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#1853830 - 09/19/13 04:45 PM fee problem - need help
complyorelse Offline
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Joined: Nov 2007
Posts: 442
U.S.
Having trouble understanding a problem loan. We provided early disclosures that did not include a fee that accidentally was included on the final TIL. The fee was greater than $100. The APR on the final TIL of course ended up higher than the early disclosure. The difference was greater than the tolerance allowed and no redisclosure was provided.

Desperate for some help on how to remedy this loan. This problem was discovered through an internal quality control check that was done three months after it closed.

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#1853869 - 09/19/13 05:59 PM Re: fee problem - need help complyorelse
Truffle Royale Offline

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Joined: Jul 2003
Posts: 17,348
Should the fee have been included on the final TIL or not?

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#1853870 - 09/19/13 06:01 PM Re: fee problem - need help complyorelse
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,834
Bloomington, IN
You can't cure the violation. You can only document the corrective action taken to prevent this from reoccurring.

Just saw TR's comment. If the fee was erroneously included I would issue a corrected TIL omitting the fee from the APR calculation.
Last edited by Dan Persfull; 09/19/13 06:04 PM. Reason: Add comment.
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#1853913 - 09/19/13 06:50 PM Re: fee problem - need help complyorelse
complyorelse Offline
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Joined: Nov 2007
Posts: 442
U.S.
Is there no reimbursement needed? I hope not, but we want to do the right thing.

To answer Truffle, the fee should not have been included. The early TIL was actually correct by not including the fee.

With regard to issuing a corrected TIL, what does this accomplish? Is it required in the Reg that we do this? Again, loan closed months ago.

I truly appreciate your feedback.

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#1853935 - 09/19/13 07:09 PM Re: fee problem - need help complyorelse
Truffle Royale Offline

10K Club
Joined: Jul 2003
Posts: 17,348
Originally Posted By: complyorelse
Is there no reimbursement needed? I hope not, but we want to do the right thing.
There's nothing to remimburse for.
To answer Truffle, the fee should not have been included. The early TIL was actually correct by not including the fee. simple mistake that is corrected by doing a corrected TIL

With regard to issuing a corrected TIL, what does this accomplish? Is it required in the Reg that we do this? Again, loan closed months ago. Yes you need to do a corrected TIL no matter when you find the error. It's the proactive stance that most everyone here takes. Better you find it and correct it and document it then an examiner stumbles over it and gets to make you do it.

I truly appreciate your feedback.

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#1854426 - 09/21/13 11:53 PM Re: fee problem - need help complyorelse
Richard Insley Online
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Richard Insley
Joined: Oct 2000
Posts: 10,064
Toano, VA
Sorry I'm arriving late for this discussion.

After reading all the discussion twice, my understanding is that:
- this loan is subject to Section 1026.19(a)(1)(i) of Regulation Z
- estimated disclosures were provided timely and they were accurate
- final disclosures (required by Section 1026.18) were given
- a nonexistent fee exceeding $100 was accidentally included in the disclosed final FC and APR
- inclusion of the "accidental fee" caused the final FC and APR to be overstated
- this error was discovered during a quality control review three months after closing

Unless I missed something, there is no violation...and therefore no need for any kind of action.

Section 1026.18(d)(1) says
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:
...
(ii) Is greater than the amount required to be disclosed.


Originally Posted By: complyorelse
With regard to issuing a corrected TIL, what does this accomplish?
This question deserves more discussion.

Disclosures required by Sections 1026.18 and 1026.19 can be "corrected" at any time prior to consummation. If an error exists at the moment the loan is consummated, there is a violation. Nothing you can do after consummation will "correct" the faulty disclosure or eliminate the violation.

As a result of the violation, Section 130(a) of the TILA makes you civilly liable to the the borrower for damages (if the FC or APR is understated), a penalty, and court costs. If you want to eliminate the civil liability, Section 130(b) of the TILA tells you to: notify the borrower that there was an error (violation) and take whatever action necessary to guarantee that the borrower does not have to pay more than the FC or APR (commonly known as "reimbursement" or "restitution.") Notification can include a revised disclosure if you need to restate non-FC/APR items (late charges or security interest, for example), but any other form of notification is also effective.

In a case where reimbursement is necessary but not done, notification puts the borrower on notice that there were TIL violations but does not eliminate the civil liability. For the borrower's attorney, this amounts to a "sue me" sign on your back.
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