Tennessee Department of Financial Institutions Tennessee Home Loan Protection Act

Compliance Division Departmental Organization 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? 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. non- THLPA 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.

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 Notice must include: Sect. 4 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: Chris.Adams@state.tn.us