one could reason that all that needs to be done for a business applicant is to obtain consent. Because of this, at the least, I recommend obtaining consent from the business applicant stating that they authorize electronic delivery.
tstrait responded:
“The Consumer Compliance Outlook Fourth Quarter 2013 that I received Friday included an artical on E-Sign. Here is a excerpt that addresses appraisals.The Dodd-Frank Act amended the ECOA’s notice requirements for appraisals effective January 18, 2014. Under the amendment, a creditor must notify an applicant
for a first-lien mortgage loan that the creditor may order an appraisal or other written valuation to determine the value of the property securing the loan
and will promptly provide the applicant with a copy, even if the loan is not consummated. The appraisal or valuation may be provided electronically subject to compliance with the E-Sign Act’s consent provisions, while the notice may be provided without regard to the consent requirements.”Jack’s Compliance Resource offers many products including policy and procedure updates, Director/Senior Manager Updates, Training Manuals, Flowcharts, Checklists and more. To see our Reg B products click here:
Reg B MarketplaceThis is really a 401-K question and outside our area of expertise.
There are restrictions on use of funds withdrawn from a 401-K to avoid tax penalties. A distribution of funds to pay a mortgage and avoid foreclosure is not subject to penalties. We are not familiar with the documentation requirements. If the borrower must be in foreclosure in order to use the 401K funds, this account is not eligible. If a letter stating that the borrower is 60 days past due and the creditor intends to initiate the foreclosure process once the borrower is 120 days past due is sufficient under the 401-K rules, then everything is fine. Your borrower should consult with the plan holder to determine the requirements and if taking a loan in this circumstance is possible.
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 Marketplace
You must consider the DTI but there is no threshold for a small creditor QM, that if exceeded, disqualifies it from QM status, as long as all other criteria are met. Be aware of the fair lending risk associated with policy exceptions and mindful of ways to minimize those risks.
Jack’s Compliance Resource offers many products including policy and procedure updates, Director/Senior Manager Updates, Training Manuals, Flowcharts, Checklists and more. To see our Reg Z products click here:
Reg Z MarketplaceYou must consider the DTI but there is no threshold for a small creditor QM, that if exceeded, disqualifies it from QM status, as long as all other criteria are met. Be aware of the fair lending risk associated with policy exceptions and mindful of ways to minimize those risks.
From reading the commentary (see below) it seems rehabilitation and improvement are considered construction in this type of situation. In as a construction/perm you would qualify the permanent phase as a QM, but the construction phase (of 12 months or less) would be exempt from the requirements.
The commentary, Paragraph 43(a)(3) – 2 states:
2. Construction phase of a construction-to-permanent loan. Under § 1026.43(a)(3)(iii), a construction phase of 12 months or less of a construction-to-permanent loan is exempt from § 1026.43(c) through (f). A construction-to-permanent loan is a potentially multiple-advance loan to finance the construction, rehabilitation, or improvement of a dwelling that may be permanently financed by the same creditor. For such a loan, the construction phase and the permanent phase may be treated as separate transactions for the purpose of compliance with § 1026.43(c) through (f), and the construction phase of the loan is exempt from § 1026.43(c) through (f), provided the initial term is 12 months or less. See § 1026.17(c)(6)(ii), allowing similar treatment for disclosures. Where the construction phase of a construction-to-permanent loan is renewable for a period of one year or less, the term of that construction phase does not include any additional period of time that could result from a renewal provision. For example, if the construction phase of a construction-to-permanent loan has an initial term of 12 months but is renewable for another 12-month term before permanent financing begins, the construction phase is exempt from § 1026.43(c) through (f) because the initial term is 12 months. Any renewal of one year or less also qualifies for the exemption. The permanent phase of the loan is treated as a separate transaction and is not exempt under § 1026.43(a)(3)(iii). It may be a qualified mortgage if it satisfies the appropriate requirements.
This is really a 401-K question and outside our area of expertise.
There are restrictions on use of funds withdrawn from a 401-K to avoid tax penalties. A distribution of funds to pay a mortgage and avoid foreclosure is not subject to penalties. We are not familiar with the documentation requirements. If the borrower must be in foreclosure in order to use the 401K funds, this account is not eligible. If a letter stating that the borrower is 60 days past due and the creditor intends to initiate the foreclosure process once the borrower is 120 days past due is sufficient under the 401-K rules, then everything is fine. Your borrower should consult with the plan holder to determine the requirements and if taking a loan in this circumstance is possible.
