The Federal Reserve Board recently proposed revisions to the rules for determining when a modification of an existing closed-end mortgage loan secured by real property or a dwelling is a new transaction requiring new disclosures.
The Federal Register notice for the proposed rule is available at:
The proposed rules would provide that new TILA disclosures are required when the parties to an existing closed-end loan secured by real property or a dwelling agree to modify key loan terms, without reference to state contract law.
New disclosures would be required when, for example, the parties agree to change the interest rate or monthly payment, advance new money, or add an adjustable rate or other "risky" feature such as a prepayment penalty.
The proposal also provides that whenever a fee is imposed on a consumer in connection with a modification, including a modification for a consumer in default, a "new transaction" would occur requiring new TILA disclosures.
In addition, if a new transaction is created, and the new transaction's APR exceeds the threshold for a "higher-priced mortgage loan" under the FRB's 2008 HOEPA rules, then special HOEPA protections would apply to the new transaction.
Importantly, the FRB notes that, "[c]onsistent with the current rule, the proposal would exempt modifications reached in a court proceeding, and modifications for borrowers in default or delinquency, unless the loan amount or interest rate is increased, or a fee is imposed on the consumer."
Certain beneficial modifications, such as "no cost" rate and payment decreases, would also be exempt from the requirement for new TILA disclosures.
Let me know if you have any questions. Thanks.
Ralph T. Wutscher
Kahrl Wutscher LLP
The Loop Center Building
105 W. Madison Street, Suite 2100
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (866) 581-9302
Mobile: (312) 493-0874
RWutscher@kw-llp.com
http://www.kw-llp.com
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The Federal Reserve Board recently proposed significant changes to reverse mortgage advertisements and disclosures.
The Federal Register notice for the proposed rule is available at:
These proposed rules would:
• Impose rules for reverse mortgage advertising to ensure advertisements contain accurate and balanced information.
• Change the disclosures consumers receive for reverse mortgages, including: (a) at application, creditors must provide a new, two-page disclosure which highlights in simple language the basic features and risks of reverse mortgages; (b) within three days after receiving the consumer's application, creditors must provide transaction-specific disclosures that reflect the actual terms of the reverse mortgage being offered, which must be presented in a tabular format; (c) at least three days before closing the loan, creditors must provide final disclosures in the same format, to facilitate comparison with the earlier disclosures; and (d) creditors also must ensure that their advertisements for reverse mortgages are accurate and balanced.
• Prohibit certain unfair practices in the sale of financial products with reverse mortgages, such as: (a) prohibiting creditors from conditioning a reverse mortgage on the consumer's purchase of another financial or insurance product; (b) requiring that a consumer receive counseling about reverse mortgages before a creditor can impose nonrefundable fees for a reverse mortgage or close the loan; and (c) prohibiting creditors from steering consumers to specific reverse mortgage counselors or compensating counselors or counseling agencies.
The comment period ends 90 days after publication of the proposal in the Federal Register, which is expected shortly.
Let me know if you have any questions. Thanks.
Ralph T. Wutscher
Kahrl Wutscher LLP
The Loop Center Building
105 W. Madison Street, Suite 2100
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (866) 581-9302
Mobile: (312) 493-0874
RWutscher@kw-llp.com
http://www.kw-llp.com
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com
