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#1219683 - 07/21/09 02:06 PM
Re: New Reg Z Final Rule - Just Published
pjs
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Power Poster
Joined: Aug 2001
Posts: 7,352
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I'm thinking those "various investors" should be locked up. ....or slapped. On top of that, it's a direct insult to me for a senior lender to question me over an opinion of an investor who is simply interested in pushing paper in a furiously fast manner. K....I'm venting, venting, venting......whew!
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#1219687 - 07/21/09 02:08 PM
Re: New Reg Z Final Rule - Just Published
Dan Persfull
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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I've seen at least one of our investors taking the same stance I am...I'm sorry guys..but it's clear in the regulation that for mortgage loans changes that are directly related to the finance charge (rate/prepaids)that cause the end result to be lower, will not be considered in the redisclosure tolerance rules (we redisclose, but will not require additional waiting period). My Federal Reserve contact had no problem with agreeing [i]in writing [i] that this stands and is correct. However, if the error was a typo or program error or ANYTHING not related to a true change in the FC...no deal.
Again, I encourage you to go with what your regulator says...I will be.
The investor's memo that was sent to me was very well done...it was very accurate and to the point...the particular section discussing tolerance waiting periods follows:
If the APR at consummation increases by more than .125% from the previously disclosed APR, a re-disclosure TIL must be given. The loan cannot close (document signing) until 3 business days after the re-disclosure TIL is received by the borrower.
I will also be interested in the SAN FRAN FRB stance on this..since mine came from ATL.
Last edited by RR joker; 07/21/09 02:21 PM.
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#1219741 - 07/21/09 02:56 PM
Re: New Reg Z Final Rule - Just Published
RR Joker
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Power Poster
Joined: Aug 2001
Posts: 7,352
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I've seen at least one of our investors taking the same stance I am...I'm sorry guys..but it's clear in the regulation that for mortgage loans changes that are directly related to the finance charge (rate/prepaids)that cause the end result to be lower, will not be considered in the redisclosure tolerance rules (we redisclose, but will not require additional waiting period). My Federal Reserve contact had no problem with agreeing [i]in writing [i] that this stands and is correct. However, if the error was a typo or program error or ANYTHING not related to a true change in the FC...no deal.
I'm a little dense, but I'm not sure what you're telling me in the above paragraph.
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#1219794 - 07/21/09 03:35 PM
Re: New Reg Z Final Rule - Just Published
swiggles
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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We need an offcial release from the regulatory agencies themselves.
If you look at the OSC to .22(a)(4) and (5) they both refer to the APR being considered accurate based on an understatement of the finance charge, not an overstatement. They also both in their last sentence give you an example of what would not be considered accurate.
In fact in .22(a)(5) it makes a point to illustrate in an irregular transaction that if the APR is understated because of the omission of a $75 fee that an APR of 8.5% (if closer to the actual APR) would be considered accurate, that is 1/2 percent below the disclosed APR of 9%, but it also says that an APR over 9.25% would not be considered accurate, that remains at the 1/4 percentile tolerance. So to me that is saying an overstated APR is not considered accurate.
I will be the first to agree that it does not make sense to have to redisclose if the ETIL APR is higher than the "final" APR but I don't see the exception as written.
Last edited by Dan Persfull; 07/21/09 04:11 PM.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1219885 - 07/21/09 04:31 PM
Re: New Reg Z Final Rule - Just Published
Dan Persfull
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New Poster
Joined: Apr 2006
Posts: 9
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In the past, the ETIL was only required on Residential Mortgage Transactions which are not subject to the right of rescission. The disclosures could be made to any consumer who was primarily liable on the obligation. Up until now, we have not had a requirement to provide an ETIL on a rescindable transaction. The issue of providing an ETIL to each applicant is new. 226.17(d) has not changed. It is not uncommon in a RMT to take both an existing primary residence and the new residence as security on the note. In those instances the ETIL was required and also the ROR. As I said, the requirement has not changed. Dan, I agree the requirement has not changed. Typically, the bank is making a bridge loan when it takes both an existing primary residence and a new residence as security on the note. Again, bridge loans are exempt from RESPA and from ETIL. I suspect that many bank's may have been providing early disclosures when not really required (such as refinancings and bridge loans), but question whether they have been providing early disclosures to all applicants in those situations. If someone has, I would love to hear about their process.
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#1219892 - 07/21/09 04:38 PM
Re: New Reg Z Final Rule - Just Published
ckr
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Platinum Poster
Joined: Jan 2006
Posts: 642
Missouri
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Quick point of clarification ... is a fee considered imposed, for purposes of needing to wait until the ETIL is considered received, when the service is ordered or when the provider has completed enough work that the request cannot be cancelled?
