Monday, Dec. 3 2007
Huntington Bancshares Announces
Retirement of Marty Adams as President, Chief Operating Officer and Director
Huntington Bancshares Incorporated (Nasdaq: HBAN) (www.huntington.com) announced today that Marty Adams will retire as president and chief operating officer effective December 31, 2007. Mr. Adams has served in his current position since the completion of the merger between Huntington and Sky Financial Group, Inc. on July 1, 2007. He will also step down as a company director at that time.
Mr. Adams will serve as a consultant to Huntington for one year following his retirement to assist with matters concerning Franklin Credit Management Corporation and other transitional issues.
"We are grateful to Marty for his leadership at Huntington and the important role he played in ensuring a smooth integration of Huntington and Sky," said David L. Porteous, Huntington's lead director.
"Marty has had a truly distinguished 30-year banking career, having built Sky from a small community bank in Ohio into an $18 billion diversified financial holding company with locations throughout the Midwest," said Thomas E. Hoaglin, Huntington's chairman and chief executive officer. "We wish him the best in retirement."
Mr. Adams began his career in 1977 with The Citizens Banking Company, Salineville, Ohio. He held several key positions and eventually became president and CEO of the company and its parent company, Citizens Bancshares. Citizens Bancshares was renamed Sky Financial Group, Inc. as a result of a merger between Citizens and Mid Am in 1998.
"I have decided to retire so I can remain in close proximity to my parents," said Mr. Adams. "My role with Huntington would have required a permanent relocation, which became a difficult family issue. With its business model of decision-making by local bankers supported by national resources and a value proposition of service excellence, Huntington's future is bright. I have enjoyed my time at Huntington and I look forward to supporting the company in any way I can."
Mr. Hoaglin will once again assume the role of president upon Mr. Adams' retirement. Mr. Hoaglin's retirement plans, previously announced in conjunction with the merger, are no longer in effect. As part of its normal fiduciary duties, the board of directors will review management succession plans on an ongoing basis.
About Huntington
Huntington Bancshares Incorporated is a $55 billion regional bank holding company headquartered in Columbus, Ohio. Huntington has more than 141 years of serving the financial needs of its customers. Huntington's banking subsidiary, The Huntington National Bank, provides innovative retail and commercial financial products and services through over 600 regional banking offices in Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia. Huntington also offers retail and commercial financial services online at huntington.com; through its technologically advanced, 24-hour telephone bank; and through its network of over 1,400 ATMs. Selected financial service activities are also conducted in other states including: Dealer Sales offices in Arizona, Florida, Georgia, Nevada, New Jersey, New York, North Carolina, South Carolina, and Tennessee; Private Financial and Capital Markets Group offices in Florida; and Mortgage Banking offices in Maryland and New Jersey. Sky Insurance offers retail and commercial insurance agency services, through offices in Ohio, Pennsylvania, Michigan, Indiana, and West Virginia. International banking services are available through the headquarters office in Columbus, a limited purpose office located in both the Cayman Islands and Hong Kong.
Forward-looking Statement
This document contains certain forward-looking statements, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors including: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of other business strategies; the nature, extent, and timing of governmental actions and reforms; and extended disruption of vital infrastructure. Additional factors that could cause results to differ materially from those described above can be found in Huntington's 2006 Annual Report on Form 10-K, and documents subsequently filed by Huntington with the Securities and Exchange Commission. All forward-looking statements included in this release are based on information available at the time of the release. Huntington assumes no obligation to update any forward-looking statement.
SOURCE Huntington Bancshares Incorporated
http://www.huntington.com
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Wednesday, December 5, 2007
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The New York Times
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November 15, 2007
Foreclosures Hit a Snag for Lenders
By GRETCHEN MORGENSON
A federal judge in Ohio has ruled against a longstanding foreclosure practice, potentially creating an obstacle for lenders trying to reclaim properties from troubled borrowers and raising questions about the legal standing of investors in mortgage securities pools.
Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.
The pooling of home loans into securities has been practiced for decades and helped propel real estate prices in recent years as investors sought the higher yields that such mortgage trusts could provide. Some $6.5 trillion of securitized mortgage debt was outstanding at the end of 2006.
But as foreclosures have surged, the complex structure and disparate ownership of mortgage securities have made it harder for borrowers to work out troubled loans, in part because they cannot identify who holds the mortgage notes, consumer advocates say.
Now, the Ohio ruling indicates that the intricacies of the mortgage pools are starting to create problems for lenders as well. Lawyers for troubled homeowners are expected to seize upon the district judge’s opinion as a way to impede foreclosures across the country or force investors to settle with homeowners. And it may encourage judges in other courts to demand more documentation of ownership from lenders trying to foreclose.
The ruling was issued Oct. 31 by Judge Boyko, and relates to 14 foreclosure cases brought by Deutsche Bank National Trust Company. The bank is trustee for securitization pools, issued as recently as June 2006, claiming to hold mortgages underlying the foreclosed properties.
On Oct. 10, Judge Boyko, 53, ordered the lenders’ representative to file copies of loan assignments showing that the lender was indeed the owner of the note and mortgage on each property when the foreclosure was filed. But lawyers for Deutsche Bank supplied documents showing only an intent to convey the rights in the mortgages rather than proof of ownership as of the foreclosure date.
Saying that Deutsche Bank’s arguments of legal standing fell woefully short, the judge wrote: “The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the court to stop them at the gate.”
A spokesman for Deutsche Bank declined to comment on the ruling. But the inability of Deutsche Bank, as trustee for the pools, to produce proof of ownership at the time of the foreclosures will fuel borrowers’ concerns that they are being forced out of their homes by entities that may not even hold the underlying loans.
“This is the miracle of not having securities mapped to the underlying loans,” said Josh Rosner, a specialist in mortgage securities at Graham-Fisher, an independent research firm in New York. “There is no industry repository for mortgage loans. I have heard of instances where the same loan is in two or three pools.”
The process of putting together a mortgage pool begins when a home loan is originated by a bank or mortgage lender. That loan is typically sold to a Wall Street firm that pools it with thousands of others. Once a pool is packaged, it is sold to investors in different slices, based on risk. A trustee bank oversees the pool’s operations, ensuring that payments made by borrowers go to the appropriate investors.
Lawyers who represent troubled borrowers complain that trustees overseeing home loan pools often do not produce proof, usually in the form of a mortgage note, that their investors own a foreclosed property. And a recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership. Such proof gives a creditor standing to foreclose against a borrower and is required by law.
“The big issue in all these cases, whether we are dealing with a bankruptcy court, a state court or a federal court, is who really owns the mortgage note, and that is allegedly what they securitized,” said O. Max Gardner III, a lawyer who represents borrowers in foreclosure in Shelby, N.C. “A collateral question is, has that mortgage note really been transferred and assigned to the securitization trust? If not, then they really don’t have standing. It’s Law School 101.”
When a loan goes into a securitization, the mortgage note is not sent to the trust. Instead it shows up as a data transfer with the physical note being kept at a separate document repository company. Such practices keep the process fast and cheap.
Because most foreclosures proceed without challenges from borrowers, few judges have forced trustees like Deutsche Bank and Bank of New York to prove ownership by producing a mortgage note in each case.
Borrower advocates cheered Judge Boyko’s ruling.
The plaintiff’s argument that “‘Judge, you just don’t understand how things work,’” the judge wrote, “reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.” The cases could be filed again in state court, however.
April Charney, a consumer lawyer at Jacksonville Area Legal Aid in Florida, who has been practicing foreclosure law since the late 1980s, said she rarely sees proof of ownership in cases involving securitization trusts. Her group has 30 to 50 such cases and not one of the lenders’ representatives has produced proof of ownership predating the foreclosure action.
“We see a trend toward judges having enough of this trampling of the rules and procedure and care and reverence with which lawyers and litigants and participants in the judicial process should comply,” Ms. Charney said. “Hopefully this will convince everybody that the time to work out these home loans is now.”
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November 15, 2007
Foreclosures Hit a Snag for Lenders
By GRETCHEN MORGENSON
A federal judge in Ohio has ruled against a longstanding foreclosure practice, potentially creating an obstacle for lenders trying to reclaim properties from troubled borrowers and raising questions about the legal standing of investors in mortgage securities pools.
Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.
The pooling of home loans into securities has been practiced for decades and helped propel real estate prices in recent years as investors sought the higher yields that such mortgage trusts could provide. Some $6.5 trillion of securitized mortgage debt was outstanding at the end of 2006.
But as foreclosures have surged, the complex structure and disparate ownership of mortgage securities have made it harder for borrowers to work out troubled loans, in part because they cannot identify who holds the mortgage notes, consumer advocates say.
Now, the Ohio ruling indicates that the intricacies of the mortgage pools are starting to create problems for lenders as well. Lawyers for troubled homeowners are expected to seize upon the district judge’s opinion as a way to impede foreclosures across the country or force investors to settle with homeowners. And it may encourage judges in other courts to demand more documentation of ownership from lenders trying to foreclose.
The ruling was issued Oct. 31 by Judge Boyko, and relates to 14 foreclosure cases brought by Deutsche Bank National Trust Company. The bank is trustee for securitization pools, issued as recently as June 2006, claiming to hold mortgages underlying the foreclosed properties.
On Oct. 10, Judge Boyko, 53, ordered the lenders’ representative to file copies of loan assignments showing that the lender was indeed the owner of the note and mortgage on each property when the foreclosure was filed. But lawyers for Deutsche Bank supplied documents showing only an intent to convey the rights in the mortgages rather than proof of ownership as of the foreclosure date.
Saying that Deutsche Bank’s arguments of legal standing fell woefully short, the judge wrote: “The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the court to stop them at the gate.”
A spokesman for Deutsche Bank declined to comment on the ruling. But the inability of Deutsche Bank, as trustee for the pools, to produce proof of ownership at the time of the foreclosures will fuel borrowers’ concerns that they are being forced out of their homes by entities that may not even hold the underlying loans.
“This is the miracle of not having securities mapped to the underlying loans,” said Josh Rosner, a specialist in mortgage securities at Graham-Fisher, an independent research firm in New York. “There is no industry repository for mortgage loans. I have heard of instances where the same loan is in two or three pools.”
The process of putting together a mortgage pool begins when a home loan is originated by a bank or mortgage lender. That loan is typically sold to a Wall Street firm that pools it with thousands of others. Once a pool is packaged, it is sold to investors in different slices, based on risk. A trustee bank oversees the pool’s operations, ensuring that payments made by borrowers go to the appropriate investors.
Lawyers who represent troubled borrowers complain that trustees overseeing home loan pools often do not produce proof, usually in the form of a mortgage note, that their investors own a foreclosed property. And a recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership. Such proof gives a creditor standing to foreclose against a borrower and is required by law.
“The big issue in all these cases, whether we are dealing with a bankruptcy court, a state court or a federal court, is who really owns the mortgage note, and that is allegedly what they securitized,” said O. Max Gardner III, a lawyer who represents borrowers in foreclosure in Shelby, N.C. “A collateral question is, has that mortgage note really been transferred and assigned to the securitization trust? If not, then they really don’t have standing. It’s Law School 101.”
When a loan goes into a securitization, the mortgage note is not sent to the trust. Instead it shows up as a data transfer with the physical note being kept at a separate document repository company. Such practices keep the process fast and cheap.
Because most foreclosures proceed without challenges from borrowers, few judges have forced trustees like Deutsche Bank and Bank of New York to prove ownership by producing a mortgage note in each case.
Borrower advocates cheered Judge Boyko’s ruling.
The plaintiff’s argument that “‘Judge, you just don’t understand how things work,’” the judge wrote, “reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.” The cases could be filed again in state court, however.
April Charney, a consumer lawyer at Jacksonville Area Legal Aid in Florida, who has been practicing foreclosure law since the late 1980s, said she rarely sees proof of ownership in cases involving securitization trusts. Her group has 30 to 50 such cases and not one of the lenders’ representatives has produced proof of ownership predating the foreclosure action.
