Source: http://magazines.aba.com/bcmag/september_october_2018?pg=40
Timestamp: 2019-04-21 04:11:15
Document Index: 369651454

Matched Legal Cases: ['§1026', '§1026', '§1026', '§1026', '§1003', '§1026']

QIf a bank offers a home equity line of credit product with a fixed rate conversion option (FRCO) under which borrowers may fix the interest rate on a portion of their balance and make payments as if it were a closed-end amortizing loan (i.e., principal and interest payments that are different than that for the disclosed open-end plan), must the bank disclose on the periodic statement the amounts applicable to the FRCO? Or, would this be subject to the periodic statement requirements applicable to residential mortgage loans of Regulation Z’s §1026.41?
AIt depends on whether the principal portion of the pay- ments made under the FCRO replenishes the line of credit. The answer is found in Comment 5 to §1026.40 of Regulation Z, entitled “Payment terms—applicability of closed-end provisions and substantive rules. “Specifically, Comments 5.i and ii to that section indicate that if the amount of credit will be replenished as the principal balance of a conversion of part or all of the balance to a fixed rate during the draw period, then the creditor must continue to provide periodic statements under §1026.7. If, however, the FRCO payments will not be made available for future use, then, as indicated in Comment 5.iii, the transaction would be subject to closed-end credit provisions, including, as applicable, the periodic statement provisions under §1026.41. (Response provided August 2018.)
QWhich credit score should be reported, and where on the Loan Application Register (LAR) should it be reported, where there are more than two applicants and the bank uses the lowest credit score? For example, assume that Applicant A is the primary applicant and has a credit score of 790, Applicant B’s is 745, and Applicant C’s is 685 and that the bank uses the lowest score (Applicant C’s score).
APursuant to Comment 3 to §1003.4(a)( 15) of Regulation C, the creditor should report the “credit score for the ap-
plicant that it relied on in making the credit decision,” in this
case Applicant C. The financial institution complies by report-
ing the credit score used “for the applicant and reporting that
the requirement is not applicable for the first co-applicant or,
at the financial institution’s discretion, by reporting the data
for the first co-applicant and reporting that the requirement is
not applicable for the applicant.” Thus, it may report Applicant
C’s score in the applicant or co-applicant field.
Creditors only report two applicants—the applicant and one co-applicant. The implication appears to be that the creditor should treat as either applicant or co-applicant the applicant whose scores is relied on, even if the creditor did not originally designate that applicant as applicant or first co-applicant in its system. (Response provided August 2018.)
QA customer completed an application for a construction-only loan. After the bank provided the Loan Estimate, the customer told the lender that she has also decided to apply for permanent financing of the construction loan with the bank. When must the bank provide the Loan Estimate for the permanent phase? What is the timing if the customer applies for both phases at the same time?
AThe timing for providing the Loan Estimates depends on when the customer applies for each phase. If the customer applies separately, as your customer did, the bank would provide the Loan Estimate for the construction phase within 3 business days of receipt of the construction phase application and the Loan Estimate for the permanent phase within 3 business days of receipt of the application for the permanent phase. If the creditor receives a single application for both phases and chooses to conduct separate closings and provide separate disclosures for each phase, it would provide Loan Estimates for both phases within 3 business days of receipt of the application, a separate closing and Closing Disclosure for the construction phase, and a separate closing and Closing Disclosure for the permanent phase upon completion or near-completion of the construction phase.
See: Regulation Z, Comment 5 to §1026.19(e)( 1)(iii) and the Bureau’s Detailed Summary to the 2017 Amendment at s3.amazonaws.com/files.consumerfinance.gov/f/docu- ments/201708_cfpb_2017-TILA-RESPA-Rule-Detailed- Summary-of-Changes-and-Clarifications.pdf (Response provided August 2018.)
QWhen it is appropriate to indicate “Yes” on the Loan Estimate for the rate lock question? Regulation Z is unclear whether the bank only answers “yes” when the rate lock agreement is in writing.
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