For example, if I receive an application today and mail my disclosures today, can I go ahead and order my title work if my title company will give me until they deliver the commitment to cancel the order at no charge, or do I need to take the safer, more conservative route and wait to order anything (flood, appraisal, title work) until at least Saturday? (Today is Tuesday for those looking at this thread later)...
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#1219896 - 07/21/09 04:42 PM
Re: New Reg Z Final Rule - Just Published
Dan Persfull
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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I agree, an omission of a fee is an error...not a change. My contact indicated that if the rate lowered or the final charges lowered...you would not have to wait the additional period. It comes from the following section in .18.
(d) Finance charge. The finance charge, using that term, and a brief description such as ``the dollar amount the credit will cost you.''
(1) Mortgage loans. In a transaction secured by real property or a dwelling, the disclosed finance charge and other disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge:
(i) is understated by no more than $100; or
(ii) is greater than the amount required to be disclosed.
Personally, I hope FRB ATL is correct...it only makes sense.
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My opinion only. Not legal advice.
Say you'll haunt me - Stone Sour
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#1220318 - 07/22/09 12:56 PM
Re: New Reg Z Final Rule - Just Published
Rocky P
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Gold Star
Joined: Jun 2007
Posts: 447
New England
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From the reg - it appears that anyone who can rescind
Reg 226.17
(d) Multiple creditors; multiple consumers. If a transaction involves more than one creditor, only one set of disclosures shall be given and the creditors shall agree among themselves which creditor must comply with the requirements that this regulation imposes on any or all of them. If there is more than one consumer, the disclosures may be made to any consumer who is primarily liable on the obligation. If the transaction is rescindable under § 226.23, however, the disclosures shall be made to each consumer who has the right to rescind.
Commentary
226.17(d) Multiple creditors; multiple consumers.
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2. Multiple consumers. When two consumers are joint obligors with primary liability on an obligation, the disclosures may be given to either one of them. If one consumer is merely a surety or guarantor, the disclosures must be given to the principal debtor. In rescindable transactions, however, separate disclosures must be given to each consumer who has the right to rescind under § 226.23, although the disclosures required under § 226.19(b) need only be provided to the consumer who expresses an interest in a variable-rate loan program. If a mother/father pledge their house as collateral for their child, and we hand-deliver the ETIL to the child in person, but mail the ETIL to the parent's, would we have to wait until the 3 business days to collect a fee?
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#1220329 - 07/22/09 01:08 PM
Re: New Reg Z Final Rule - Just Published
Book Nerd
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Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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If a mother/father pledge their house as collateral for their child, and we hand-deliver the ETIL to the child in person, but mail the ETIL to the parent's, would we have to wait until the 3 business days to collect a fee? The ETIL would not be needed in this situation. Credit is not being extended to the mother/father therefore they are not consumers for the purposes of the loan and since the dwelling is not the consumer's (the borrower's) dwelling 226.19(a) would not apply. See the definition of a consumer at 226.2(11). (11) Consumer means a cardholder or a natural person to whom consumer credit is offered or extended. However, for purposes of rescission under §§226.15 and 226.23, the term also includes a natural person in whose principal dwelling a security interest is or will be retained or acquired, if that person's ownership interest in the dwelling is or will be subject to the security interest.And from the Commentary: 2(a)(11) Consumer.
1. Scope. Guarantors, endorsers, and sureties are not generally consumers for purposes of the regulation, but they may be entitled to rescind under certain circumstances and they may have certain rights if they are obligated on credit card plans.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1220478 - 07/22/09 03:34 PM
Re: New Reg Z Final Rule - Just Published
RUKiddingMe
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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Kahola, I haven't seen that addressed but I see no harm with that statement on the final TIL.
RUKiddingMe
1. Under 226.19(a) the ETIL is only required for a mortgage transaction subject to RESPA where a security interest in the consumer's dwelling is taken. Under the definition of a consumer, other than for the purposes of the ROR, the mother/father in this case are not consumers therefore you are not taking a security interest in a consumer's dwelling so the 226.19(a) disclosure is not required.
2. When an ETIL is not given then a "final" TIL is required to be given before consummation. You would provide the material disclosures to the mother/father at the closing, they then have the 3 day ROR to change their minds.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1220536 - 07/22/09 04:34 PM
Re: New Reg Z Final Rule - Just Published
Kahola
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Power Poster
Joined: Aug 2002
Posts: 3,094
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What about commentary to 23(a)
2. Consumer. To be a consumer within the meaning of §226.2, that person must at least have an ownership interest in the dwelling that is encumbered by the creditor's security interest, although that person need not be a signatory to the credit agreement. For example, if only one spouse signs a credit contract, the other spouse is a consumer if the ownership interest of that spouse is subject to the security interest.