You seem to be correct, but I believe reviewing Appendix B might clear up any further questions you might have. The wording provided is part of a sample form that uses model language; that being said I have never seen any other language used by a creditor.
https://www.gpo.gov/fdsys/pkg/CFR-2013-title12-vol8/pdf/CFR-2013-title12-vol8-part1003-appB.pdfI don’t see a problem with your rounding down. The RESPA FAQ states:
4) Q: How is an average charge calculated?
A: The settlement service provider using an average charge must define a specific class of transactions for a specific time period (not less than 30 calendar days, nor more than 6 months), for a specific geographical area, and for a specific loan type. The average charge is based on a calculation of the average amount paid for the settlement service for the particular class of transaction. HUD does not prescribe a particular method for calculating the average charge, but it must be determined in such a way that the total amounts paid by borrowers and sellers through use of an average charge will not exceed the total amounts paid to the applicable settlement service providers in the particular class of transactions.6) Q: If the charge for a settlement service is calculated using average charge, may the charge be waived or discounted?
A: Yes. The regulations prohibit charging more than the calculated average charge, but discounting or waiving a charge to a borrower is permitted.E-sign only applies to disclosures to consumers. That being said, the Reg B valuation delivery rule doesn’t clarify that point. There are differing opinions out there on whether the e-sign rules should be followed for business applicants covered by this part. The conservative approach is to comply with e-sign for all applicants. The preamble to the rule states: “The Bureau believes that it is appropriate to allow creditors to provide applicants with copies of appraisals and other written valuations in electronic form if the applicant consents to receiving the copies in such form[,]” and then goes on to discuss compliance with e-sign. Since e-sign only only applies to consumers then one could reason that all that needs to be done for a business applicant is to obtain consent. Because of this, at the least, I recommend obtaining consent from the business applicant stating that they authorize electronic delivery.
Take a look at this post: https://mycomplianceresource.com/forums/topic/e-sign/.
I believe most banks that email disclosures/information have a vendor (i.e. online banking provider or possibly your forms vendor) that sets up electronic verification and maintains record of compliance with e-sign.
Here’s a link to the E-SIGN Act: (7001(c) is where you’ll find the steps you need to take in order to comply.
https://www.bankersonline.com/regs/esign/esign.html#7001Take a look at #27: https://www.fdic.gov/news/news/financial/2005/fil2005a.html
Look at page 77461, XIV Validity of Appraisals and Evaluations: https://www.occ.gov/news-issuances/federal-register/75fr77450.pdf
HELOCs are exempt from 1026.43, Ability to Repay/QM rules. However, if you have a high-cost mortgage loan (aka HOEPA, Sect. 32 Loan, or HCML) that is open-end (e.g. HELOC) then there are repayment ability requirements you must meet in 1026.34(a)(4).
The HOEPA coverage test is outlined below and includes an APR test, Points and Fees test and Prepayment Penalty test. If you do not have a HOEPA loan based on any of these test the HELOC ability to repay will not apply to the transaction.
1026.32(a) Coverage. (1) The requirements of this section apply to a high-cost mortgage, which is any consumer credit transaction that is secured by the consumer’s principal dwelling, other than as provided in paragraph (a)(2) of this section, and in which:
(i) The annual percentage rate applicable to the transaction, as determined in accordance with paragraph (a)(3) of this section, will exceed the average prime offer rate, as defined in § 1026.35(a)(2), for a comparable transaction by more than:
(A) 6.5 percentage points for a first-lien transaction, other than as described in paragraph (a)(1)(i)(B) of this section;
(B) 8.5 percentage points for a first-lien transaction if the dwelling is personal property and the loan amount is less than $50,000; or
(C) 8.5 percentage points for a subordinate-lien transaction; or
(ii) The transaction’s total points and fees, as defined in paragraphs (b)(1) and (2) of this section, will exceed:
(A) 5 percent of the total loan amount for a transaction with a loan amount of $20,000 or more; the $20,000 figure shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index that was reported on the preceding June 1; or
(B) The lesser of 8 percent of the total loan amount or $1,000 for a transaction with a loan amount of less than $20,000; the $1,000 and $20,000 figures shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index that was reported on the preceding June 1; or
(iii) Under the terms of the loan contract or open-end credit agreement, the creditor can charge a prepayment penalty, as defined in paragraph (b)(6) of this section, more than 36 months after consummation or account opening, or prepayment penalties that can exceed, in total, more than 2 percent of the amount prepaid.
