We have some confusion in regards to using a Closing Disclosure to reset the tolerance on a “0” tolerance item (origination charge) if there is a bona fide Change in Circumstance. On November 8, 2018, the customer requests an increase in the loan amount to $115,000, which is approved since the appraisal would allow for additional funds. The initial Closing Disclosure had not been delivered before this requested Change in Circumstance. The processor prepares an initial Closing Disclosure using a loan amount of $115,000 and shows the increased origination charge and a closing date of November 19, 2018. This was given to the borrower in person. My question is, since there was adequate time before the closing date of November 19, 2018, should we have not issued a new Loan Estimate on November 8, 2018 showing the increased loan amount and origination charge since the CD did not have to go out on November 8, 2018?
Under the recent "black hole" amendments, the bank would be allowed to "reset" these on the CD rather than the LE. Note, however, that it still has to be given within three business days of the changed circumstance and that may or may not have been the case from what you described above, as set out here:
…The creditor must provide the consumer with the Closing Disclosure reflecting the revised estimate at or before consummation and within three business days of receiving information sufficient to establish that the changed circumstance or other triggering event has occurred. …
We have a customer that is leaving for boot camp for the Air Force. Am I correct in stating that boot camp is not active duty?
Boot camp is included in active duty. "Military Service" is defined under SCRA as period of active duty status. For members of the regular Armed Forces, active duty begins the day they leave civilian life; for them, active duty is not synonymous with deployment. For a member of a reserve component, the protections the SCRA offers begin when a member of the Reserves or National Guard receives mobilization orders. It is initiated upon receipt of mobilization orders in order to give the soldier time to put his or her affairs in order.
There may be several active duty periods during a member of the Reserves or National Guard’s career, including the initial active duty for training ("boot camp") and subsequent call-ups for service, whether or not the Servicemember volunteered for active duty is immaterial. Finally, military service also includes any period during which a Servicemember is absent from duty because of sickness, wounds, leave or other lawful causes.
Our Lending to Servicemembers Policy has great information regarding both the SCRA and MLA: https://www.compliancealliance.com/find-a-tool/tool/lending-to-service-members-policy
The term “active duty” means full-time duty in the active military service of the United States. Such term includes full-time training duty, annual training duty, and attendance, while in the active military service, at a school designated as a service school by law or by the Secretary of the military department concerned. 10 USC 101(d)(1) http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title32-section101&num=0&edition=prelim
Our current practice on residential balloon mortgages is to extend the maturity date prior to the balloon period if the customer requests it prior to the balloon and the borrower meets certain conditions. This is completed with a change in terms document leaving the current amortization period the same. The examiners have reviewed the process and are ok with this. We have a customer that has approached the bank and would like to extend the maturity but would like to shorten the amortization. She currently has 13 years left, but wants the bank to shorten it to 12. I guess my concern is, do we now have to treat it as a new request because it is a change that is increasing the monthly burden, not decreasing it.
So the rules on whether a "modification" would be considered a "refinancing" for Reg. Z purposes can be found in 1026.20 here: https://www.consumerfinance.gov/eregulations/1026-20/2016-14782_20160627#1026-20
Generally speaking, if there's satisfaction and replacement, or if the bank changes the rate based on a new variable rate feature, it will be considered a refinance which would require new disclosures. And although the rule doesn't specifically say this, we also interpret that it's best practice to provide new disclosures for any increase in credit, or if the prior obligation has already matured. So if any of these are occurring, that's when a new set of disclosures should be provided--but from what you describe, it doesn't sound like any of these are happening here.
With the lapse in funding for the NFIP, is it true that no new policies can be written?
On December 28, 2018 FEMA announced that it will resume the sale of new insurance policies and the renewal of expiring policies.
This press release rescinds initial guidance that was issued on December 26, 2018 to suspend sales operations as a result of the current lapse in annual appropriations. The National Flood insurance Program has been reauthorized by congress until May 31, 2019.
The guidance is located here: https://www.fema.gov/news-release/2018/12/28/fema-resumes-selling-flood-insurance-policies-during-appropriations-lapse
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