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Truth in Lending: 41(e)(5)(iv)(B) Single-Statement Exemption.

Editor’s Note838

1. Timing. The exemption in § 1026.41(e)(5)(iv)(B) applies with respect to a single periodic statement or coupon book following an event listed in § 1026.41(e)(5)(iv)(A). For example, assume that a mortgage loan has a monthly billing cycle, each payment due date is on the first day of the month following its respective billing cycle, and each payment due date has a 15-day courtesy period. In this scenario:

Truth in Lending: 41(e)(6) Charged-off loans.

Editor’s Note839

1. Change in ownership. If a charged-off mortgage loan is subsequently purchased, assigned, or transferred, § 1026.39(b) requires a covered person, as defined in § 1026.39(a)(1), to provide mortgage transfer disclosures. See § 1026.39.

Truth in Lending: Amendment History

[78 Fed. Reg. 11,017 (Feb. 14, 2013); 78 Fed. Reg. 44,725 (July 24, 2013); 78 Fed. Reg. 60,442 (Oct. 1, 2013); 78 Fed. Reg. 63,006 (Oct. 23, 2013); 78 Fed. Reg. 65,300 (Nov. 3, 2014); 81 Fed. Reg. 49,869 (July 29, 2016); 81 Fed. Reg. 72,160 (Oct. 19, 2016); 81 Fed. Reg. 84,369 (Nov. 22, 2016); 82 Fed. Reg. 18,975 (Apr. 25, 2017); 83 Fed. Reg. 6364 (Feb. 13, 2018); 83 Fed. Reg. 10,553 (Mar. 12, 2018)]

Truth in Lending: 42(a) Scope.

1. Open- and closed-end credit. Section 1026.42 applies to both open-end and closed-end transactions secured by the consumer’s principal dwelling.

2. Consumer’s principal dwelling. Section 1026.42 applies only if the dwelling that will secure a consumer credit transaction is the principal dwelling of the consumer who obtains credit.

Truth in Lending: 42(b) Definitions.

Paragraph 42(b)(1)

1. Examples of covered persons. “Covered persons” include creditors, mortgage brokers, appraisers, appraisal management companies, real estate agents, and other persons that provide “settlement services” as defined under the Real Estate Settlement Procedures Act and implementing regulations. See 12 U.S.C. 2602(3).

Truth in Lending: 42(c)(1) Coercion.

1. State law. The terms “coercion,” “extortion,” “inducement,” “bribery,” “intimidation,” “compensation,” “instruction,” and “collusion” have the meanings given to them by applicable state law or contract. See § 1026.2(b)(3).

Truth in Lending: 42(c)(2)(i) Misrepresentation.

1. Opinion of value. Section 1026.42(c)(2)(i) prohibits a person that performs valuations from misrepresenting the value of the consumer’s principal dwelling in a valuation. Such person misrepresents the value of the consumer’s principal dwelling by assigning a value to such dwelling that does not reflect the person’s opinion of the value of such dwelling.

Truth in Lending: 42(c)(2)(iii) Inducement of Mischaracterization.

1. Inducement. A covered person may not induce a person to materially misrepresent the value of the consumer’s principal dwelling in a valuation or to falsify or alter a valuation. For example, a loan originator may not coerce a loan underwriter to alter an appraisal report to increase the value assigned to the consumer’s principal dwelling.

Truth in Lending: 42(d)(1)(i) In General.

1. Prohibited interest in the property. A person preparing a valuation or performing valuation management functions for a covered transaction has a prohibited interest in the property under paragraph (d)(1)(i) if the person has any ownership or reasonably foreseeable ownership interest in the property.

Truth in Lending: 42(d)(1)(ii) Employees and Affiliates of Creditors; Providers of Multiple Settlement Services.

1. Employees and affiliates of creditors. In general, a creditor may use employees or affiliates to prepare a valuation or perform valuation management functions without violating paragraph (d)(1)(i). However, whether an employee or affiliate has a direct or indirect interest in the property or transaction that creates a prohibited conflict of interest under paragraph (d)(1)(i) depends on the facts and circumstances of a particular case, including the structure of the employment or affiliate relationship.

Truth in Lending: 42(d)(2) Employees and Affiliates of Creditors with Assets of More than $250 Million for Both of the Past two Calendar Years.

1. Safe harbor. A person who a prepares valuation or performs valuation management functions for a covered transaction and is an employee or affiliate of the creditor will not be deemed to have an interest prohibited under paragraph (d)(1)(i) on the basis of the employment or affiliate relationship with the creditor if the conditions in paragraph (d)(2) are satisfied.

Truth in Lending: 42(d)(3) Employees and Affiliates of Creditors With Assets of $250 Million or Less for Either of the Past Two Calendar Years.

1. Safe harbor. A person who prepares a valuation or performs valuation management functions for a covered transaction and is an employee or affiliate of the creditor will not be deemed to have interest prohibited under paragraph (d)(1)(i) on the basis of the employment or affiliate relationship with the creditor if the conditions in paragraph (d)(3) are satisfied.

Truth in Lending: 42(e) When Extension of Credit Prohibited.

1. Reasonable diligence. A creditor will be deemed to have acted with reasonable diligence under § 1026.42(e) if the creditor extends credit based on a valuation other than the valuation subject to the restriction in § 1026.42(e). A creditor need not obtain a second valuation to document that the creditor has acted with reasonable diligence to determine that the valuation does not materially misstate or misrepresent the value of the consumer’s principal dwelling, however.

Truth in Lending: 42(f)(2) Presumption of Compliance.

1. In general. A creditor and its agent are presumed to comply with paragraph (f)(1) if the creditor or its agent meets the conditions specified in paragraph (f)(2) in determining the compensation paid to a fee appraiser. These conditions are not requirements for compliance but, if met, create a presumption that the creditor or its agent has complied with § 1026.42(f)(1).

Truth in Lending: 42(f)(3) Alternative Presumption of Compliance.

1. In general. A creditor and its agent are presumed to comply with paragraph (f)(1) if the creditor or its agent determine the compensation paid to a fee appraiser based on information about customary and reasonable rates that satisfies the conditions in paragraph (f)(3) for that information. Reliance on information satisfying the conditions in paragraph (f)(3) is not a requirement for compliance with paragraph (f)(1), but creates a presumption that the creditor or its agent has complied.

Truth in Lending: 42(f)(4)(i) Fee Appraiser.

1. Organization. The term “organization” in paragraph 42(f)(4)(i)(B) includes a corporation, partnership, proprietorship, association, cooperative, or other business entity and does not include a natural person.