“We see a trend toward judges having enough of this trampling of the rules and procedure and care and reverence with which lawyers and litigants and participants in the judicial process should comply,” Ms. Charney said. “Hopefully this will convince everybody that the time to work out these home loans is now.”
or Us
Saturday, November 17, 2007
Franklin Credit Management Corporation and related deterioration in Franklin's mortgage portfolios, 2007 fourth quarter
Huntington Bancshares Announces: 2007 Fourth Quarter Charge of Up to $300 Million After-Tax, or $0.81 Per Common Share, to Increase Allowance for Loan and Lease Losses
PR Newswire
- Will Report a Net Loss for the 2007 Fourth Quarter- Board Reaffirms the Common Stock Dividend- Agreements with Franklin Credit Management Corporation- Huntington to Hold Conference Call at 1:00PM ET Today
November 16, 2007: 09:20 AM EST
COLUMBUS, Ohio, Nov. 16 /PRNewswire-FirstCall/ -- As a result of the recently announced actions of Franklin Credit Management Corporation and related deterioration in Franklin's mortgage portfolios, 2007 fourth quarter results for Huntington Bancshares Incorporated are expected to include an after-tax charge of up to $300 million, or $0.81 per common share, to replenish and build the allowance for loan and lease losses in support of the Franklin relationship. As a result of this charge, Huntington will report a 2007 fourth quarter net loss.
"For over 17 years Sky Financial had a commercial lending relationship with Franklin Credit Management Corporation. This became our relationship when we acquired Sky Financial on July 1, 2007," said Thomas E. Hoaglin, chairman and chief executive officer. "Throughout this period the relationship continued to perform. At September 30, 2007, our loans to Franklin totaled $1.5 billion. All were performing and we had experienced no charge-offs. Even today, all loans are current."
"We only recently learned of Franklin's actions to reassess the adequacy of their loan loss reserves," he continued. "Franklin's mortgages represent the underlying collateral for our loans to Franklin. As a result of this new information, we needed to reassess the collectability of the Franklin loans. This has caused us to act promptly to review our estimates of the value of the cash flows and embedded losses over the life of these mortgages. The actions we have announced today, we believe, fully address the issues embedded in our Franklin exposure. The fact that this will result in a net loss for the quarter is regrettable and upsetting. Yet, we must take whatever action is necessary to deal with this issue."
Board Reaffirms Common Stock Dividend
At a board meeting today, the board of directors reaffirmed their confidence in the sustainability of the common stock dividend.
"The expected loss in the 2007 fourth quarter does not place our current common stock dividend in question," said Thomas E. Hoaglin, chairman and chief executive officer. "Capital levels at the holding company and The Huntington National Bank will remain above the regulatory "well capitalized" minimums. Further, we believe the actions we have taken position Huntington to continue to generate excess capital going forward."
Franklin Credit Management Announcement and Agreements with Huntington
After the market closed on November 15, 2007, Franklin Credit Management Corporation , a commercial loan customer of Huntington, announced it has delayed the release of its 2007 third quarter results and the filing of its 2007 third quarter Form 10-Q with the Securities and Exchange Commission (SEC). The Franklin 2007 third quarter Form 10-Q, originally scheduled to be filed with the SEC November 15, 2007, has been delayed to provide Franklin time to conduct a thorough review of the adequacy of its loan loss reserve. Franklin has also announced that it expects to complete its review, release its 2007 third quarter results, and file its 2007 third quarter Form 10-Q prior to December 31, 2007.
Franklin also announced that it expects its credit review will result in a substantial increase in its 2007 third quarter provision for loan losses due to increased delinquencies and the expectation of increased defaults and ultimate losses inherent in its portfolio as of September 30, 2007. Franklin also expects that this increase in its third quarter provision for credit losses will result in substantial negative stockholders' equity for them as of September 30, 2007.
Huntington has agreed with Franklin to waive the breach of Franklin's debt covenants for Franklin's failure to timely provide its financial statements. This waiver is in effect until the earlier of the filing of Franklin's 2007 third quarter Form 10-Q, or December 31, 2007. In consideration of this waiver, Franklin has agreed to pledge certain assets as additional security to Huntington.
Franklin has acknowledged that Huntington is under no obligation to grant additional waivers, and that if an accommodation with Huntington is not reached and additional waivers of Franklin's debt covenants are necessary and not granted, that Franklin's debt to Huntington could become immediately payable, resulting in Franklin's insolvency.
Huntington has suspended new loan origination and acquisition fundings for Franklin for the period of the review, and is under no obligation to resume funding Franklin's loan originations and acquisitions after the review is completed.
All of Franklin's loans to Huntington are current with regard to principal and interest payments.
Conference Call / Webcast Information
Huntington's senior management will host a conference call today at 1:00 p.m. (Eastern Time). The call may be accessed via a live Internet webcast at huntington-ir.com or through a dial-in telephone number at 800-223-1238; conference ID 25107576. A replay of the webcast will be archived in the Investor Relations section of Huntington's web site at huntington-ir.com. A telephone replay will be available approximately two hours after the completion of the call through November 30, 2007 at 800-642-1687; conference ID 25107576.
About the Franklin Credit Management Corporation (Franklin) Portfolio
As a result of the acquisition of Sky Financial, Huntington has a commercial lending relationship with Franklin Credit Management Corporation (Franklin), a customer of Sky Financial for 17 years. Franklin's primary business is to acquire, service, and resolve seasoned performing, re- performing, and nonperforming first- and second-priority lien residential mortgage loans and real estate assets. Through their wholly-owned subsidiary, Tribeca Lending Corp (Tribeca), Franklin also originates maximum 75% loan-to- value non-prime mortgage loans for their own portfolio. Tribeca currently accounts for approximately 25% of Franklin's business activities. Huntington's primary relationship with Franklin consists of both commercial term financing and revolving credit warehouse facilities, where The Huntington National Bank is the lead bank. As of September 30, 2007, this relationship accounted for less than 5% of total loans and leases, with approximately 16% of Huntington's direct exposure to Franklin participated on a non-recourse basis to other financial institutions. The term debt exposure is in the form of over 400 individually underwritten commercial loans used to fund over 30,000 individual first- and second-priority lien residential mortgages. The collateral securing our commercial term loans cross-collateralizes other loans made under these facilities. Specifically, the collateral for term loans used to fund mortgage loans originated by Tribeca also secures our other term loans used to fund other mortgage loans originated by Tribeca. Likewise, the collateral for term loans used to fund mortgage loans acquired by Franklin also secures our other term loans used to fund other mortgage loans acquired by Franklin. In addition, pursuant to an exclusive lockbox arrangement, Huntington receives all payments made to Franklin and Tribeca on their individual mortgages. As of September 30, 2007, no commercial loans to Franklin were classified as 30-day delinquent or nonperforming, and there have been no net charge-offs related to these facilities for the first nine months of 2007. The determination of an appropriate allowance for loan and lease losses (ALLL) follows Huntington's standard ALLL methodology. As such, an allowance associated with the Franklin portfolio of commercial loans is included in Huntington's total ALLL. On September 10, 2007, as part of a public webcast presentation at the Lehman Banking conference, Huntington announced its intention to reduce its Franklin credit exposure in both absolute and relative terms over time.
About Huntington
Huntington Bancshares Incorporated is a $55 billion regional bank holding company headquartered in Columbus, Ohio. Huntington has more than 141 years of serving the financial needs of its customers. Huntington's banking subsidiary, The Huntington National Bank, provides innovative retail and commercial financial products and services through over 600 regional banking offices in Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia. Huntington also offers retail and commercial financial services online at huntington.com; through its technologically advanced, 24-hour telephone bank; and through its network of over 1,400 ATMs. Selected financial service activities are also conducted in other states including: Dealer Sales offices in Arizona, Florida, Georgia, Nevada, New Jersey, New York, North Carolina, South Carolina, and Tennessee; Private Financial and Capital Markets Group offices in Florida; and Mortgage Banking offices in Maryland and New Jersey. Sky Insurance offers retail and commercial insurance agency services, through offices in Ohio, Pennsylvania, Michigan, Indiana, and West Virginia. International banking services are available through the headquarters office in Columbus, a limited purpose office located in both the Cayman Islands and Hong Kong.
Forward-looking Statement
This document contains certain forward-looking statements, including certain plans, expectations, goals, and projections, and including statements about the impact of the Franklin Credit Mortgage Corporation performance on Huntington's results, which are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors including: deterioration in the underlying Franklin loans may be worse than expected and collateral values could prove less valuable than otherwise assumed; changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of other business strategies; the nature, extent, and timing of governmental actions and reforms; and extended disruption of vital infrastructure. Additional factors that could cause results to differ materially from those described above can be found in Huntington's 2006 Annual Report on Form 10-K, and documents subsequently filed by Huntington with the Securities and Exchange Commission. All forward- looking statements included in this release are based on information available at the time of the release. Huntington assumes no obligation to update any forward-looking statement.
Top of page
PR Newswire
- Will Report a Net Loss for the 2007 Fourth Quarter- Board Reaffirms the Common Stock Dividend- Agreements with Franklin Credit Management Corporation- Huntington to Hold Conference Call at 1:00PM ET Today
November 16, 2007: 09:20 AM EST
COLUMBUS, Ohio, Nov. 16 /PRNewswire-FirstCall/ -- As a result of the recently announced actions of Franklin Credit Management Corporation and related deterioration in Franklin's mortgage portfolios, 2007 fourth quarter results for Huntington Bancshares Incorporated are expected to include an after-tax charge of up to $300 million, or $0.81 per common share, to replenish and build the allowance for loan and lease losses in support of the Franklin relationship. As a result of this charge, Huntington will report a 2007 fourth quarter net loss.
"For over 17 years Sky Financial had a commercial lending relationship with Franklin Credit Management Corporation. This became our relationship when we acquired Sky Financial on July 1, 2007," said Thomas E. Hoaglin, chairman and chief executive officer. "Throughout this period the relationship continued to perform. At September 30, 2007, our loans to Franklin totaled $1.5 billion. All were performing and we had experienced no charge-offs. Even today, all loans are current."
"We only recently learned of Franklin's actions to reassess the adequacy of their loan loss reserves," he continued. "Franklin's mortgages represent the underlying collateral for our loans to Franklin. As a result of this new information, we needed to reassess the collectability of the Franklin loans. This has caused us to act promptly to review our estimates of the value of the cash flows and embedded losses over the life of these mortgages. The actions we have announced today, we believe, fully address the issues embedded in our Franklin exposure. The fact that this will result in a net loss for the quarter is regrettable and upsetting. Yet, we must take whatever action is necessary to deal with this issue."
Board Reaffirms Common Stock Dividend
At a board meeting today, the board of directors reaffirmed their confidence in the sustainability of the common stock dividend.
"The expected loss in the 2007 fourth quarter does not place our current common stock dividend in question," said Thomas E. Hoaglin, chairman and chief executive officer. "Capital levels at the holding company and The Huntington National Bank will remain above the regulatory "well capitalized" minimums. Further, we believe the actions we have taken position Huntington to continue to generate excess capital going forward."
Franklin Credit Management Announcement and Agreements with Huntington
After the market closed on November 15, 2007, Franklin Credit Management Corporation , a commercial loan customer of Huntington, announced it has delayed the release of its 2007 third quarter results and the filing of its 2007 third quarter Form 10-Q with the Securities and Exchange Commission (SEC). The Franklin 2007 third quarter Form 10-Q, originally scheduled to be filed with the SEC November 15, 2007, has been delayed to provide Franklin time to conduct a thorough review of the adequacy of its loan loss reserve. Franklin has also announced that it expects to complete its review, release its 2007 third quarter results, and file its 2007 third quarter Form 10-Q prior to December 31, 2007.
Franklin also announced that it expects its credit review will result in a substantial increase in its 2007 third quarter provision for loan losses due to increased delinquencies and the expectation of increased defaults and ultimate losses inherent in its portfolio as of September 30, 2007. Franklin also expects that this increase in its third quarter provision for credit losses will result in substantial negative stockholders' equity for them as of September 30, 2007.
Huntington has agreed with Franklin to waive the breach of Franklin's debt covenants for Franklin's failure to timely provide its financial statements. This waiver is in effect until the earlier of the filing of Franklin's 2007 third quarter Form 10-Q, or December 31, 2007. In consideration of this waiver, Franklin has agreed to pledge certain assets as additional security to Huntington.
Franklin has acknowledged that Huntington is under no obligation to grant additional waivers, and that if an accommodation with Huntington is not reached and additional waivers of Franklin's debt covenants are necessary and not granted, that Franklin's debt to Huntington could become immediately payable, resulting in Franklin's insolvency.
Huntington has suspended new loan origination and acquisition fundings for Franklin for the period of the review, and is under no obligation to resume funding Franklin's loan originations and acquisitions after the review is completed.
All of Franklin's loans to Huntington are current with regard to principal and interest payments.
Conference Call / Webcast Information
Huntington's senior management will host a conference call today at 1:00 p.m. (Eastern Time). The call may be accessed via a live Internet webcast at huntington-ir.com or through a dial-in telephone number at 800-223-1238; conference ID 25107576. A replay of the webcast will be archived in the Investor Relations section of Huntington's web site at huntington-ir.com. A telephone replay will be available approximately two hours after the completion of the call through November 30, 2007 at 800-642-1687; conference ID 25107576.
