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#1749898 - 10/17/12 04:12 PM
Can we do this and is it RESPA?
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The Great White North
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10 year fixed rate note. Secured by a ranch and a Condo, both of which are not primary residence. Interest only monthly payments with an annual principal reduction of $500,000. Consumer purpose.
For some reason our LOS will not allow the annual principal reduction with the interest only monthly payments. Does this payment stream go against some regulation? I have looked and looked and I don't see anything that would prohibit this.
Also, in my opinion the Condo throws this into the realm of RESPA (The ranch is over 25 acres). So therefore GFE. How do we show the interest only monthly payments with the annual principal reduction on the GFE Payments section?? If that is even ok to do?
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#1749930 - 10/17/12 05:10 PM
Re: Can we do this and is it RESPA?
Bec
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Bloomington, IN
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The greater than 25 acres will exempt it from RESPA.
You will have to talk to your vendor about the payment stream. I just did a test loan using ARTA and had no problem setting up the stream.
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#1749962 - 10/17/12 05:56 PM
Re: Can we do this and is it RESPA?
Bec
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So the payment stream is legit. That is a great start. My concern is that the loan is also secured by a condo which would not exempt it from RESPA...correct?
Last edited by Bec; 10/17/12 05:56 PM.
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#1749972 - 10/17/12 06:04 PM
Re: Can we do this and is it RESPA?
Bec
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Bloomington, IN
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The 25 or more acres does not have to be contiguous. The loan is exempt from RESPA.
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#1749997 - 10/17/12 06:41 PM
Re: Can we do this and is it RESPA?
Bec
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Wow, that is good to know. I appreciate your help as always Dan! You made my day
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#1750108 - 10/17/12 09:36 PM
Re: Can we do this and is it RESPA?
Bec
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Okay, upon further investigation, the property is less than 25 acres. So I believe this would become a RESPA covered loan. My question is the same as above...are we allowed to manipulate the GFE payment section to reflect the interest only monthly, annual principal reduction? If not, what can we put on there and how do we do it?? Anyone have any experience in this area that could help us out...I would be greatly in your debt for your insight!
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#1750167 - 10/18/12 12:46 PM
Re: Can we do this and is it RESPA?
Bec
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Bloomington, IN
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If the total acreage is less than 25 then RESPA will apply.
You have to show monthly payments regardless if the payment is monthly, quarterly, semi-annual or annually. You will have to divide the $500,000 principal payment by 12. See Q&A #6 beginning on page 3 of the 4/2/10 RESPA FAQs.
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#1750187 - 10/18/12 01:20 PM
Re: Can we do this and is it RESPA?
Bec
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I agree with Dan...our's takes total interest and principal and then divides by 12 to get the monthly payment.
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#1750199 - 10/18/12 01:33 PM
Re: Can we do this and is it RESPA?
Bec
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Ok, that totally makes sense. Wasn't sure how much manipulating we were allowed being that they don't like us to mess with the form at all, but that sounds easy peasy.
Thank you both for your help.
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#1755871 - 11/07/12 03:15 PM
Re: Can we do this and is it RESPA?
Bec
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**dusts off this old threa***
Take the above scenario, interest only payments with an annual principal reduction of $500,000. HOw would this translate onto the Truth in Lending? Would we have to do the same thing as we did with the GFE?
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#1755874 - 11/07/12 03:18 PM
Re: Can we do this and is it RESPA?
Bec
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Your truth-in-lending should reflect the real deal...it's not limited in 'modification ability' like GFE/HUD's are.
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#1755883 - 11/07/12 03:25 PM
Re: Can we do this and is it RESPA?
Bec
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Ahhh so we can tweak the T&L to reflect interest only pymts with the principal reduction?
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#1755892 - 11/07/12 03:32 PM
Re: Can we do this and is it RESPA?
Bec
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You're not tweaking anything...your stating the actual terms...your software, if you input the actual deal, should handle the breakout for you.
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#1755896 - 11/07/12 03:33 PM
Re: Can we do this and is it RESPA?
Bec
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Great, Thanks for the help.
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#1757436 - 11/13/12 04:58 PM
Re: Can we do this and is it RESPA?
