Transcript Tennessee Department of Financial Institutions

Tennessee Department
of Financial Institutions
Tennessee Home Loan Protection Act
Compliance Division
Departmental Organization
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Greg Gonzales- Commissioner TDFI
Mike Igney- Assistant Commissioner, Compliance
Chris Adams- Chief Administrator of Safety and Soundness
Christina Coleman- Program Administrator
Georgia Cannon- West Tennessee Regional Manager
Brian Williams- East Tennessee Regional Manager
Carl Scott- Director of Licensing
Applicability/Coverage
 The THLPA applies to both lender and broker
 Applies to closed end consumer home loans that meet
or exceed THLPA statutory triggers
 Does not apply to:
-Residential mortgage transactions
-Reverse mortgage transactions
-Loans insured by or sold to government agencies
-Construction loans (defined in THLPA)
-Open end credit (unless used to evade the THLPA)
Exam Process
 THLPA exam will be included in the
standard mortgage/TILT exam.
 THLPA loan sample will vary depending on
total volume.
 Loans approaching the thresholds will be
selected and rates, points/fees recalculated
to determine coverage.
 Supplements to the examination will be
revised to include affiliate and THLPA loan
information.
What will change?
 Exam time
 Areas of examination
How do I expedite the exam?
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Identify THLPA loans on loan log
Identify rates and fees on loan log
Segregate THLPA loans
Segregate loans in foreclosure
Provide or obtain lender underwriting
guidelines for THLPA loans vs. nonTHLPA loans.
How do I know if it’s a high cost
home loan?
 Thresholds:
Section 2 (15,17)
 Rate: Same as HOEPA (Section 32)
 Points/Fees: If Total Loan Amount is . . .
$30,000.01 or more – greater of 5% or
$2,400
$30,000.00 or less – 8%
Key Definitions
 Total Loan Amount is defined in Reg. Z,
Sect. 32
 Points/Fees is defined under Reg. Z, Sect.
32, but for THLPA purposes, excludes:
up to (2) “bona fide” loan discount points
as defined in the THLPA
 and real estate related fees defined in Reg.
Z 226.4(c)(7) paid to a 3rd party or affiliate
of the lender if those fees are
reasonable.
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Prohibitions and Limitations
 Cannot encourage default/payment
skipping. Sect. 3(1)
 Payoff Statements:
 Must provide, free of charge, up to (2)
payoff statements in a 12 month period.
Sect. 3(2)
 These statements must be provided
within FIVE business days of the
request. Sect. 3(2)
Prohibitions and Limitations
 Lien release fee for actual cost only. Sect. 3(3)
 Cannot refinance a home loan with a THLPA loan within
30 months of the original loan date unless provides a
reasonable benefit to the borrower. Sect. 3(4)
 Financing of single premium credit insurance: Sect. 3(5)
 Benefits payable under all polices cannot exceed
$50,000.
 Principal amount of premiums must be repaid over
the policy term.
 Benefits cannot exceed 103% of the unamortized
principal balance at any time during the loan.
Prohibitions and Limitations
 Can’t make a loan unless you reasonably believe the
borrower can make the payments. Sect. 3(6)
 Financing of fees: Sect. 3(7)
 Capped at 5% if Total Loan Amount is $30,000 or
less
 Capped at $1,500 if Total Loan Amount is
$30,000.01 to $50,000
 Capped at 3% if Total Loan Amount is greater than
$50,000
TILTs are exempt from this provision but must comply
with TCA Section 45-5-403(a)(1)(A).
Prohibitions and Limitations
 Cannot charge points/fees on a
THLPA loan, (other than on new
money) if you or one of your
affiliates refinance the loan. Sect. 3(8)
Prohibitions and Limitations
 Prepayment Penalties:
 No prepayment penalties in excess of 2%. No
prepayment penalties greater than 24 months.