About the Franklin Credit Management Corporation (Franklin) Portfolio
As a result of the acquisition of Sky Financial, Huntington has a commercial lending relationship with Franklin Credit Management Corporation (Franklin), a customer of Sky Financial for 17 years. Franklin's primary business is to acquire, service, and resolve seasoned performing, re- performing, and nonperforming first- and second-priority lien residential mortgage loans and real estate assets. Through their wholly-owned subsidiary, Tribeca Lending Corp (Tribeca), Franklin also originates maximum 75% loan-to- value non-prime mortgage loans for their own portfolio. Tribeca currently accounts for approximately 25% of Franklin's business activities. Huntington's primary relationship with Franklin consists of both commercial term financing and revolving credit warehouse facilities, where The Huntington National Bank is the lead bank. As of September 30, 2007, this relationship accounted for less than 5% of total loans and leases, with approximately 16% of Huntington's direct exposure to Franklin participated on a non-recourse basis to other financial institutions. The term debt exposure is in the form of over 400 individually underwritten commercial loans used to fund over 30,000 individual first- and second-priority lien residential mortgages. The collateral securing our commercial term loans cross-collateralizes other loans made under these facilities. Specifically, the collateral for term loans used to fund mortgage loans originated by Tribeca also secures our other term loans used to fund other mortgage loans originated by Tribeca. Likewise, the collateral for term loans used to fund mortgage loans acquired by Franklin also secures our other term loans used to fund other mortgage loans acquired by Franklin. In addition, pursuant to an exclusive lockbox arrangement, Huntington receives all payments made to Franklin and Tribeca on their individual mortgages. As of September 30, 2007, no commercial loans to Franklin were classified as 30-day delinquent or nonperforming, and there have been no net charge-offs related to these facilities for the first nine months of 2007. The determination of an appropriate allowance for loan and lease losses (ALLL) follows Huntington's standard ALLL methodology. As such, an allowance associated with the Franklin portfolio of commercial loans is included in Huntington's total ALLL. On September 10, 2007, as part of a public webcast presentation at the Lehman Banking conference, Huntington announced its intention to reduce its Franklin credit exposure in both absolute and relative terms over time.
About Huntington
Huntington Bancshares Incorporated is a $55 billion regional bank holding company headquartered in Columbus, Ohio. Huntington has more than 141 years of serving the financial needs of its customers. Huntington's banking subsidiary, The Huntington National Bank, provides innovative retail and commercial financial products and services through over 600 regional banking offices in Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia. Huntington also offers retail and commercial financial services online at huntington.com; through its technologically advanced, 24-hour telephone bank; and through its network of over 1,400 ATMs. Selected financial service activities are also conducted in other states including: Dealer Sales offices in Arizona, Florida, Georgia, Nevada, New Jersey, New York, North Carolina, South Carolina, and Tennessee; Private Financial and Capital Markets Group offices in Florida; and Mortgage Banking offices in Maryland and New Jersey. Sky Insurance offers retail and commercial insurance agency services, through offices in Ohio, Pennsylvania, Michigan, Indiana, and West Virginia. International banking services are available through the headquarters office in Columbus, a limited purpose office located in both the Cayman Islands and Hong Kong.
Forward-looking Statement
This document contains certain forward-looking statements, including certain plans, expectations, goals, and projections, and including statements about the impact of the Franklin Credit Mortgage Corporation performance on Huntington's results, which are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors including: deterioration in the underlying Franklin loans may be worse than expected and collateral values could prove less valuable than otherwise assumed; changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of other business strategies; the nature, extent, and timing of governmental actions and reforms; and extended disruption of vital infrastructure. Additional factors that could cause results to differ materially from those described above can be found in Huntington's 2006 Annual Report on Form 10-K, and documents subsequently filed by Huntington with the Securities and Exchange Commission. All forward- looking statements included in this release are based on information available at the time of the release. Huntington assumes no obligation to update any forward-looking statement.
Top of page
Friday, November 16, 2007
Tribeca Lending Suspends Origination -
Tribeca Lending Corp. (Wholesale) - Wholesale
2007-11-16
stories: reuters.com
Although the announcement is dated today, Tribeca Lending shut down November 15,2007. Getting no response on the phone, we called their Retail Division. Retail said "We can't transfer you... there's nobody there."
"Nov 15 (Reuters) - Franklin Credit Management Corp (FCMC.O: Quote, Profile, Research) said it suspended acquisition and origination of new loans as it reviews reserves for its portfolio of acquired loans amid deteriorating real-estate and mortgage origination credit markets.
The specialty consumer finance company said its lead lender bank suspended funding for new loan acquisition and origination activities. The company said it could face insolvency if it could not reach an agreement with the bank and debt covenants are violated."
We understand they were known as NY Mortgage Company before Tribeca. They did borderline hard money. Low LTV Bankruptcy buyouts, and foreclosure bailout type loans.
Here's the announcement emailed to Brokers:
Announcement 07-25
Date: November 16, 2007
To: Lending Partners
From: Tribeca Wholesale Administration/Products
Re: Suspended Loan Originations
------------------------------------------------------------
Suspended Loan Originations
Franklin Credit Management Corp, parent company for Tribeca Lending Corporation, has suspended acquisition and origination of new loans. If you have received this fax/email in error or no longer wish to receive this fax/email, please contact Tribeca Lending at brokerlock@tribecalending.com
From another reader:
"Tribeca Lending has been letting go a lot of their employees. In fact they just closed one of their branches and released the duties of the 2 managers (1 quit and the other is an AE in NJ).
They use to do 75 LTV and have a no doc program, but now can only go up to 65 LTV, all full doc with a max loan amount of 417k and can not fund more than 20 Mil.
The NJ branch can no longer do NJ loans and the employees are declining."
2007-11-16
stories: reuters.com
Although the announcement is dated today, Tribeca Lending shut down November 15,2007. Getting no response on the phone, we called their Retail Division. Retail said "We can't transfer you... there's nobody there."
"Nov 15 (Reuters) - Franklin Credit Management Corp (FCMC.O: Quote, Profile, Research) said it suspended acquisition and origination of new loans as it reviews reserves for its portfolio of acquired loans amid deteriorating real-estate and mortgage origination credit markets.
The specialty consumer finance company said its lead lender bank suspended funding for new loan acquisition and origination activities. The company said it could face insolvency if it could not reach an agreement with the bank and debt covenants are violated."
We understand they were known as NY Mortgage Company before Tribeca. They did borderline hard money. Low LTV Bankruptcy buyouts, and foreclosure bailout type loans.
Here's the announcement emailed to Brokers:
Announcement 07-25
Date: November 16, 2007
To: Lending Partners
From: Tribeca Wholesale Administration/Products
Re: Suspended Loan Originations
------------------------------------------------------------
Suspended Loan Originations
Franklin Credit Management Corp, parent company for Tribeca Lending Corporation, has suspended acquisition and origination of new loans. If you have received this fax/email in error or no longer wish to receive this fax/email, please contact Tribeca Lending at brokerlock@tribecalending.com
From another reader:
"Tribeca Lending has been letting go a lot of their employees. In fact they just closed one of their branches and released the duties of the 2 managers (1 quit and the other is an AE in NJ).
They use to do 75 LTV and have a no doc program, but now can only go up to 65 LTV, all full doc with a max loan amount of 417k and can not fund more than 20 Mil.
The NJ branch can no longer do NJ loans and the employees are declining."
Tuesday, June 12, 2007
Closed-End Credit Forms Review Worksheet
Page 66
Closed-End Credit Forms Review Worksheet
c.
Obtained the customer’s signature or
initials as an affirmative request for the
insurance? [226.18(n) and 226.4(d)]
17. If the property insurance premium has
been excluded from finance charge, has
the bank:
a.
Disclosed that the consumer may
choose the insurance company?
b.
Disclosed the cost of the insurance for
the initial term if obtained from or
through the bank? [226.18(n) and
226.4(d)]
18. Are the disclosures required under
226.4(e) to exclude certain fees required
by law, such as a filing fee or certain
insurance premiums from the finance
charge provided? [226.18(o)]
19. Is there a statement referring to the
contract document for specified
information? [226.18(p)]
20. Is there an appropriate assumption
disclosure for residential mortgage
transactions? [226.18(q)]
21. If a deposit is required as a condition of
the transaction, has the bank disclosed
that the APR does not reflect its effect?
[226.18(r)]
Truth in Lending Act
62
Comptroller’s Handbook
Page 67
Worksheet #4
Closed-End Credit – Adjustable Rate Mortgage Forms Review
Use this worksheet when reviewing variable rate loans or ARMs with a maturity greater than one year secured
by the principal dwelling of the borrower. To complete, review the forms and place a check in each
applicable box. Determine the accuracy of the disclosures by comparing them to the contract and other
bank documents. This worksheet can be used for reviewing audit work papers, evaluating bank policies,
performing expanded procedures, and training as appropriate. Only complete those sections of the worksheet
that specifically relate to the issue being reviewed, evaluated or tested, and retain those completed sections in
the work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency
and should be explained in the work papers. When performing expanded procedures, a “No” answer
indicates a possible violation and should be explained in the work papers. If a line item is not applicable
within the area you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Closed-End Credit Adjustable Rate Mortgage Forms Review Worksheet
Product Type:
Yes No
Yes No
Yes No
Yes No
Yes No
1. Is the fact that the note contains a
variable rate feature disclosed?
[226.18(f)(2)(i)]
2. Is there a statement that variable rate
disclosures were provided earlier?
[226.18(f)(2)(ii)]
Disclosure At Time Of Application (one for each program in which the consumer expresses an interest)
[226.19(b)(2)]
3. Are disclosures provided either at time of
application or before consumer pays any
nonrefundable fee or, if the application
is received from a mortgage broker or
over the telephone, mailed within three
business days following receipt of the
application? [226.19(b) & footnote 45b]
4. Do variable rate program disclosures
provide:
a. The booklet entitled “Consumer
Handbook on ARMs,” or a suitable
substitute? [226.19(b)(1)]
b. A statement that interest rate,
payment or the term can change?
[226.19(b)(2)(i)]
c. The index/formula with source of
Comptroller’s Handbook
63
Truth in Lending Act
Page 68
Closed-End Credit Adjustable Rate Mortgage Forms Review Worksheet
Product Type:
Yes No
Yes No
Yes No
Yes No
Yes No
information disclosed?
[226.19(b)(2)(ii)]
d. An explanation of the interest
rate/payment determination and
margin? [226.19(b)(2)(iii)]
e. A statement that consumer should ask
for the current margin and interest
rate? [226.19(b)(2)(iv)]
f. The fact that interest rate is
discounted, if applicable, and a
statement that the consumer should
ask about the amount of discount?
[226.19(b)(2)(v)]
g. The frequency of interest rate and
payment changes? [226.19(b)(2)(vi)]
h. The rules relating to changes?
[226.19(b)(2)(vii)]
i. An historical example or the
maximum interest rate and payment?
[226.19(b)(2)(viii)]
j. An explanation of how the loan
payment can be calculated based on
example? [226.19(b)(2)(ix)]
k. The fact that the loan program
contains a demand feature?
[226.19(b)(2)(x)]
l. Information on, and timing of,
adjustment notices? [226.19(b)(2)(xi)]
m. A statement that disclosures for other
variable rate loan programs are
available? [226.19(b)(2)(xii)]
Truth in Lending Act
64
Comptroller’s Handbook
Page 69
Worksheet #5
Closed-End Credit File Review
Use this worksheet when reviewing closed-end credit loans. The worksheet contains all the standard closed-
end credit disclosure requirements and should be used with the other closed-end worksheets. Determine the
accuracy of the disclosures by comparing them to the contract and other bank documents. To complete,
review loan files and place a check in each applicable box.
This worksheet can be used for reviewing audit work papers, evaluating bank policies, performing expanded
procedures, and training as appropriate. Only complete those sections of the worksheet that specifically relate
to the issue being reviewed, evaluated or tested, and retain those completed sections in the work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency
and should be explained in the work papers. When performing expanded procedures, a “No” answer
indicates a possible violation and should be explained in the work papers. If a line item is not applicable
within the area you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Closed-End Credit File Review Worksheet
Product Type:
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
1. Are disclosures furnished before
consummation? [226.17(b)]
2. Is the amount financed disclosed and
accurate? [226.18(b)]
3. Is there a separate itemization of the
amount financed (RESPA-GFE, if
applicable, may be substituted)?
