Pub. 5 2017 Issue 4

20 The Community Banker www.mibonline.org TILA/RESPA. Q: We have a purchase transaction that we are doing an 80 percent first lien and a 10 percent second lien. Which Closing Disclosure form should be used on the second lien transaction, the standard version or alternate version (since there is not a seller involved on the second loan)? A: You would not use the alternative CD since that is for refinances only. You just do not complete a seller side for the CD for the second lien loan. Also, remember that the proceeds of the second mortgage must appear in section L of the first mortgage CD. The seller gets only his side of the first mortgage CD (noth- ing for the second mortgage loan). If both of these loans are for the purchase of the subject residence (as it sounds from your description), then the loan purpose for both would be marked as “purchase.” Privacy. Q: I need an example of a privacy notice that includes identify- ing a third party vendor that we must add to our annual privacy agreement. Also, what information do we need to disclose? A: Your privacy notice to customers need disclose only the type of nonaffiliated com- panies to which you disclose customer information, not their names. The instructions in the appendix of the privacy rules for completing the model notice form direct that you “list categories of companies such as mortgage companies, insurance companies, direct marketing companies, and nonprofit organizations,” rather than the names of such entities. TILA. Q: My assumption is that if the loan is a higher-priced mortgage loan (HPML) we have to do a full appraisal unless it falls into one of the exemptions or the special rules for manufactured homes. Is there any kind of exemption for a small servicer or small creditor for the full appraisal rule? I know it keeps us from having to get a second appraisal. We process most of our in house loans as small creditor qualified mortgage (QM) basic loans. A: No, there is no exemp- tion from the HPML appraisal requirement for small creditors. However, there is one for QMs. So, if all these in-house HPMLs are also QMs, then the HPML appraisal requirement would not apply. These exemptions also apply to the requirement for a second appraisal when someone is buying a home to flip it in a short time. EFTA. Q: At the time of account opening a customer does not opt-in for paying an overdraft for ATM or one-time debit card transactions un- der the institution's overdraft service. Later, the customer calls and provides affirmative consent via telephone. From that consent, the confirmation notice is provided. Does the bank have to get the customer’s opt-in/affirmative consent in writing? Or, is the telephone confir- mation sufficient? A: Since the regulation sets no specific requirements or format, any record should be sufficient. It does need to be recorded, including some file notation recording when the customer called, to whom she spoke, what she said, etc. TILA/RESPA. Q: We have some confusion regarding the Adjustable Payment (AP) Table on the Loan Estimate (LE) and Closing Disclosure (CD) and I'm hoping you can provide some guidance. Should the AP Table be completed for a construction or bridge loan that is interest only? The interest rate is fixed, but the interest payments will change based on the number of days in the month. We have not been completing the AP Table, but now are wondering if it should be since it has an interest only feature. A: No, you do not need the AP table in the situation you described. It is required when either (1) the principal and interest payments (which your construction loans do not have) may vary based on some loan term other than the interest rate (different numbers of days in different months are not loan terms) or (2) there are seasonal payments. Granted, there is a lot of discussion of interest-only payments in this section of the regulation and its commentary, but that is dealing only with disclosing such a feature for a loan that has either (1) or (2), above. If your loan product does not have either (1) or (2), then the AP table is prohibited, as stated in this comment from the Official Staff Commentary on Regulation Z. HMDA. Q: A borrower came in with his wife to get a loan to purchase a house. The loan was turned down the same day and an adverse action notice went out. The borrower came back a few days later to add his mother on as a co-borrower. The loan was then approved. Before the disclosures even went out, the purchase contract was denied and the application was withdrawn. Does this situation require two HMDA entries, one for the first denial and one for the withdrawal? A: Yes, you would have two HMDA entries/transactions – one a denied application and the second an approved not ac- cepted application. From your description, it sounds like the bank approved the application with the mother as co-borrower, but then the seller rejected the purchase contract and your applicants “withdrew.” However, you cannot use the “withdrawn” action taken code once a credit decision has been reached (in this case, your approval). COMPLIANCE —WINTER 2017 By Bill Showalter, Senior Consultant, Young & Associates, Inc. Young & Associates provides banks and thrifts with support for their compliance programs, independent reviews, and in-bank training, as well as a full menu of management consulting, loan review, IT consulting, and policy systems. Compliance Q&A — Winter 2017