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While you may be able to technically meet the requirements by doing this, I agree by making this a standard part of your procedure, it appears your bank would be trying to evade the valuation delivery requirements under Regulation B. And if you are slipping another document (a waiver to sign) in with each early disclosure packet it could be deemed deceptive. Also remember that if it is an HPML there is no waiver of the appraisal delivery timing (three business day prior to consummation).
1 – I agree, this transaction would not qualify for the refinance exception to 1026.43(c).
2 – Unfortunately, there is no special rule exempting workouts from the ATR requirements.
3- Although it would not work in the specific example you’ve given, consider that the ATR rules do not apply to modifications.CFPB ATR Small Entity Compliance Guide
Click on this link, https://files.consumerfinance.gov/f/201308_cfpb_atr-qm-implementation-guide_final.pdf and see excerpts below:P. 12: The Truth in Lending Act applies to a loan modification only if it is considered a refinancing under Regulation Z. If a loan modification is not subject to the Truth in Lending Act, it is not subject to the ATR/QM rule. Therefore, you should determine if a loan modification is a refinancing to see if the ATR/QM rule applies. You will find the rules for determining whether a loan workout is a modification or a refinance in Regulation Z at § 1026.20(a) and accompanying Commentary.
P. 44:
The ATR/QM rule does not apply when you alter an existing loan without refinancing it. So you can provide a loan modification to a defaulted (or non-defaulted) consumer without complying with ATR. You can find a discussion of what changes to a loan will be treated as a modification rather than a refinancing in Regulation Z at § 1026.20(a).The format requirements in 1026.9(c)(2)(IV)(D) state that the disclosure needs to be substantially similar to the model format. I don’t think a letter format would be substantially similar.
If your bank is offering/selling the insurance then I would say the disclosures would be triggered. I do not believe simply listing owner’s title on the GFE, as required by regulation, is a solicitation of insurance. However, other practices you have in place may be a solicitation. The FDIC regulation is 12 CFR 343 or the applicable regulation of your regulator. FRB: 12 CFR 208.80; OCC: 12 CFR 14; Saving Associations 12 CFR 136.
Here’s a link to ecfr where you can find these regulations: https://www.ecfr.gov/cgi-bin/text-idx?SID=3355ebc2e6ac3beeaccafd165da8dbe7&tpl=/ecfrbrowse/Title12/12tab_02.tpl
1) There is not a dollar threshold exemption, but there is a proposal out that would exempt loans of $25,000 or less. So the $250,000 threshold will not come into play for appraisals on HPMLs.
2) As for abundance of caution collateral, the regulation states except for the exemptions provided a creditor shall not extend a higher-priced mortgage loan to a consumer without obtaining, prior to consummation, a written appraisal of the property to be mortgaged. In my opinion, that means would apply to any property mortgaged as collateral.
Here are the exemptions to the HPML appraisal requirements:
12 CFR 1026.35(c)(2) Exemptions. The requirements in paragraphs (c)(3) through (6) of this section do not apply to the following types of transactions:
(i) A qualified mortgage as defined in 12 CFR 1026.43(e).
(ii) A transaction secured by a new manufactured home.
(iii) A transaction secured by a mobile home, boat, or trailer.
(iv) A transaction to finance the initial construction of a dwelling.
(v) A loan with maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer’s principal dwelling.
(vi) A reverse-mortgage transaction subject to 12 CFR 1026.33(a).You’re right, they appear to be the same thing, but I believe there is one technical difference. Since Regulation Z doesn’t provide a definition of mobile home for us to use, I’m looking to the industry and HUD standard. There were mobile/manufactured home building standards implemented by HUD in 1976 under 24 CFR 3280. Mobile home is the term applied when built before these standards were implemented. Homes produced after implementation are called manufactured homes.
Here’s a couple of links that may help:
https://www.nadaguides.com/Manufactured-Homes/Tips-and-Articles/Definitions
https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ramh/mhs/faqAnd remember not to confuse these with a modular home, which is different as well.
The HPML escrow amendments were effective June 1, 2013, so if you qualify for the exemption you may use it now. You’ve addressed 1026.35(b)(2)(iii)(A)-(C) in your question. Don’t forget to ensure you meet 1026.35(b)(2)(iii)(D), as well, which adds:
Neither the creditor nor its affiliate maintains an escrow account of the type described in paragraph (b)(1) of this section for any extension of consumer credit secured by real property or a dwelling that the creditor or its affiliate currently services, other than:
(1) Escrow accounts established for first-lien higher-priced mortgage loans on or after April 1, 2010, and before June 1, 2013; or
(2) Escrow accounts established after consummation as an accommodation to distressed consumers to assist such consumers in avoiding default or foreclosure.Jack will provide a worksheet once the regulations are final. The regulations defining the total of points and fees are final, but new finance charge rules have not yet been completed. So this project is still pending.
You are correct. And reason would indicate that you wouldn’t have to do a background check if one had already been done at the time of hire. However, the regulation or commentary doesn’t seem to give an exception for this. Take a look at page 367 and 368 of the final rule: https://files.consumerfinance.gov/f/201301_cfpb_final-rule_loan-originator-compensation-preamble.pdf
You are correct, QM are exempt from the HPML appraisal rules, including the flip requirements. In my opinion, you could certainly abide by the HPML appraisal rules to be cautious, but if you have a safe harbor QM and have documentation in the file to back it up, you shouldn’t have any problem using the exemption to the HPML appraisal rule. However, if you have a loan that meets the QM requirements, but is a higher cost covered transaction, then you only have a presumption of compliance, which means your compliance with the ability to repay rules could be questioned. At that point, if it is determined you did not satisfy the QM requirements then you also would not have technically qualified for the HPML appraisal exemption. In cases where you only have a presumption of compliance, I think it would be prudent to follow the HPML appraisal rules if they apply.
Of course, as you stated, this is all new so we’ll have to wait to see what the examiners expect in these situations, but I think this is a safe approach.
Does your bank comply with the Risk Based Pricing requirement or the Credit Score Disclosure Exception?
FCRA/Regulation V requires that lenders comply with the Risk Based Pricing guidelines for consumer loans (e.g. primarily for personal, family or household purposes), regardless of the collateral. In general, the rule is that if you offer or provide credit to a consumer on material terms that are materially less favorable than the most favorable material terms available to a substantial proportion of your consumers and your decision for this pricing was based in whole or in part on a consumer report then you should be providing the risk based pricing notice to those consumers that receive the less favorable terms, unless you comply with the Credit Score Disclosure exception. Most banks use this exception. If your bank uses the exception notices/credit score disclosure notice, then you should be providing it in connection with all consumer applications where a consumer report is used. There are model notices in Reg V for 1-4 family secured, non RE secured and credit report, but no credit score available.
These are not required to be signed, however, you do want to ensure you can prove your process for providing them.
Here’s a link to Regulation V: https://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=265fb98f13755c81ea96b0ae3b8fc462&tpl=/ecfrbrowse/Title12/12cfr1022_main_02.tpl. Look specifically at Subpart H, 1022.70-75This same question was addressed a while back. Take a look at the post linked below.
In that thread a member offered to share their questionnaire/survey with another member and may be willing to share with you as well.
If you aren’t able to obtain a sample, please post in this thread again letting us know.
Another thought…if the application wasn’t withdrawn and she is simply adding co-applicants, in my opinion you would be fine in giving the new co-borrowers the early disclosures you have already given to the initial applicant. Your file will reflect when the applicants were added and therefore there shouldn’t be any questions as to why they received the disclosures later.