[226.18(c)]
4. Is the finance charge disclosed and
accurate? [226.4, 226.18(d) & footnote
41]
5. Is the APR disclosed and accurate?
[226.18(e), footnote 42 & 226.22(a)]
6. Are the following required disclosures on
variable rate loans (other than those
secured by the consumer’s principal
dwelling with a term of more than one
year) provided?
a. Circumstances that permit rate
increase? [226.18(f)(1)(i)]
b. Limits on the increase:
Comptroller’s Handbook
65
Truth in Lending Act
Page 70
Closed-End Credit File Review Worksheet
Product Type:
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
Periodic? [226.18(f)(1)(ii)]
Lifetime? [226.18(f)(1)(ii)]
c. Effects of increase? [226.18(f)(1)(iii)]
d. Hypothetical example of new payment
terms? [226.18(f)(1)(iv)]
7. Are the following required disclosures
provided if the annual percentage rate
may increase after consummation on
variable rate loan transaction secured by
the consumer’s principal dwelling with a
term greater than one year:
a. The fact that the transaction contains a
variable-rate feature?
b. A statement that variable-rate
disclosures have been provided earlier?
[226.18(f)(2)]
8. Is the payment schedule (amount, timing,
and number of payments) provided and
accurate? [226.18(g)]
9. Is the total of payments provided and
accurate? [226.18(h)]
10. a. If the obligation has a demand feature,
is that fact disclosed?
b. If the disclosures are based on an
assumption of one year as provided in
section 226.17(c)(5), is that fact disclosed?
[226.18(i)]
11. If a credit sale, is the total sale price
accurate? [226.18(j)]
12. Is the security interest described
accurately, if applicable? [226.18(m)]
13. Is the credit life insurance premium or
debt cancellation fee for the initial term
Truth in Lending Act
66
Comptroller’s Handbook
Page 71
Closed-End Credit File Review Worksheet
Product Type:
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
accurately disclosed, if applicable?
[226.18(n) & 226.4(d)]
14. Is the cost of insurance for the initial term
accurately disclosed if from or through
the creditor? [226.18(n) and 226.4(d)]
15. Are deposits required for credit
transactions disclosed accurately?
[226.18(r)]
16. Are REM closing fees that are excluded
from the disclosed finance charge bona
fide and reasonable? [226.4(c)(7)]
17. Is the maximum interest rate in the
contract (variable rate mortgage)
disclosed? [226.30(a)]
Comptroller’s Handbook
67
Truth in Lending Act
Page 72
Worksheet #6
Closed-End Credit – Adjustable Rate Mortgage File Review
Use this worksheet when reviewing variable rate loans or ARMs with maturity greater than one year secured by
the principal dwelling of the borrower. To complete, review applicable loan files and place a check in each
applicable box. Determine the accuracy of the disclosures by comparing them to the contract and other bank
documents. This worksheet can be used for reviewing audit work papers, evaluating bank policies, performing
expanded procedures, and training as appropriate. Only complete those sections of the worksheet that
specifically relate to the issue being reviewed, evaluated or tested, and retain those completed sections in the
work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency and
should be explained in the work papers. When performing expanded procedures, a “No” answer indicates a
possible violation and should be explained in the work papers. If a line item is not applicable within the area
you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Closed-End Credit – Adjustable Rate Mortgage File Review Worksheet
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
1. Did the bank provide timely early disclosures for
residential mortgage transactions subject to RESPA?
[226.19(a)(1)]
2. Was the booklet entitled “Consumer Handbook on
ARMs” or a substitute provided? [226.19(b)(1)]
3. Does the contract contain an independent index [12
CFR 34.22] if the transaction is an ARM under 12
CFR 34.20 or an ARM under 226.19(b)?
Subsequent Disclosures
4. Were subsequent disclosures mailed in accordance
with timing requirements? [226.20(c)] and do they
provide the:
a. Current and prior interest rates (verify accuracy of
rates used)? [226.20(c)(1)]
b. Index values on which interest rates are based
(verify accuracy of indexes used)? [226.20(c)(2)]
c. Extent to which the creditor has foregone an
interest rate increase (only if carryover exists)?
[226.20(c)(3)]
d. Contractual effects of the adjustment, including
Truth in Lending Act
68
Comptroller’s Handbook
Page 73
Closed-End Credit – Adjustable Rate Mortgage File Review Worksheet
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
the new payment amount and a statement of the
loan balance? [226.20(c)(4)]
e. Payment required to avoid negative amortization?
[226.20(c)(5)]
Comptroller’s Handbook
69
Truth in Lending Act
Page 74
Worksheet #7
Right of Rescission File Review
Use this worksheet when reviewing the right to rescission for both closed- and open-end loans subject to
Regulation Z that are secured by the consumer’s principal dwelling. Requirements for closed- and open-end
loans are found in 12 CFR 226.23 and 12 CFR 226.15, respectively. (Note: Loans not subject to rescission
include business purpose credit, refinancings in which no new money is advanced, and residential mortgage
transactions.). To complete, review applicable loan files and place a check in each applicable box
This worksheet can be used for reviewing audit work papers, evaluating bank policies, performing expanded
procedures, and training as appropriate. Only complete those sections of the worksheet that specifically relate
to the issue being reviewed, evaluated or tested, and retain those completed sections in the work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency
and should be explained in the work papers. When performing expanded procedures, a “No” answer
indicates a possible violation and should be explained in the work papers. If a line item is not applicable
within the area you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Right of Rescission File Review Worksheet
Product Type:
Name of Borrower:
Loan/Account #:
Type of Credit (closed or open):
Yes No
Yes No
Yes No
Yes No Yes No
1. Were two copies furnished to each person
entitled to rescind? [226.23(b)(1)/226.15(b)]
2. Does the rescission notice identify the
transaction? [226.23(b)(1)/226.15(b)]
3. Does the rescission notice disclose:
a. The retention or acquisition of a security
interest in the consumer’s principal
dwelling? [226.23(b)(1)(i)/226.15(b)(1)]
b. The consumer’s right to rescind?
[226.23(b)(1)(ii)/226.15(b)(2)]
c. How to exercise the right to rescind?
[226.15(b)(1)(iii)/226.23(b)(3)]
d. The effects of rescission?
[226.23(b)(1)(iv)/226.15(b)(4)]
Closed-End Credit Forms Review Worksheet
c.
Obtained the customer’s signature or
initials as an affirmative request for the
insurance? [226.18(n) and 226.4(d)]
17. If the property insurance premium has
been excluded from finance charge, has
the bank:
a.
Disclosed that the consumer may
choose the insurance company?
b.
Disclosed the cost of the insurance for
the initial term if obtained from or
through the bank? [226.18(n) and
226.4(d)]
18. Are the disclosures required under
226.4(e) to exclude certain fees required
by law, such as a filing fee or certain
insurance premiums from the finance
charge provided? [226.18(o)]
19. Is there a statement referring to the
contract document for specified
information? [226.18(p)]
20. Is there an appropriate assumption
disclosure for residential mortgage
transactions? [226.18(q)]
21. If a deposit is required as a condition of
the transaction, has the bank disclosed
that the APR does not reflect its effect?
[226.18(r)]
Truth in Lending Act
62
Comptroller’s Handbook
Page 67
Worksheet #4
Closed-End Credit – Adjustable Rate Mortgage Forms Review
Use this worksheet when reviewing variable rate loans or ARMs with a maturity greater than one year secured
by the principal dwelling of the borrower. To complete, review the forms and place a check in each
applicable box. Determine the accuracy of the disclosures by comparing them to the contract and other
bank documents. This worksheet can be used for reviewing audit work papers, evaluating bank policies,
performing expanded procedures, and training as appropriate. Only complete those sections of the worksheet
that specifically relate to the issue being reviewed, evaluated or tested, and retain those completed sections in
the work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency
and should be explained in the work papers. When performing expanded procedures, a “No” answer
indicates a possible violation and should be explained in the work papers. If a line item is not applicable
within the area you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Closed-End Credit Adjustable Rate Mortgage Forms Review Worksheet
Product Type:
Yes No
Yes No
Yes No
Yes No
Yes No
1. Is the fact that the note contains a
variable rate feature disclosed?
[226.18(f)(2)(i)]
2. Is there a statement that variable rate
disclosures were provided earlier?
[226.18(f)(2)(ii)]
Disclosure At Time Of Application (one for each program in which the consumer expresses an interest)
[226.19(b)(2)]
3. Are disclosures provided either at time of
application or before consumer pays any
nonrefundable fee or, if the application
is received from a mortgage broker or
over the telephone, mailed within three
business days following receipt of the
application? [226.19(b) & footnote 45b]
4. Do variable rate program disclosures
provide:
a. The booklet entitled “Consumer
Handbook on ARMs,” or a suitable
substitute? [226.19(b)(1)]
b. A statement that interest rate,
payment or the term can change?
[226.19(b)(2)(i)]
c. The index/formula with source of
Comptroller’s Handbook
63
Truth in Lending Act
Page 68
Closed-End Credit Adjustable Rate Mortgage Forms Review Worksheet
Product Type:
Yes No
Yes No
Yes No
Yes No
Yes No
information disclosed?
[226.19(b)(2)(ii)]
d. An explanation of the interest
rate/payment determination and
margin? [226.19(b)(2)(iii)]
e. A statement that consumer should ask
for the current margin and interest
rate? [226.19(b)(2)(iv)]
f. The fact that interest rate is
discounted, if applicable, and a
statement that the consumer should
ask about the amount of discount?
[226.19(b)(2)(v)]
g. The frequency of interest rate and
payment changes? [226.19(b)(2)(vi)]
h. The rules relating to changes?
[226.19(b)(2)(vii)]
i. An historical example or the
maximum interest rate and payment?
[226.19(b)(2)(viii)]
j. An explanation of how the loan
payment can be calculated based on
example? [226.19(b)(2)(ix)]
k. The fact that the loan program
contains a demand feature?
[226.19(b)(2)(x)]
l. Information on, and timing of,
adjustment notices? [226.19(b)(2)(xi)]
m. A statement that disclosures for other
variable rate loan programs are
available? [226.19(b)(2)(xii)]
Truth in Lending Act
64
Comptroller’s Handbook
Page 69
Worksheet #5
Closed-End Credit File Review
Use this worksheet when reviewing closed-end credit loans. The worksheet contains all the standard closed-
end credit disclosure requirements and should be used with the other closed-end worksheets. Determine the
accuracy of the disclosures by comparing them to the contract and other bank documents. To complete,
review loan files and place a check in each applicable box.
This worksheet can be used for reviewing audit work papers, evaluating bank policies, performing expanded
procedures, and training as appropriate. Only complete those sections of the worksheet that specifically relate
to the issue being reviewed, evaluated or tested, and retain those completed sections in the work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency
and should be explained in the work papers. When performing expanded procedures, a “No” answer
indicates a possible violation and should be explained in the work papers. If a line item is not applicable
within the area you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Closed-End Credit File Review Worksheet
Product Type:
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
1. Are disclosures furnished before
consummation? [226.17(b)]
2. Is the amount financed disclosed and
accurate? [226.18(b)]
3. Is there a separate itemization of the
amount financed (RESPA-GFE, if
applicable, may be substituted)?
[226.18(c)]
4. Is the finance charge disclosed and
accurate? [226.4, 226.18(d) & footnote
41]
5. Is the APR disclosed and accurate?
[226.18(e), footnote 42 & 226.22(a)]
6. Are the following required disclosures on
variable rate loans (other than those
secured by the consumer’s principal
dwelling with a term of more than one
year) provided?
a. Circumstances that permit rate
increase? [226.18(f)(1)(i)]
b. Limits on the increase:
Comptroller’s Handbook
65
Truth in Lending Act
Page 70
Closed-End Credit File Review Worksheet
Product Type:
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
Periodic? [226.18(f)(1)(ii)]
Lifetime? [226.18(f)(1)(ii)]
c. Effects of increase? [226.18(f)(1)(iii)]
d. Hypothetical example of new payment
terms? [226.18(f)(1)(iv)]
7. Are the following required disclosures
provided if the annual percentage rate
may increase after consummation on
variable rate loan transaction secured by
the consumer’s principal dwelling with a
term greater than one year:
a. The fact that the transaction contains a
variable-rate feature?
b. A statement that variable-rate
disclosures have been provided earlier?
[226.18(f)(2)]
8. Is the payment schedule (amount, timing,
and number of payments) provided and
accurate? [226.18(g)]
9. Is the total of payments provided and
accurate? [226.18(h)]
10. a. If the obligation has a demand feature,
is that fact disclosed?
b. If the disclosures are based on an
assumption of one year as provided in
section 226.17(c)(5), is that fact disclosed?