It refers the reader back to the general definition. It seems to say that if the guarantor or endorser is allowing his prin dwell to secure the ln, he is a consumer. Am I off track?
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#1220544 - 07/22/09 04:46 PM
Re: New Reg Z Final Rule - Just Published
ahou
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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.23 is the section of Reg. Z that address rescission rules for closed-end credit and if they are giving a security interest in their primary dwelling in which they have an ownership then for the purposes of the ROR they are consumers. Again look at the definition of a consumer.
(11) Consumer means a cardholder or a natural person to whom consumer credit is offered or extended. However, for purposes of rescission under §§226.15 and 226.23, the term also includes a natural person in whose principal dwelling a security interest is or will be retained or acquired, if that person's ownership interest in the dwelling is or will be subject to the security interest.
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#1220628 - 07/22/09 05:47 PM
Re: New Reg Z Final Rule - Just Published
Dan Persfull
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Gold Star
Joined: Jun 2007
Posts: 447
New England
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1. Under 226.19(a) the ETIL is only required for a mortgage transaction subject to RESPA where a security interest in the consumer's dwelling is taken. Under the definition of a consumer, other than for the purposes of the ROR, the mother/father in this case are not consumers therefore you are not taking a security interest in a consumer's dwelling so the 226.19(a) disclosure is not required. The MDIA ruling on page 6 states: If the transaction is a dwelling-secured extension of consumer credit, early disclosures would be required regardless of who occupies the dwelling.Does this mean that we still have to provide the E-TIL to the child, but not the parents?
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#1220659 - 07/22/09 06:22 PM
Re: New Reg Z Final Rule - Just Published
Book Nerd
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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Further down in that section it references that business purpose credit and loans for the purchase, maintenance or rehabilitation of rental property are exempt, I read that to imply that if a consumer purpose loan is secured by the consumer's dwelling then it is subject to the disclosure requirements whether the dwelling is owner occupied or not by the consumer.
226.19(a) specifically states the "consumer's" dwelling:
§ 226.19 Certain mortgage and variable rate
transactions.
(a) Mortgage transactions subject to
RESPA—
(1)(i) Time of disclosures. In a mortgage transaction subject to the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) that is secured by the consumer’s dwelling, other than a home equity line of credit . . . .
And again the mother/father, other than for the ROR, do not meet the definition of a consumer.
If you are more comfortable in disclosing then you by all means should disclose but it is still my opinion it is not required.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1220679 - 07/22/09 06:40 PM
Re: New Reg Z Final Rule - Just Published
Book Nerd
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Diamond Poster
Joined: Nov 2005
Posts: 2,409
SW GA
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Any one listening to the San Francisco Fed's audio conference on consumer compliance hot topics - including MDIA?
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#1220680 - 07/22/09 06:41 PM
Re: New Reg Z Final Rule - Just Published
pjs
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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RRjoker- after reading your words several times- what you write makes sense. THANKS, but San Fran just said NOPE! grrrrrr.....wait til I tell ATL FRB. Only the very complicated "if it is closer than the, blah, blah, blah" part is allowed.
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My opinion only. Not legal advice.
Say you'll haunt me - Stone Sour
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#1220682 - 07/22/09 06:44 PM
Re: New Reg Z Final Rule - Just Published
Kahola
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Power Poster
Joined: Feb 2005
Posts: 6,559
Foxboro
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Is it okay that the new verbiage "You are not required to complete this agreement merely because you have received these disclosures or signed a loan application" be on the TIL that we give at closing? I am being told that the processing/closing system we are using won't allow us to remove this verbiage. Funny this question came up. We are in the process of changing closing doc prep companies, and I noted they included this on their final TIL. I asked them where they saw it was required since what I had read only mentioned it was requried on the ETIL. They came back to me today and said their counsel felt it should be on the final as well as ETIL...no specific reason why. Probably a CYA.
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#1220685 - 07/22/09 06:47 PM
Re: New Reg Z Final Rule - Just Published
RR Joker
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Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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RRjoker- after reading your words several times- what you write makes sense. THANKS, but San Fran just said NOPE! grrrrrr.....wait til I tell ATL FRB. Only the very complicated "if it is closer than the, blah, blah, blah" part is allowed. Am I to understand from the above comments they agreed with my analysis in our PM discussion?
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The opinions expressed are mine and they are not to be taken as legal advice.
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