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#1219770 - 07/21/09 03:18 PM Cross collateral addendum
AuditorK Offline
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Joined: Feb 2003
Posts: 962
PA
Our loan forms vendor has added a "Cross-collateral Addendum" pertaining to the John Warner National Defense Authorization Act.

It amends the loan documents to add the following wording:

No present or future agreement securing any other debt I owe you will secure the payment of this loan if, as a result, this loan would become subject to Section 670 of the JWNDAA of 2007. In addition, the documents will not secure any other debt I owe you if, as a result, such other debt would become subject to Section 670.

Can anyone explain what the purpose of this addendum is and in what circumstances we would need to use it?

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Lending Compliance
#1497529 - 01/20/11 03:07 PM Re: Cross collateral addendum AuditorK
LambChop Offline
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Joined: Jan 2011
Posts: 1
What was the answer for this question?

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#1499957 - 01/25/11 07:18 PM Re: Cross collateral addendum LambChop
mstark Offline
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mstark
Joined: Mar 2006
Posts: 336
Bank
Cross-collateral Addendum
The Cross-collateral Addendum has been revised to expand its scope. As revised, the Addendum will now carve out the effect of the cross-collateral clause contained in present or future agreements (i.e., mortgages) in order to prevent a violation of Sections 19(a), 32 or 35 of Regulation Z. Such a violation may occur if a borrower has an existing loan secured by
the consumer's dwelling with the same lender who is now extending
another consumer loan (regardless of collateral type) to the borrower. Due
to the operation of a cross-collateral clause contained in the existing
mortgage, the new consumer loan may become a "consumer transaction secured by the consumer's dwelling" subject to
the early TIL disclosure requirements of Section 19(a) of Reg. Z or
the high-cost or higher-priced mortgage loan requirements or
limitations relating of Sections 32 or 35 of Reg. Z.
When making a closed-end consumer loan, Lenders may use the Addendum (along with the consumer note) to make the cross-collateral clause ineffective if, with respect to the new loan, the lender does not fulfill the necessary requirements of Sections 19(a), 32 or 35 of Reg. Z. Note that the Secured Debt and Future Advances section of the real estate security instruments do contain such a cross-collateral clause if selected. However, the Fannie Mae/Freddie Mac real estate security instruments do not.
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Thanks

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#1499959 - 01/25/11 07:19 PM Re: Cross collateral addendum mstark
mstark Offline
Gold Star
mstark
Joined: Mar 2006
Posts: 336
Bank
source is wolterskluwerfs.com
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Thanks

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