[226.18(i)]
11. If a credit sale, is the total sale price
accurate? [226.18(j)]
12. Is the security interest described
accurately, if applicable? [226.18(m)]
13. Is the credit life insurance premium or
debt cancellation fee for the initial term
Truth in Lending Act
66
Comptroller’s Handbook
Page 71
Closed-End Credit File Review Worksheet
Product Type:
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
accurately disclosed, if applicable?
[226.18(n) & 226.4(d)]
14. Is the cost of insurance for the initial term
accurately disclosed if from or through
the creditor? [226.18(n) and 226.4(d)]
15. Are deposits required for credit
transactions disclosed accurately?
[226.18(r)]
16. Are REM closing fees that are excluded
from the disclosed finance charge bona
fide and reasonable? [226.4(c)(7)]
17. Is the maximum interest rate in the
contract (variable rate mortgage)
disclosed? [226.30(a)]
Comptroller’s Handbook
67
Truth in Lending Act
Page 72
Worksheet #6
Closed-End Credit – Adjustable Rate Mortgage File Review
Use this worksheet when reviewing variable rate loans or ARMs with maturity greater than one year secured by
the principal dwelling of the borrower. To complete, review applicable loan files and place a check in each
applicable box. Determine the accuracy of the disclosures by comparing them to the contract and other bank
documents. This worksheet can be used for reviewing audit work papers, evaluating bank policies, performing
expanded procedures, and training as appropriate. Only complete those sections of the worksheet that
specifically relate to the issue being reviewed, evaluated or tested, and retain those completed sections in the
work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency and
should be explained in the work papers. When performing expanded procedures, a “No” answer indicates a
possible violation and should be explained in the work papers. If a line item is not applicable within the area
you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Closed-End Credit – Adjustable Rate Mortgage File Review Worksheet
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
1. Did the bank provide timely early disclosures for
residential mortgage transactions subject to RESPA?
[226.19(a)(1)]
2. Was the booklet entitled “Consumer Handbook on
ARMs” or a substitute provided? [226.19(b)(1)]
3. Does the contract contain an independent index [12
CFR 34.22] if the transaction is an ARM under 12
CFR 34.20 or an ARM under 226.19(b)?
Subsequent Disclosures
4. Were subsequent disclosures mailed in accordance
with timing requirements? [226.20(c)] and do they
provide the:
a. Current and prior interest rates (verify accuracy of
rates used)? [226.20(c)(1)]
b. Index values on which interest rates are based
(verify accuracy of indexes used)? [226.20(c)(2)]
c. Extent to which the creditor has foregone an
interest rate increase (only if carryover exists)?
[226.20(c)(3)]
d. Contractual effects of the adjustment, including
Truth in Lending Act
68
Comptroller’s Handbook
Page 73
Closed-End Credit – Adjustable Rate Mortgage File Review Worksheet
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
the new payment amount and a statement of the
loan balance? [226.20(c)(4)]
e. Payment required to avoid negative amortization?
[226.20(c)(5)]
Comptroller’s Handbook
69
Truth in Lending Act
Page 74
Worksheet #7
Right of Rescission File Review
Use this worksheet when reviewing the right to rescission for both closed- and open-end loans subject to
Regulation Z that are secured by the consumer’s principal dwelling. Requirements for closed- and open-end
loans are found in 12 CFR 226.23 and 12 CFR 226.15, respectively. (Note: Loans not subject to rescission
include business purpose credit, refinancings in which no new money is advanced, and residential mortgage
transactions.). To complete, review applicable loan files and place a check in each applicable box
This worksheet can be used for reviewing audit work papers, evaluating bank policies, performing expanded
procedures, and training as appropriate. Only complete those sections of the worksheet that specifically relate
to the issue being reviewed, evaluated or tested, and retain those completed sections in the work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency
and should be explained in the work papers. When performing expanded procedures, a “No” answer
indicates a possible violation and should be explained in the work papers. If a line item is not applicable
within the area you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Right of Rescission File Review Worksheet
Product Type:
Name of Borrower:
Loan/Account #:
Type of Credit (closed or open):
Yes No
Yes No
Yes No
Yes No Yes No
1. Were two copies furnished to each person
entitled to rescind? [226.23(b)(1)/226.15(b)]
2. Does the rescission notice identify the
transaction? [226.23(b)(1)/226.15(b)]
3. Does the rescission notice disclose:
a. The retention or acquisition of a security
interest in the consumer’s principal
dwelling? [226.23(b)(1)(i)/226.15(b)(1)]
b. The consumer’s right to rescind?
[226.23(b)(1)(ii)/226.15(b)(2)]
c. How to exercise the right to rescind?
[226.15(b)(1)(iii)/226.23(b)(3)]
d. The effects of rescission?
[226.23(b)(1)(iv)/226.15(b)(4)]
Time of disclosures 17(b in a form the consumer may keep, before consummation
Final rule—amendment to regulation Z - Legal Developments
Federal Reserve Bulletin, June, 2002
The Board of Governors is amending 12 C.F.R. Part 226, its Regulation Z (Truth in Lending). The Board is publishing revisions to the official staff commentary to Regulation Z, which implements the Truth in Lending Act. The commentary applies and interprets the requirements of Regulation Z. The revisions clarify how creditors that place Truth in Lending Act disclosures on the same document with the credit contract may satisfy the requirement for providing the disclosures, in a form the consumer may keep, before consummation. In addition, the revisions provide guidance on disclosing costs for certain credit insurance policies and on the definition of "business day" for purposes of the right to rescind certain home-secured loans.
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The Board is also publishing technical corrections to the commentary and regulation.
Effective April 9, 2002, 12 C.F.R. Part 226 is amended as follows:
Part 226--Truth in Lending (Regulation Z)
1. The authority citation for Part 226 continues to read as follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and 1637(c)(5).
Section 226.17--[Amended]
2. Section 226.17, in paragraph (a)(1), footnote 38, is amended by removing "[section] 226.18(f)(4)" and adding "[section] 226.18(f)(1)(iv)" in its place.
3. In Supplement I to Part 226:
a. Under Section 226.2--Definitions and Rules of Construction, under 2(a)(6) Business Day, paragraph 2. is revised.
b. Under Section 226.4--Finance Charge, under 4(d) Insurance and Debt Cancellation Coverage, paragraph 12. is revised.
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c. Under Section 226.6--Initial Disclosure Requirements, under Paragraph 6(b), paragraph 1.vi. is amended by removing "comment 4(a)-5" and adding "comment 4(a)-4" in its place.
d. Under Section 226.17--General Disclosure Requirements, under 17(b) Time of Disclosures, a new paragraph 3. is added.
e. Under Section 226.32--Requirements for Certain Closed-End Home Mortgages, under Paragraph 32(c)(3), paragraph 1. is revised; and under Paragraph 32(c)(4), paragraph 1. is amended by removing "[section] 226.19(b)(2)(x)" and adding "[section] 226.19(b)(2)(viii)(B)" in its place.
Supplement I to Part 226--Official Staff Interpretations
Subpart A--General
Section 226.2--Definition and Rules of Construction
2(a)(6) Business day.
2. Rescission rule. A more precise rule for what is a business day (all calendar days except Sundays and the federal legal holidays listed in 5 U.S.C. 6103(a)) applies when the right of rescission or mortgages subject to section 226.32 are involved. (See also comment 31 (c)(1)-1.) Four federal legal holidays are identified in 5 U.S.C. 6103(a) by a specific date: New Year's Day, January 1; Independence Day, July 4; Veterans Day, November 11; and Christmas Day, December 25. When one of these holidays (July 4, for example) falls on a Saturday, federal offices and other entities might observe the holiday on the preceding Friday (July 3). The observed holiday (in the example, July 3) is a business day for purposes of rescission or the delivery of disclosures for certain high-cost mortgages covered by Section 226.32.
Section 226.4--Finance Charge
4(d) Insurance and debt cancellation coverage.
12. Initial term; alternative, i. General. A creditor has the option of providing cost disclosures on the basis of an assumed initial term of one year of insurance or debt- cancellation coverage instead of a longer initial term (provided the premium or fee is clearly labeled as being for one year) if:
A. The initial term is indefinite or not clear, or
B. The consumer has agreed to pay a premium or fee that is assessed periodically but the consumer is under no obligation to continue the coverage, whether or not the consumer has made an initial payment.
ii. Open-end plans. For open-end plans, a creditor also has the option of providing unit-cost disclosure on the basis of a period that is less than one year if the consumer has agreed to pay a premium or fee that is assessed periodically, for example monthly, but the consumer is under no obligation to continue the coverage.
iii. Examples. To illustrate: A. A credit life insurance policy providing coverage for a 30-year mortgage loan has an initial term of 30 years, even though premiums are paid monthly and the consumer is not required to continue the coverage. Disclosures may be based on the initial term, but the creditor also has the option of making disclosures on the basis of coverage for an assumed initial term of one year.
Subpart C--Closed-End Credit
Section 226.17--General Disclosure Requirements
17(b) Time of disclosures.
3. Disclosures provided on credit contracts. Creditors must give the required disclosures to the consumer in writing, in a form that the consumer may keep, before consummation of the transaction. See section 226.17(a)(1) and (b). Sometimes the disclosures are placed on the same document with the credit contract. Creditors are not required to give the consumer two separate copies of the document before consummation, one for the consumer to keep and a second copy for the consumer to execute. The disclosure requirement is satisfied if the creditor gives a copy of the document containing the unexecuted credit contract and disclosures to the consumer to read and sign; and the consumer receives a copy to keep at the time the consumer becomes obligated. It is not sufficient for the creditor merely to show the consumer the document containing the disclosures before the consumer signs and becomes obligated. The consumer must be free to take possession of and review the document in its entirety before signing.
Federal Reserve Bulletin, June, 2002
The Board of Governors is amending 12 C.F.R. Part 226, its Regulation Z (Truth in Lending). The Board is publishing revisions to the official staff commentary to Regulation Z, which implements the Truth in Lending Act. The commentary applies and interprets the requirements of Regulation Z. The revisions clarify how creditors that place Truth in Lending Act disclosures on the same document with the credit contract may satisfy the requirement for providing the disclosures, in a form the consumer may keep, before consummation. In addition, the revisions provide guidance on disclosing costs for certain credit insurance policies and on the definition of "business day" for purposes of the right to rescind certain home-secured loans.
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The Board is also publishing technical corrections to the commentary and regulation.
Effective April 9, 2002, 12 C.F.R. Part 226 is amended as follows:
Part 226--Truth in Lending (Regulation Z)
1. The authority citation for Part 226 continues to read as follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and 1637(c)(5).
Section 226.17--[Amended]
2. Section 226.17, in paragraph (a)(1), footnote 38, is amended by removing "[section] 226.18(f)(4)" and adding "[section] 226.18(f)(1)(iv)" in its place.
3. In Supplement I to Part 226:
a. Under Section 226.2--Definitions and Rules of Construction, under 2(a)(6) Business Day, paragraph 2. is revised.
b. Under Section 226.4--Finance Charge, under 4(d) Insurance and Debt Cancellation Coverage, paragraph 12. is revised.
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c. Under Section 226.6--Initial Disclosure Requirements, under Paragraph 6(b), paragraph 1.vi. is amended by removing "comment 4(a)-5" and adding "comment 4(a)-4" in its place.
d. Under Section 226.17--General Disclosure Requirements, under 17(b) Time of Disclosures, a new paragraph 3. is added.
e. Under Section 226.32--Requirements for Certain Closed-End Home Mortgages, under Paragraph 32(c)(3), paragraph 1. is revised; and under Paragraph 32(c)(4), paragraph 1. is amended by removing "[section] 226.19(b)(2)(x)" and adding "[section] 226.19(b)(2)(viii)(B)" in its place.
Supplement I to Part 226--Official Staff Interpretations
Subpart A--General
Section 226.2--Definition and Rules of Construction
2(a)(6) Business day.
2. Rescission rule. A more precise rule for what is a business day (all calendar days except Sundays and the federal legal holidays listed in 5 U.S.C. 6103(a)) applies when the right of rescission or mortgages subject to section 226.32 are involved. (See also comment 31 (c)(1)-1.) Four federal legal holidays are identified in 5 U.S.C. 6103(a) by a specific date: New Year's Day, January 1; Independence Day, July 4; Veterans Day, November 11; and Christmas Day, December 25. When one of these holidays (July 4, for example) falls on a Saturday, federal offices and other entities might observe the holiday on the preceding Friday (July 3). The observed holiday (in the example, July 3) is a business day for purposes of rescission or the delivery of disclosures for certain high-cost mortgages covered by Section 226.32.
