December 5, 2019

PPDocs holiday schedule, Texas home equity loans, Taxpayer First Act and FDIC teleconference on TRID rule.

In observation of Christmas and New Years, PPDocs will close Christmas Eve (December 24th) and New Years Eve (December 31st) at noon. We will be closed Christmas (December 25th) and New Years day (January 1st).

PPDocs Holiday Schedule

Texas Supreme Court case involving Texas home equity loans pending

There is a case currently pending before the Texas Supreme Court (Federal Home Loan Bank vs. Zepeda) involving a Texas home equity loan that is concerning. The case involves the refinance of a purchase money loan with additional funds in the form of a home equity loan. The lender didn’t properly execute the acknowledgement of fair market value, and, when the consumer sent a cure notice regarding it, the lender failed to act to cure. The case revolves around whether equitable subrogation applies.

That just means that the borrower is claiming that the lender’s failure to cure doesn’t only mean the lender risks the additional funds advanced, but also the funds of the refinanced purchase money loan. We are hopeful that the court applies the doctrine of equitable subrogation and says that the lender’s failures don’t put the refinanced purchase money at risk.

What lenders really need to know at this point is that they must always:

comply with all constitutional requirements for home equity loans, including signing the acknowledgement of fair market value at closing;

have procedures in place to timely handle cure notices.

Additionally, to assure that cure notices are properly attended to, we encourage every lender and holder to designate a location where borrowers may deliver written or oral notices of home equity violations as permitted in 7 TAC §153.93. If no location is designated, borrowers may deliver the notice of violation to any physical address or mailing address of the lender or holder (see §153.93(d)). A lender or holder may change the location for delivery of the notice by sending the borrower a conspicuous written notice of the address change (see§153.93(b)).

We will update you when the Texas Supreme Court issues a ruling.

New PPDocs form addresses Taxpayer First Act

A new law, The Taxpayer First Act, requires lenders (and other entities) to get express permission from borrowers to obtain and to state the express purpose for obtaining tax return information. In response, PPDocs has created a taxpayer consent form, which was based on the model language released by MISMO.

FDIC teleconference on TRID rule

The FDIC will host a teleconference on December 11, 2019 for FDIC-supervised institutions to provide information and answer questions relating to the TRID rule, including a review of common issues and tips to help banks address and avoid mistakes. Registration is required for this event and is available online. There will be a Q&A session following the presentation. FIL-73-2019

Question of the Month

Question: We are doing the modification to add a variable rate to a loan that matured on November 27, 2019. Our disclosures will be dated December 3, 2019. Is this ok?

Answer: If you are backdating the effective date of the modification to extend maturity, we recommend extending the loan on a separate modification from the modification used to add the variable rate feature. The reason is that the addition of the variable rate feature will constitute a “refinancing” under Reg Z. There is not really a provision in Reg Z which allows the TRID disclosures to be backdated.

The first modification would extend the matured loan until the TRID waiting periods can be observed, then the second modification would further extend the loan and add the variable feature. This way the dates will match up.

Of course, how to proceed is a business decision, and we can draw the docs as instructed. This is just our advised approach.