Bec
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Ok so this note is like a really bad dream or penny or something like that. So in our LOS we are not able to put in the $500,000 annual principal reduction. What we have found is that when we show the payments as interest only, then we can't enter in the principal reduction. If we enter in the principal reduction, we can't show the interest only monthly payments and it intead just looks like a yearly payment of $500,000. (they want the first annual principal reduction to be paid December of 2012.)
Does anyone have any ideas or insight as to how to correct this problem? Or is it ok to just show the payments one way or the other?
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#1757472 - 11/13/12 05:54 PM
Re: Can we do this and is it RESPA?
Bec
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Bloomington, IN
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I got the following payment stream using Wolter Kluwers ARTA software.
59 monthly interest payments ranging from 1,917.81 to 10,616.44 beginning 12-13-2012 and 4 annual principal payments of 500,000.00 beginning 11-13-2013 and 1 payment of 502,123.29 on 11-13-2017.
This was based on a $2,500,000 loan for 60 months at a 5% rate with no fees. First interest payment due in 30 days and first principal payment due in 12 months. It was calculated using their principal reduction option.
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#1757512 - 11/13/12 06:57 PM
Re: Can we do this and is it RESPA?
Bec
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Thank you Dan, hopefully that will help the processor.
Kathleen, I believe that is what we may have to do. However, one of our LOS vendors said that they will in no way, shape, or form support this document. I don't understand that but I suppose it is a CYButt thing???
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#1757555 - 11/13/12 08:01 PM
Re: Can we do this and is it RESPA?
Bec
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Bec...this loan set-up does not sound 'odd' to me at all. I can't imagine your LOS vendor making that statement.
My question to you, however, is this. You never stated the loan amount that I can find, but it must be pretty large. Is this really a consumer purpose loan??
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#1757565 - 11/13/12 08:12 PM
Re: Can we do this and is it RESPA?
Bec
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It is a loan for $4,000,000. It is in the name of a revocable trust. From what it appears it is consumer purpose in that it is refi'ing a Condo in Hawaii and a ranch in Wyoming. We are having the trustees sign as individuals.
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#1757567 - 11/13/12 08:16 PM
Re: Can we do this and is it RESPA?
Bec
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That would exempt it from Reg Z, so you may not need to worry about that particular exact payment schedule. (You could draw up an agreement, instead) Set it up on the system as IO, then apply principal based on your agreement and it should re-set the Int payments post-reduction.
If it's truly personal purpose, you aren't exempt from RESPA.
You really need to know what the true purpose is. Just because the Condo and Ranch are security, doesn't mean it's not refinancing Ranch/Farming operations, just as a for-instance.
You may be stressing for nothing.
Last edited by RR Joker; 11/13/12 08:18 PM. Reason: added more detail
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#1757568 - 11/13/12 08:16 PM
Re: Can we do this and is it RESPA?
Bec
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Posts: 47,763
Bloomington, IN
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RRJ, based on the original post they do identify this as a consumer purpose and based on the 10 year term I would guess the loan to be for $5,000,000.
I did not have to set up any special product in ARTA. I just chose their new loan option and in the repayment method option I chose principal reduction. It was quite easy to set up.
If I was Bec I'd be looking for a new loan document software vendor.
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#1757573 - 11/13/12 08:23 PM
Re: Can we do this and is it RESPA?
Bec
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I was questioning the legitimacy of the "appears to be" consumer purpose.
Based on the post just above mine, I questioned it, even though the original post says it is.
Since it's to a Trust, they may have a work-around for this loan...but I totally agree with you, Dan, that I'd be looking for a new vendor if they truly stated that and can't handle this type of request.
Last edited by RR Joker; 11/13/12 08:23 PM.
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#1757584 - 11/13/12 08:40 PM
Re: Can we do this and is it RESPA?
Bec
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Bloomington, IN
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Bec's f/u post to yours posted while I was typing the above response.
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#1757589 - 11/13/12 08:45 PM
Re: Can we do this and is it RESPA?
Bec
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Posts: 1,115
The Great White North
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You know what is really sad guys....this is new software for us! Ugh Unbelieveable.
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