Section 226.4--Finance Charge
4(d) Insurance and debt cancellation coverage.
12. Initial term; alternative, i. General. A creditor has the option of providing cost disclosures on the basis of an assumed initial term of one year of insurance or debt- cancellation coverage instead of a longer initial term (provided the premium or fee is clearly labeled as being for one year) if:
A. The initial term is indefinite or not clear, or
B. The consumer has agreed to pay a premium or fee that is assessed periodically but the consumer is under no obligation to continue the coverage, whether or not the consumer has made an initial payment.
ii. Open-end plans. For open-end plans, a creditor also has the option of providing unit-cost disclosure on the basis of a period that is less than one year if the consumer has agreed to pay a premium or fee that is assessed periodically, for example monthly, but the consumer is under no obligation to continue the coverage.
iii. Examples. To illustrate: A. A credit life insurance policy providing coverage for a 30-year mortgage loan has an initial term of 30 years, even though premiums are paid monthly and the consumer is not required to continue the coverage. Disclosures may be based on the initial term, but the creditor also has the option of making disclosures on the basis of coverage for an assumed initial term of one year.
Subpart C--Closed-End Credit
Section 226.17--General Disclosure Requirements
17(b) Time of disclosures.
3. Disclosures provided on credit contracts. Creditors must give the required disclosures to the consumer in writing, in a form that the consumer may keep, before consummation of the transaction. See section 226.17(a)(1) and (b). Sometimes the disclosures are placed on the same document with the credit contract. Creditors are not required to give the consumer two separate copies of the document before consummation, one for the consumer to keep and a second copy for the consumer to execute. The disclosure requirement is satisfied if the creditor gives a copy of the document containing the unexecuted credit contract and disclosures to the consumer to read and sign; and the consumer receives a copy to keep at the time the consumer becomes obligated. It is not sufficient for the creditor merely to show the consumer the document containing the disclosures before the consumer signs and becomes obligated. The consumer must be free to take possession of and review the document in its entirety before signing.
Certain Closed-End Home Mortgages Section 226.32
Section 226.32—Requirements for Certain Closed-End Home Mortgages
32(a) Coverage.
Paragraph 32(a)(1)(i).
1. Application date. An application is deemed received when it reaches the creditor in any of the ways applications are normally transmitted. (See § 226.19(a).) For example, if a borrower applies for a 10-year loan on September 30 and the creditor counteroffers with a 7-year loan on October 10, the application is deemed received in September and the creditor must measure the annual percentage rate against the appropriate Treasury security yield as of August 15. An application transmitted through an intermediary agent or broker is received when it reaches the creditor, rather than when it reaches the agent or broker. (See comment 19(b)-3 to determine whether a transaction involves an intermediary agent or broker.)
2. When fifteenth not a business day. If the 15th day of the month immediately preceding the application date is not a business day, the creditor must use the yield as of the business day immediately preceding the 15th.
3. Calculating annual percentage rates for variable-rate loans and discount loans. Creditors must use the rules set out in the commentary to § 226.17(c)(1) in calculating the annual percentage rate for variable-rate loans (assume the rate in effect at the time of disclosure remains unchanged) and for discount, premium, and stepped-rate transactions (which must reflect composite annual percentage rates).
4. Treasury securities. To determine the yield on comparable Treasury securities for the annual percentage rate test, creditors may use the yield on actively traded issues adjusted to constant maturities published in the Board's "Selected Interest Rates" (statistical release H-15). Creditors must use the yield corresponding to the constant maturity that is closest to the loan's maturity. If the loan's maturity is exactly halfway between security maturities, the annual percentage rate on the loan should be compared with the yield for Treasury securities having the lower yield. In determining the loan's maturity, creditors may rely on the rules in § 226.17(c)(4) regarding irregular first payment periods. For example:
i. If the H-15 contains a yield for Treasury securities with constant maturities of 7 years and 10 years and no maturity in between, the annual percentage rate for an 8-year mortgage loan is compared with the yield of securities having a 7-year maturity, and the annual percentage rate for a 9-year mortgage loan is compared with the yield of securities having a 10-year maturity.
ii. If a mortgage loan has a term of 15 years, and the H-15 contains a yield of 5.21 percent for constant maturities of 10 years, and also contains a yield of 6.33 percent for constant maturities of 20 years, then the creditor compares the annual percentage rate for a 15-year mortgage loan with the yield for constant maturities of 10 years.
iii. If a mortgage loan has a term of 30 years, and the H-15 does not contain a yield for 30-year constant maturities, but contains a yield for 20-year constant maturities, and an average yield for securities with remaining terms to maturity of 25 years and over, then the annual percentage rate on the loan is compared with the yield for 20-year constant maturities.
Paragraph 32(a)(1)(ii).
1. Total loan amount. For purposes of the "points and fees" test, the total loan amount is calculated by taking the amount financed, as determined according to § 226.18(b), and deducting any cost listed in § 226.32(b)(1)(iii) and § 226.32(b)(1)(iv) that is both included as points and fees under § 226.32(b)(1) and financed by the creditor. Some
{{6-30-05 p.6980.01}}examples follow, each using a $10,000 amount borrowed, a $300 appraisal fee, and $400 in points. A $500 premium for optional credit life insurance is used in one example.
i. If the consumer finances a $300 fee for a creditor-conducted appraisal and pays $400 in points at closing, the amount financed under § 226.18(b) is $9,900 ($10,000 plus the $300 appraisal fee that is paid to and financed by the creditor, less $400 in prepaid
{{8-31-06 p.6981}}finance charges). The $300 appraisal fee paid to the creditor is added to other points and fees under § 226.32(b)(1)(iii). It is deducted from the amount financed ($9,900) to derive a total loan amount of $9,600.
ii. If the consumer pays the $300 fee for the creditor-conducted appraisal in cash at closing, the $300 is included in the points and fees calculation because it is paid to the creditor. However, because the $300 is not financed by the creditor, the fee is not part of the amount financed under § 226.18(b). In this case, the amount financed is the same as the total loan amount: $9,600 ($10,000, less $400 in prepaid finance charges).
iii. If the consumer finances a $300 fee for an appraisal conducted by someone other than the creditor or an affiliate, the $300 fee is not included with other points and fees under § 226.32(b)(1)(iii). The amount financed under § 226.18(b) is $9,900 ($10,000 plus the $300 fee for an independently-conducted appraisal that is financed by the creditor, less the $400 paid in cash and deducted as prepaid financed charges).
iv. If the consumer finances a $300 fee for a creditor-conducted appraisal and a $500 single premium for optional credit life insurance, and pays $400 in points at closing, the amount financed under § 226.18(b) is $10,400 ($10,000, plus the $300 appraisal fee that is paid to and financed by the creditor, plus the $500 insurance premium that is financed by the creditor, less $400 in prepaid finance charges). The $300 appraisal fee paid to the creditor is added to other points and fees under § 226.32(b)(1)(iii) and the $500 insurance premium is added under 226.32(b)(1)(iv). The $300 and $500 costs are deducted from the amount financed ($10,400) to derive a total loan amount of $9,600.
2. Annual adjustment of $400 amount. A mortgage loan is covered by § 226.32 if the total points and fees payable by the consumer at or before loan consummation exceed the greater of $400 or 8 percent of the total loan amount. The $400 figure is adjusted annually on January 1 by the annual percentage change in the CPI that was in effect on the preceding June 1. The Board will publish adjustments after the June figures become available each year. The adjustment for the upcoming year will be included in any proposed commentary published in the fall, and incorporated into the commentary the following spring. The adjusted figures are:
i. For 1996, $412, reflecting a 3.00 percent increase in the CPI--U from June 1994 to June 1995, rounded to the nearest whole dollar.
ii. For 1997, $424, reflecting a 2.9 percent increase in the CPI--U from June 1995 to June 1996, rounded to the nearest whole dollar.
iii. For 1998, $435, reflecting a 2.5 percent increase in the CPI--U from June 1996 to June 1997, rounded to the nearest whole dollar.
iv. For 1999, $441, reflecting a 1.4 percent increase in the CPI--U from June 1997 to June 1998, rounded to the nearest whole dollar.
v. For 2000, $451, reflecting a 2.3 percent increase in the CPI--U from June 1998 to June 1999, rounded to the nearest whole dollar.
vi. For 2001, $465, reflecting a 3.1 percent increase in the CPI--U from June 1999 to June 2000, rounded to the nearest whole dollar.
vii. For 2002, $480, reflecting a 3.27 percent increase in the CPI--U from June 2000 to June 2001, rounded to the nearest whole dollar.
viii. For 2003, $488, reflecting a 1.64 percent increase in the CPI--U from June 2001 to June 2002, rounded to the nearest whole dollar.
ix. For 2004, $499, reflecting a 2.22 percent increase in the CPI--U from June 2002 to June 2003, rounded to the nearest whole dollar.
x. For 2005, $510, reflecting a 2.29 percent increase in the CPI--U from June 2003 to June 2004, rounded to the nearest whole dollar.
xi. For 2006, $528, reflecting a 3.51 percent increase in the CPI--U from June 2004 to June 2005, rounded to the nearest whole dollar.
xii. For 2007, $547, reflecting a 3.55 percent increase in the CPI--U from June 2005 to June 2006, rounded to the nearest whole dollar.
32(b) Definitions
Paragraph 32(b)(1)(i).
1. General. Section 226.32(b)(1)(i) includes in the total "points and fees" items defined as finance charges under §§ 226.4(a) and 226.(4)(b). Items excluded from the finance charge under other provisions of § 226.4 are not included in the total "points and fees" under paragraph 32(b)(1)(i), but may be included in "points and fees" under paragraphs
{{8-31-06 p.6982}}32(b)(1)(ii) and 32(b)(1)(iii). Interest, including per-diem interest, is excluded from "points and fees" under § 226.32(b)(1).
Paragraph 32(b)(1)(ii).
1. Mortgage broker fees. In determining "points and fees" for purposes of this section, compensation paid by a consumer to a mortgage broker (directly or through the creditor for delivery to the broker) is included in the calculation whether or not the amount is disclosed as a finance charge. Mortgage broker fees that are not paid by the consumer are not included. Mortgage broker fees already included in the calculation as finance charges under § 226.32(b)(1)(i) need not be counted again under § 226.32(b)(1)(ii).
2. Example. Section 226.32(b)(1)(iii) defines "points and fees" to include all items listed in § 226.4(c)(7), other than amounts held for the future payment of taxes. An item listed in § 226.4(c)(7) may be excluded from the "points and fees" calculation, however, if the charge is reasonable, the creditor receives no direct or indirect compensation from the charge, and the charge is not paid to an affiliate of the creditor. For example, a reasonable fee paid by the consumer to an independent, third-party appraiser may be excluded from the "points and fees" calculation (assuming no compensation is paid to the creditor). A fee paid by the consumer for an appraisal performed by the creditor must be included in the calculation, even though the fee may be excluded from the finance charge if it is bona fide and reasonable in amount.
Paragraph 32(b)(1)(iv).
1. Premium amount. In determining "points and fees" for purposes of this section, premiums paid at or before closing for credit insurance are included whether they are paid in cash or financed, and whether the amount represents the entire premium for the coverage or an initial payment.
32(c) Disclosures.
1. Format. The disclosures must be clear and conspicuous but need not be in any particular type size or typeface, nor presented in any particular manner. The disclosures need not be a part of the note or mortgage document.
Paragraph 32(c)(3) Regular payment; balloon payment.
1. General. The regular payment is the amount due from the borrower at regular intervals, such as monthly, bimonthly, quarterly, or annually. There must be at least two payments, and the payments must be in an amount and at such intervals that they fully amortize the amount owed. In disclosing the regular payment, creditors may rely on the rules set forth in § 226.18(g); however, the amounts for voluntary items, such as credit life insurance, may be included in the regular payment disclosure only if the consumer has previously agreed to the amounts.
i. If the loan has more than one payment level, the regular payment for each level must be disclosed. For example:
A. In a 30-year graduated payment mortgage where there will be payments of $300 for the first 120 months, $400 for the next 120 months, and $500 for the last 120 months, each payment amount must be disclosed, along with the length of time that the payment will be in effect.
B. If interest and principal are paid at different times, the regular amount for each must be disclosed.
C. In discounted or premium variable-rate transactions where the creditor sets the initial interest rate and later rate adjustments are determined by an index or formula, the creditor must disclose both the initial payment based on the discount or premium and the payment that will be in effect thereafter. Additional explanatory material which does not detract from the required disclosures may accompany the disclosed amounts. For example, if a monthly payment is $250 for the first six months and then increases based on an index and margin, the creditor could use language such as the following: "Your regular monthly payment will be $250 for six months. After six months your regular monthly payment will be based on an index and margin, which currently would make your payment $350. Your actual payment at that time may be higher or lower."
