Forum Replies Created
-
Posts
-
For some reason, I’m not finding the exact language you mentioned above. Can you send me the source where you found it so I can take a look?
From the CFPB’s ECOA Valuation Rules Small Entity Compliance Guide, p. 16:
You cannot charge fees for photocopying or to cover the cost of postage to mail copies of appraisals or other written valuations.
You may charge a reasonable fee to cover the cost of developing an appraisal or other written valuation, except as otherwise provided by law. You cannot condition providing copies on payment of this fee, however. If you receive a completed valuation, you must promptly provide it to the applicants, even if they do not pay for it. To ensure payment, you can collect payment before ordering the appraisal or other written valuation, subject to restrictions for some mortgages under Regulation Z (§ 1026.19(a)(ii)). Alternatively, if you collect payment at closing, you can also provide the copy at that time if you obtain a waiver.
Jack and I discussed your question and here are a few points from our conversation:
• The loan is an ARM – that would seem to offset most interest rate risk, so why is there a need for a call feature?
• The loan has a variable rate and we assume it has standard default clauses. If your bank calls a loan for something other than an interest rate issue, which shouldn’t exist since it is a variable rate, or for standard default, the use of the call may be deemed unfair.
• Fair lending could arise if certain customers get the product with the call and others get it without the call.
• The call feature appears to be an unnecessary feature, but we don’t see any clear violation associated with it.I’m assuming the gift card the other bank is giving away is less than $10 which doesn’t qualify as a bonus and therefore doesn’t trigger the bonus disclosures. Same goes for the free box of check which would be an absorption of an expense.
From Reg DD 1030.2(f) Bonus means a premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a consumer during a year in exchange for opening, maintaining, renewing, or increasing an account balance. The term does not include interest, other consideration worth $10 or less given during a year, the waiver or reduction of a fee, or the absorption of expenses.
There isn’t an exception that I see for this in the definition of “extension of credit” or the general prohibitions. (See links below.)
I think if you can document that the rate is a result of the program and anyone qualifying for a loan under this program will/would receive the same rate it should be fine. Just make sure it is documented. For example, do you offer this program to non-insiders? If so, document that and the rates that are available to everyone as of the date the rate is set. Also, if you have any other non-insider loans through this program that you could use to do a comparison to show the rate or underwriting isn’t preferential that would be great for examiners to see?
Here’s a link to Reg O’s general probitions: https://www.ecfr.gov/cgi-bin/text-idx?SID=f99c4c8d05a48ec42cac71afe72381fc&node=12:2.0.1.1.16.0.6.4&rgn=div8
And the definition of extension of credit: https://www.ecfr.gov/cgi-bin/text-idx?SID=f99c4c8d05a48ec42cac71afe72381fc&node=12:2.0.1.1.16.0.6.3&rgn=div8
I believe what the question you referenced is referring to is a fee for an attorney preparing documents (GFE, HUD, note, etc.) for the lender. Deed prep is a title services fee and (if it is typically a borrower paid fee) should be disclosed in block 4 of the GFE and 1101 of the HUD. If it is disclosed on the GFE and then you find out later it will be paid by the seller it should be disclosed in 1101 as a charge to the borrower, then a credit to the borrower and a charge to the seller on page 1 of the HUD.
Take a look a these Q&As from the RESPA FAQ 1100 Series:
3) Q: Are document preparation fees included in ―title services‖ or would they appear as separate line item charge in the borrower‘s column?
A: Document preparation fees are part of administrative or processing fees which are included in the charge in Line 1101 of the HUD-1 and may not be separately itemized.
15) Q: What items are included in the amount disclosed on Line 1101 of the HUD-1?
A: Line 1101 is the total of the charges for ―Title services and lender‘s title insurance,‖ which includes: all charges for conducting a settlement (Line 1102); any premiums paid for lender‘s title insurance and its related endorsements (Line 1104); all charges for title searches and examinations; and charges for all other services itemized in the 1100 series if those services are included in the definition of ―title service.‖ The total on Line 1101 should not include the amount of any premium for owner‘s title insurance and its related endorsements, which must be listed in the columns on Line 1103.
HUD General:
6) Q: How should payments by the seller or real estate agent that are for settlement services included on the GFE be shown on the HUD-1?