Sect. 3(9)
 If you refinance a THLPA loan and you or your
affiliate is the lender on the loan being
refinanced, you cannot collect prepayment
penalties on the refinanced loan nor can you
provide for prepayment penalties on the new
loan. Sect. 3(9)
 Cannot use Rule of 78ths as refund method on
THLPA loans. Sect. 3(9)
Prohibitions and Limitations
 No balloon payments. Sect. 3(10)
 No negative amortization. Sect. 3(11)
 Lender cannot accelerate the debt at
its sole discretion.
Sect. 3(12)
 Cannot consolidate more than (2)
payments up front to be paid at or
before closing. Sect. 3(13)
Prohibitions and Limitations
 Interest rate can’t be increased, post default.
Sect. 3(14)
 Late Fees:
 Late payment fee can’t exceed the greater of 5%
or $15. It can’t be charged until the 11th day. Sect.
3(15)
 Late fee can only be charged once per late
payment. Sect. 3(15)
 Late fee can’t be assessed on a payment which
would have been a full payment if not for a
previously assessed late fee. Sect. 3(15)
Prohibitions and Limitations
 Must provide written “NOTICE TO
BORROWER” at least (3) business days
prior to closing. Must use statutory
language. Sect. 3(16)
Prohibitions and Limitations
 Any material changes in rate, term,
type of loan or settlement charges
must be re-disclosed in written form
at least 1 day prior to closing. Sect.
3(17)
Prohibitions and Limitations
 THLPA loans can ONLY be closed in the offices of a:
lender; attorney; title agent; closing agent; or
commercial office of a mortgage broker. Sect. 3(17)
 Must report favorable and unfavorable borrower credit
histories to a national CCRA at least quarterly. Must
provide evidence of this reporting. Sect. 3(18)
Prohibitions and Limitations
 Promissory Note and Deed of
Trust/Mortgage must display on the
face of each: “This instrument is a
high cost home loan as defined in
Tennessee Code Annotated Title 45”.
Sect. 3(19)
 Customer may not sign any loan
documents with material terms
omitted or incomplete. Sect. 3(20)
Prohibitions and Limitations
 No loan modifications, alterations or changes can
occur after execution without written consent of all
parties involved or as authorized by valid power of
attorney. Sect. 3(20)
 Must provide borrower, in a separate document,
either: a listing of HUD approved counselors or a
resource list for HUD, THDA or TDFI with toll free
numbers and website information to identify these
counselors. Cannot penalize a borrower for exercising
this right. This disclosure must be provided to the
borrower no later than the disclosure of the Good
Faith Estimate as required by RESPA. Sect. 3(21)
Prohibitions and Limitations
RIGHT TO CURE
 Must be afforded to borrower at least once
in a 12 month period. Can exercise the
right up to 3 days prior to foreclosure.
Actual written notice must be sent to
borrower outlining this right. Notice must
be provided at least 30 days prior to
publishing the notice of foreclosure. Sect. 4
Prohibitions and Limitations
RIGHT TO CURE
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Notice must include: Sect. 4
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Nature of default
Amount of money required to cure
If the amount will change in next 30 days
Date for cure to avoid foreclosure
Name/address/phone of who/where to send payment
Notice that foreclosure will occur if payment is not made
Name/address/phone of contact if borrower disagrees with
default or calculations to cure
Upon exercising the “right to cure”, lender must reinstate
borrower to same position as if default had never occurred.
Prohibitions and Limitations
Right To Cure
 Cannot assess borrower any charges, fees
or penalties for exercising right to cure
other than those in statute: Sect. 4
 During the cure period, actual expenses to
preserve, maintain or protect property as
permitted in the note or deed of trust, or other
loan documents.
 Attorney fees which are reasonable and actually
incurred for publishing notice of and conducting
the foreclosure sale.
Prohibitions and Limitations
 Cannot divide or structure any loan
transaction to avoid/evade the
THLPA. Sect. 6(a)
 Open end credit
 Financing fees with subordinate lien
 Etc.
Contact Information
 TDFI: (615) 741-3186
 Regional Offices:
 East
865-594-2137
 Middle 615-896-3780
 West 901-754-5790
 Consumer/Industry complaints:
(615) 741-3186
 For questions regarding THLPA, contact:
 [email protected]