Paragraph 32(c)(4) Variable-rate.
1. Calculating "worst-case" payment example. Creditors may rely on instructions in § 226.19(b)(2)(viii)(B) for calculating the maximum possible increases in rates in the shortest possible timeframe, based on the face amount of the note (not the hypothetical loan amount of $10,000 required by § 226.19(b)(2)(viii)(B)). The creditor must provide a
{{4-30-04 p.6982.01}}maximum payment for each payment level, where a payment schedule provides for more than one payment level and more than one maximum payment amount is possible.
Paragraph 32(c)(5) Amount borrowed.
1. Optional insurance; debt-cancellation coverage. This disclosure is required when the amount borrowed in a refinancing includes premiums or other charges for credit life, accident, health, or loss-of-income insurance, or debt-cancellation coverage (whether or not the debt-cancellation coverage is insurance under applicable law) that provides for cancellation of all or part of the consumer's liability in the event of the loss of life, health, or income or in the case of accident. See comment 4(d)(3)--2 and comment app. G and H--2 regarding terminology for debt-cancellation coverage.
32(d) Limitations
Paragraph 32(d)(1)(i) Balloon payment.
1. Regular periodic payments. The repayment schedule for a § 226.32 mortgage loan with a term of less than five years must fully amortize the outstanding principal balance through "regular periodic payments." A payment is a "regular periodic payment" if it is not more than twice the amount of other payments.
Paragraph 32(d)(2) Negative amortization.
1. Negative amortization. The prohibition against negative amortization in a mortgage covered by § 226.32 does not preclude reasonable increases in the principal balance that result from events permitted by the legal obligation unrelated to the payment schedule. For example, when a consumer fails to obtain property insurance and the creditor purchases insurance, the creditor may add a reasonable premium to the consumer's principal balance, to the extent permitted by the legal obligation.
Paragraph 32(d)(4) Increased interest rate.
1. Variable-rate transactions. The limitation on interest rate increases does not apply to rate increases resulting from changes in accordance with the legal obligation in a variable-rate transaction, even if the increase occurs after default by the consumer.
Paragraph 32(d)(5) Rebates.
1. Calculation of refunds. The limitation applies only to refunds of precomputed (such as add-on) interest and not to any other charges that are considered finance charges under § 226.4 (for example, points and fees paid at closing). The calculation of the refund of interest includes odd-days interest, whether paid at or after consummation.
Paragraph 32(d)(6) Prepayment penalties.
1. State law. For purposes of computing a refund of unearned interest, if using the actuarial method defined by applicable state law results in a refund that is greater than the refund calculated by using the method described in section 933(d) of the Housing and Community Development Act of 1992, creditors should use the state law definition in determining if a refund is a prepayment penalty.
32(d)(7) Prepayment penalty exception.
Paragraph 32(d)(7)(iii).
1. Calculating debt-to-income ratio. "Debt" does not include amounts paid by the borrower in cash at closing or amounts from the loan proceeds that directly repay an existing debt. Creditors may consider combined debt-to-income ratios for transactions involving joint applicants.
32(a) Coverage.
Paragraph 32(a)(1)(i).
1. Application date. An application is deemed received when it reaches the creditor in any of the ways applications are normally transmitted. (See § 226.19(a).) For example, if a borrower applies for a 10-year loan on September 30 and the creditor counteroffers with a 7-year loan on October 10, the application is deemed received in September and the creditor must measure the annual percentage rate against the appropriate Treasury security yield as of August 15. An application transmitted through an intermediary agent or broker is received when it reaches the creditor, rather than when it reaches the agent or broker. (See comment 19(b)-3 to determine whether a transaction involves an intermediary agent or broker.)
2. When fifteenth not a business day. If the 15th day of the month immediately preceding the application date is not a business day, the creditor must use the yield as of the business day immediately preceding the 15th.
3. Calculating annual percentage rates for variable-rate loans and discount loans. Creditors must use the rules set out in the commentary to § 226.17(c)(1) in calculating the annual percentage rate for variable-rate loans (assume the rate in effect at the time of disclosure remains unchanged) and for discount, premium, and stepped-rate transactions (which must reflect composite annual percentage rates).
4. Treasury securities. To determine the yield on comparable Treasury securities for the annual percentage rate test, creditors may use the yield on actively traded issues adjusted to constant maturities published in the Board's "Selected Interest Rates" (statistical release H-15). Creditors must use the yield corresponding to the constant maturity that is closest to the loan's maturity. If the loan's maturity is exactly halfway between security maturities, the annual percentage rate on the loan should be compared with the yield for Treasury securities having the lower yield. In determining the loan's maturity, creditors may rely on the rules in § 226.17(c)(4) regarding irregular first payment periods. For example:
i. If the H-15 contains a yield for Treasury securities with constant maturities of 7 years and 10 years and no maturity in between, the annual percentage rate for an 8-year mortgage loan is compared with the yield of securities having a 7-year maturity, and the annual percentage rate for a 9-year mortgage loan is compared with the yield of securities having a 10-year maturity.
ii. If a mortgage loan has a term of 15 years, and the H-15 contains a yield of 5.21 percent for constant maturities of 10 years, and also contains a yield of 6.33 percent for constant maturities of 20 years, then the creditor compares the annual percentage rate for a 15-year mortgage loan with the yield for constant maturities of 10 years.
iii. If a mortgage loan has a term of 30 years, and the H-15 does not contain a yield for 30-year constant maturities, but contains a yield for 20-year constant maturities, and an average yield for securities with remaining terms to maturity of 25 years and over, then the annual percentage rate on the loan is compared with the yield for 20-year constant maturities.
Paragraph 32(a)(1)(ii).
1. Total loan amount. For purposes of the "points and fees" test, the total loan amount is calculated by taking the amount financed, as determined according to § 226.18(b), and deducting any cost listed in § 226.32(b)(1)(iii) and § 226.32(b)(1)(iv) that is both included as points and fees under § 226.32(b)(1) and financed by the creditor. Some
{{6-30-05 p.6980.01}}examples follow, each using a $10,000 amount borrowed, a $300 appraisal fee, and $400 in points. A $500 premium for optional credit life insurance is used in one example.
i. If the consumer finances a $300 fee for a creditor-conducted appraisal and pays $400 in points at closing, the amount financed under § 226.18(b) is $9,900 ($10,000 plus the $300 appraisal fee that is paid to and financed by the creditor, less $400 in prepaid
{{8-31-06 p.6981}}finance charges). The $300 appraisal fee paid to the creditor is added to other points and fees under § 226.32(b)(1)(iii). It is deducted from the amount financed ($9,900) to derive a total loan amount of $9,600.
ii. If the consumer pays the $300 fee for the creditor-conducted appraisal in cash at closing, the $300 is included in the points and fees calculation because it is paid to the creditor. However, because the $300 is not financed by the creditor, the fee is not part of the amount financed under § 226.18(b). In this case, the amount financed is the same as the total loan amount: $9,600 ($10,000, less $400 in prepaid finance charges).
iii. If the consumer finances a $300 fee for an appraisal conducted by someone other than the creditor or an affiliate, the $300 fee is not included with other points and fees under § 226.32(b)(1)(iii). The amount financed under § 226.18(b) is $9,900 ($10,000 plus the $300 fee for an independently-conducted appraisal that is financed by the creditor, less the $400 paid in cash and deducted as prepaid financed charges).
iv. If the consumer finances a $300 fee for a creditor-conducted appraisal and a $500 single premium for optional credit life insurance, and pays $400 in points at closing, the amount financed under § 226.18(b) is $10,400 ($10,000, plus the $300 appraisal fee that is paid to and financed by the creditor, plus the $500 insurance premium that is financed by the creditor, less $400 in prepaid finance charges). The $300 appraisal fee paid to the creditor is added to other points and fees under § 226.32(b)(1)(iii) and the $500 insurance premium is added under 226.32(b)(1)(iv). The $300 and $500 costs are deducted from the amount financed ($10,400) to derive a total loan amount of $9,600.
2. Annual adjustment of $400 amount. A mortgage loan is covered by § 226.32 if the total points and fees payable by the consumer at or before loan consummation exceed the greater of $400 or 8 percent of the total loan amount. The $400 figure is adjusted annually on January 1 by the annual percentage change in the CPI that was in effect on the preceding June 1. The Board will publish adjustments after the June figures become available each year. The adjustment for the upcoming year will be included in any proposed commentary published in the fall, and incorporated into the commentary the following spring. The adjusted figures are:
i. For 1996, $412, reflecting a 3.00 percent increase in the CPI--U from June 1994 to June 1995, rounded to the nearest whole dollar.
ii. For 1997, $424, reflecting a 2.9 percent increase in the CPI--U from June 1995 to June 1996, rounded to the nearest whole dollar.
iii. For 1998, $435, reflecting a 2.5 percent increase in the CPI--U from June 1996 to June 1997, rounded to the nearest whole dollar.
iv. For 1999, $441, reflecting a 1.4 percent increase in the CPI--U from June 1997 to June 1998, rounded to the nearest whole dollar.
v. For 2000, $451, reflecting a 2.3 percent increase in the CPI--U from June 1998 to June 1999, rounded to the nearest whole dollar.
vi. For 2001, $465, reflecting a 3.1 percent increase in the CPI--U from June 1999 to June 2000, rounded to the nearest whole dollar.
vii. For 2002, $480, reflecting a 3.27 percent increase in the CPI--U from June 2000 to June 2001, rounded to the nearest whole dollar.
viii. For 2003, $488, reflecting a 1.64 percent increase in the CPI--U from June 2001 to June 2002, rounded to the nearest whole dollar.
ix. For 2004, $499, reflecting a 2.22 percent increase in the CPI--U from June 2002 to June 2003, rounded to the nearest whole dollar.
x. For 2005, $510, reflecting a 2.29 percent increase in the CPI--U from June 2003 to June 2004, rounded to the nearest whole dollar.
xi. For 2006, $528, reflecting a 3.51 percent increase in the CPI--U from June 2004 to June 2005, rounded to the nearest whole dollar.
xii. For 2007, $547, reflecting a 3.55 percent increase in the CPI--U from June 2005 to June 2006, rounded to the nearest whole dollar.
32(b) Definitions
Paragraph 32(b)(1)(i).
1. General. Section 226.32(b)(1)(i) includes in the total "points and fees" items defined as finance charges under §§ 226.4(a) and 226.(4)(b). Items excluded from the finance charge under other provisions of § 226.4 are not included in the total "points and fees" under paragraph 32(b)(1)(i), but may be included in "points and fees" under paragraphs
{{8-31-06 p.6982}}32(b)(1)(ii) and 32(b)(1)(iii). Interest, including per-diem interest, is excluded from "points and fees" under § 226.32(b)(1).
Paragraph 32(b)(1)(ii).
1. Mortgage broker fees. In determining "points and fees" for purposes of this section, compensation paid by a consumer to a mortgage broker (directly or through the creditor for delivery to the broker) is included in the calculation whether or not the amount is disclosed as a finance charge. Mortgage broker fees that are not paid by the consumer are not included. Mortgage broker fees already included in the calculation as finance charges under § 226.32(b)(1)(i) need not be counted again under § 226.32(b)(1)(ii).
2. Example. Section 226.32(b)(1)(iii) defines "points and fees" to include all items listed in § 226.4(c)(7), other than amounts held for the future payment of taxes. An item listed in § 226.4(c)(7) may be excluded from the "points and fees" calculation, however, if the charge is reasonable, the creditor receives no direct or indirect compensation from the charge, and the charge is not paid to an affiliate of the creditor. For example, a reasonable fee paid by the consumer to an independent, third-party appraiser may be excluded from the "points and fees" calculation (assuming no compensation is paid to the creditor). A fee paid by the consumer for an appraisal performed by the creditor must be included in the calculation, even though the fee may be excluded from the finance charge if it is bona fide and reasonable in amount.
Paragraph 32(b)(1)(iv).
1. Premium amount. In determining "points and fees" for purposes of this section, premiums paid at or before closing for credit insurance are included whether they are paid in cash or financed, and whether the amount represents the entire premium for the coverage or an initial payment.
32(c) Disclosures.
1. Format. The disclosures must be clear and conspicuous but need not be in any particular type size or typeface, nor presented in any particular manner. The disclosures need not be a part of the note or mortgage document.
Paragraph 32(c)(3) Regular payment; balloon payment.