A: If a seller or real estate agent pays for a charge that was included on the GFE, the charges should be listed in the borrower’s column, with an offsetting credit reported in Lines 204-209 of the HUD-1, identifying the party paying the charge. For a seller-paid charge, the charge should also be listed in Lines 506-509. For a charge paid by the real estate agent, the name of the person paying the charge must also be listed.Maybe they’re talking about 1026.34(a)(3) which states:
Refinancings within one-year period. Within one year of having extended credit subject to §1026.32, refinance any loan subject to §1026.32 to the same borrower into another loan subject to §1026.32, unless the refinancing is in the borrower’s interest. An assignee holding or servicing an extension of mortgage credit subject to §1026.32, shall not, for the remainder of the one-year period following the date of origination of the credit, refinance any loan subject to §1026.32 to the same borrower into another loan subject to §1026.32, unless the refinancing is in the borrower’s interest. A creditor (or assignee) is prohibited from engaging in acts or practices to evade this provision, including a pattern or practice of arranging for the refinancing of its own loans by affiliated or unaffiliated creditors, or modifying a loan agreement (whether or not the existing loan is satisfied and replaced by the new loan) and charging a fee.
MS-3B should be used when you haven’t received any information from the borrower indicated they had or have insurance in place. MS-3C is to be used when you have received some information from the borrower pertaining to insurance; however, the information isn’t complete and/or shows lapsed periods, etc..
The instructions for the SFHDF state:
3. LENDER ID NO: The lender funding the loan should identify itself as follows: FDIC-insured lenders should indicate their FDIC Insurance Certificate Number; Federally-insured credit unions should indicate their charter/insurance number; Farm Credit institutions should indicate their UNINUM number. Other lenders who fund loans sold to or securitized by FNMA or FHLMC should enter FNMA or FHLMC seller/service number.
Also keep in mind if the loan is sold you must notify FEMA: https://www.ecfr.gov/cgi-bin/text-idx?SID=0508ca16a4bebb26037f5ad014cb8521&node=12:5.0.1.2.28.0.3.10&rgn=div8. Check with your flood vendor to see if this is something they do and what you need to do, if anything.
IMO, you would not be required to provide a copy an appraisal in the situation you described. The ECOA appraisal rule pertains to valuations in connection with an application. And both the ECOA valuation rule and Reg Z HPML rule refer to “consummation” of the transaction in the timing requirements.
This might help…take a look at p. 45: https://files.consumerfinance.gov/f/201310_cfpb_atr-qm-small-entity_compliance-guide.pdf.
The HPML repayment ability requirements are set to expire at 11:59pm on January 9, 2014 which means they won’t conflict with the ATR requirements when they become effective on January 10, 2014.
Take a look at the CFPB’s Small Entity Compliance Guide beginning on p. 21 for the general ATR DTI requirements: https://files.consumerfinance.gov/f/201310_cfpb_atr-qm-small-entity_compliance-guide.pdf
I agree with that the general and small creditor QM requires the maximum rate during the first 5 year.
from p. 35 of the SECG: regarding balloon QM…You must determine that the consumer will be able to make the scheduled periodic payments (including mortgage-related obligations) other than the balloon payment. Unlike the calculation of balloon loan monthly payments for determining ATR (See “Calculating payments under the ATR standard for the loan you are underwriting: § 1026.43(c)(5)” on page 21), the Balloon-Payment QM calculation excludes the balloon payment even if the loan is a higher-priced loan,
You can find this in 1026.43(e)(6) and(f).
If I’m understanding correctly, it sounds like you will have discounts and/or premiums which would constitute separate programs and separate disclosures. The amount of discounts don’t constitute a separate program.
10 CFR 1026.19, OSC Paragraph 19(b)(2)(v) states:
1. Discounted and premium interest rate. In some variable-rate transactions, creditors may set an initial interest rate that is not determined by the index or formula used to make later interest rate adjustments. Typically, this initial rate charged to consumers is lower than the rate would be if it were calculated using the index or formula. However, in some cases the initial rate may be higher. If the initial interest rate will be a discount or a premium rate, creditors must alert the consumer to this fact. For example, if a creditor discounted a consumer’s initial rate, the disclosure might state, “Your initial interest rate is not based on the index used to make later adjustments.” (See the commentary to §1026.17(c)(1) for a further discussion of discounted and premium variable-rate transactions.) In addition, the disclosure must suggest that consumers inquire about the amount that the program is currently discounted. For example, the disclosure might state, “Ask us for the amount our adjustable rate mortgages are currently discounted.” In a transaction with a consumer buydown or with a third-party buydown that will be incorporated in the legal obligation, the creditor should disclose the program as a discounted variable-rate transaction, but need not disclose additional information regarding the buydown in its program disclosures. (See the commentary to §1026.19(b)(2)(viii) for a discussion of how to reflect the discount or premium in the historical example or the maximum rate and payment disclosure).
Let’s see if Jack has any other thoughts on this.
Yes, if you have an HPCT QM it determines that you only get the rebuttable presumption of compliance rather than the safe harbor. Also if you have a non-QM balloon loan that is a HPCT you have to factor in the balloon payment into the payment calculation (see 1026.43(c)(5)(ii)).