1. General. The regular payment is the amount due from the borrower at regular intervals, such as monthly, bimonthly, quarterly, or annually. There must be at least two payments, and the payments must be in an amount and at such intervals that they fully amortize the amount owed. In disclosing the regular payment, creditors may rely on the rules set forth in § 226.18(g); however, the amounts for voluntary items, such as credit life insurance, may be included in the regular payment disclosure only if the consumer has previously agreed to the amounts.
i. If the loan has more than one payment level, the regular payment for each level must be disclosed. For example:
A. In a 30-year graduated payment mortgage where there will be payments of $300 for the first 120 months, $400 for the next 120 months, and $500 for the last 120 months, each payment amount must be disclosed, along with the length of time that the payment will be in effect.
B. If interest and principal are paid at different times, the regular amount for each must be disclosed.
C. In discounted or premium variable-rate transactions where the creditor sets the initial interest rate and later rate adjustments are determined by an index or formula, the creditor must disclose both the initial payment based on the discount or premium and the payment that will be in effect thereafter. Additional explanatory material which does not detract from the required disclosures may accompany the disclosed amounts. For example, if a monthly payment is $250 for the first six months and then increases based on an index and margin, the creditor could use language such as the following: "Your regular monthly payment will be $250 for six months. After six months your regular monthly payment will be based on an index and margin, which currently would make your payment $350. Your actual payment at that time may be higher or lower."
Paragraph 32(c)(4) Variable-rate.
1. Calculating "worst-case" payment example. Creditors may rely on instructions in § 226.19(b)(2)(viii)(B) for calculating the maximum possible increases in rates in the shortest possible timeframe, based on the face amount of the note (not the hypothetical loan amount of $10,000 required by § 226.19(b)(2)(viii)(B)). The creditor must provide a
{{4-30-04 p.6982.01}}maximum payment for each payment level, where a payment schedule provides for more than one payment level and more than one maximum payment amount is possible.
Paragraph 32(c)(5) Amount borrowed.
1. Optional insurance; debt-cancellation coverage. This disclosure is required when the amount borrowed in a refinancing includes premiums or other charges for credit life, accident, health, or loss-of-income insurance, or debt-cancellation coverage (whether or not the debt-cancellation coverage is insurance under applicable law) that provides for cancellation of all or part of the consumer's liability in the event of the loss of life, health, or income or in the case of accident. See comment 4(d)(3)--2 and comment app. G and H--2 regarding terminology for debt-cancellation coverage.
32(d) Limitations
Paragraph 32(d)(1)(i) Balloon payment.
1. Regular periodic payments. The repayment schedule for a § 226.32 mortgage loan with a term of less than five years must fully amortize the outstanding principal balance through "regular periodic payments." A payment is a "regular periodic payment" if it is not more than twice the amount of other payments.
Paragraph 32(d)(2) Negative amortization.
1. Negative amortization. The prohibition against negative amortization in a mortgage covered by § 226.32 does not preclude reasonable increases in the principal balance that result from events permitted by the legal obligation unrelated to the payment schedule. For example, when a consumer fails to obtain property insurance and the creditor purchases insurance, the creditor may add a reasonable premium to the consumer's principal balance, to the extent permitted by the legal obligation.
Paragraph 32(d)(4) Increased interest rate.
1. Variable-rate transactions. The limitation on interest rate increases does not apply to rate increases resulting from changes in accordance with the legal obligation in a variable-rate transaction, even if the increase occurs after default by the consumer.
Paragraph 32(d)(5) Rebates.
1. Calculation of refunds. The limitation applies only to refunds of precomputed (such as add-on) interest and not to any other charges that are considered finance charges under § 226.4 (for example, points and fees paid at closing). The calculation of the refund of interest includes odd-days interest, whether paid at or after consummation.
Paragraph 32(d)(6) Prepayment penalties.
1. State law. For purposes of computing a refund of unearned interest, if using the actuarial method defined by applicable state law results in a refund that is greater than the refund calculated by using the method described in section 933(d) of the Housing and Community Development Act of 1992, creditors should use the state law definition in determining if a refund is a prepayment penalty.
32(d)(7) Prepayment penalty exception.
Paragraph 32(d)(7)(iii).
1. Calculating debt-to-income ratio. "Debt" does not include amounts paid by the borrower in cash at closing or amounts from the loan proceeds that directly repay an existing debt. Creditors may consider combined debt-to-income ratios for transactions involving joint applicants.
Chapter 93: Section 54A accuracy of information reported
The General Laws of Massachusetts
Mass.gov
CHAPTER 93. REGULATION OF TRADE AND CERTAIN ENTERPRISES
REGULATION OF CREDIT BUREAUS
Chapter 93: Section 54A. Procedures to ensure accuracy of information reported to consumer reporting agency; disputed information; liability
Section 54A. (a) Every person who furnishes information to a consumer reporting agency shall follow reasonable procedures to ensure that the information reported to a consumer reporting agency is accurate and complete. No person may provide information to a consumer reporting agency if such person knows or has reasonable cause to believe such information is not accurate or complete.
(b) A person who (1) in the ordinary course of business regularly and on a routine basis furnishes information to one or more consumer reporting agencies about the person’s own transactions or experiences with one or more consumers, and (2) determines that information on a specific transaction or experience so provided to a consumer reporting agency is not complete or accurate, shall promptly notify the consumer reporting agency of such determination and provide to the consumer reporting agency any corrections to that information, or any additional information, which is necessary to make the information provided by the person to the consumer reporting agency complete and accurate.
(c) While the completeness or accuracy of any information on a specific transaction or experience furnished by any person to a consumer reporting agency is subject to a continuing bona fide dispute between the affected consumer and that person, the person may not furnish the information to any consumer reporting agency without also including a notice that the information is disputed by the consumer; provided further, that no person may report to a consumer reporting agency that a consumer’s account is delinquent until said bona fide dispute is resolved pursuant to the federal Fair Credit Billing Act.
(d) A person who regularly furnishes information to a consumer reporting agency regarding a consumer who has an open-end credit account with such person, and which account is closed by the consumer, shall notify the consumer reporting agency of the closure of such account by the consumer, in information regularly furnished for the period in which the account is closed.
(e) A person who places a delinquent account for collection, internally or by referral to a third party, charges the delinquent account to profit or loss, or takes similar action, and subsequently furnishes information to a consumer reporting agency regarding such action, shall include within the information furnished, the approximate commencement date of the delinquency which gave rise to such action, unless such date was previously reported to the consumer reporting agency. Nothing contained in this paragraph shall be deemed to require that a delinquency must be reported to a consumer reporting agency.
(f) Upon receiving notice of a dispute notice pursuant to paragraph (a) of section fifty-eight with regard to the completeness or accuracy of any information provided to a consumer reporting agency, the person that provided the information shall (1) complete an investigation with respect to the disputed information and report to the consumer reporting agency the results of that investigation before the end of the thirty-business-day period beginning on the date the consumer reporting agency receives the notice of dispute from the consumer in accordance with paragraph (a) of section fifty-eight and (2) review relevant information submitted to it.
(g) A person who furnishes information to a consumer reporting agency shall be liable for failure to comply with the provisions of this section, unless the person so furnishing the information establishes by a preponderance of the evidence that, at the time of the failure to comply with this section, such person maintained reasonable procedures to comply with such provisions.
Mass.gov
CHAPTER 93. REGULATION OF TRADE AND CERTAIN ENTERPRISES
REGULATION OF CREDIT BUREAUS
Chapter 93: Section 54A. Procedures to ensure accuracy of information reported to consumer reporting agency; disputed information; liability
Section 54A. (a) Every person who furnishes information to a consumer reporting agency shall follow reasonable procedures to ensure that the information reported to a consumer reporting agency is accurate and complete. No person may provide information to a consumer reporting agency if such person knows or has reasonable cause to believe such information is not accurate or complete.
(b) A person who (1) in the ordinary course of business regularly and on a routine basis furnishes information to one or more consumer reporting agencies about the person’s own transactions or experiences with one or more consumers, and (2) determines that information on a specific transaction or experience so provided to a consumer reporting agency is not complete or accurate, shall promptly notify the consumer reporting agency of such determination and provide to the consumer reporting agency any corrections to that information, or any additional information, which is necessary to make the information provided by the person to the consumer reporting agency complete and accurate.
(c) While the completeness or accuracy of any information on a specific transaction or experience furnished by any person to a consumer reporting agency is subject to a continuing bona fide dispute between the affected consumer and that person, the person may not furnish the information to any consumer reporting agency without also including a notice that the information is disputed by the consumer; provided further, that no person may report to a consumer reporting agency that a consumer’s account is delinquent until said bona fide dispute is resolved pursuant to the federal Fair Credit Billing Act.
(d) A person who regularly furnishes information to a consumer reporting agency regarding a consumer who has an open-end credit account with such person, and which account is closed by the consumer, shall notify the consumer reporting agency of the closure of such account by the consumer, in information regularly furnished for the period in which the account is closed.
(e) A person who places a delinquent account for collection, internally or by referral to a third party, charges the delinquent account to profit or loss, or takes similar action, and subsequently furnishes information to a consumer reporting agency regarding such action, shall include within the information furnished, the approximate commencement date of the delinquency which gave rise to such action, unless such date was previously reported to the consumer reporting agency. Nothing contained in this paragraph shall be deemed to require that a delinquency must be reported to a consumer reporting agency.
(f) Upon receiving notice of a dispute notice pursuant to paragraph (a) of section fifty-eight with regard to the completeness or accuracy of any information provided to a consumer reporting agency, the person that provided the information shall (1) complete an investigation with respect to the disputed information and report to the consumer reporting agency the results of that investigation before the end of the thirty-business-day period beginning on the date the consumer reporting agency receives the notice of dispute from the consumer in accordance with paragraph (a) of section fifty-eight and (2) review relevant information submitted to it.
(g) A person who furnishes information to a consumer reporting agency shall be liable for failure to comply with the provisions of this section, unless the person so furnishing the information establishes by a preponderance of the evidence that, at the time of the failure to comply with this section, such person maintained reasonable procedures to comply with such provisions.
Saturday, June 9, 2007
Various credit collecting tactics
Section 1692g(b) then provides that if the consumer disputes the debt in writing,
the collector must cease further collection efforts until the validation procedure is complied with:
Disputed debts (b) If the consumer notifies the debt collector in writing within the thirty day
period described in subsection (a) of this section that the debt, or any portion
thereof, is disputed, or that the consumer requests the name and address of the
original creditor, the debt collector shall cease collection of the debt, or any
disputed portion thereof, until the debt collector obtains verification of the debt or
a copy of a judgment, or the name and address of the original creditor, and a copy
of such verification or judgment, or name and address of the original creditor, is
mailed to the consumer by the debt collector.
Although the notice literally requires the debt collector to provide validation information, the
Seventh Circuit has held that the debt collector does not violate the statute if it ceases all furthercollection activities without providing the information. Jang v. A. M. Miller & Assoc., Inc.,1996 U.S.Dist. LEXIS 10883 (N.D.Ill., July 30, 1996), aff'd, 122 F.3d 480 (7th Cir. 1997)
Section 1692g is related to §1692e(8). Under §1692e(8), if a consumer disputes a
debt, either orally or in writing, Brady v. Credit Recovery Co., 160 F.3d 64 (1st. Cir. 1998), the
debt collector cannot report it as undisputed to a credit bureau. Thus, if the consumer orally disputes the debt, the debt collector cannot assume that the debt is valid or report it as undisputed to a credit bureau, but need not provide validation information to the debtor.
If the consumer requests a credit bureau to remove a trade line or note that the debt is disputed, the furnisher of information, which can be a debt collector, violates the Fair Credit Reporting Act as well as the FDCPA by verifying or continuing to report it as undisputed.
VI. VIOLATIONS: THREATS OF UNINTENDED, UNAUTHORIZED OR ILLEGAL
ACTION
The FDCPA prohibits "the threat to take any action that cannot legally be taken or
that is not intended to be taken." 15 U.S.C. §1692e(5). Examples of violations include:
1. Threatening criminal prosecution or liability for multiple damages or civil
penalties, when collecting bad checks. If the collector states or implies that
it regularly prosecutes criminally when it does not, its communications
violate §1692e(5). Alger v. Ganick, O'Brien & Sarin, 35 F.Supp. 2d 148
(D.Mass. 1999); Davis v. Commercial Check Control, Inc., 98 C 631, 1999
WL 89556, 1999 U.S. Dist. LEXIS 1682 (N.D.Ill. Feb. 16, 1999).
2. Section 1692e(5) is also violated if the collector misstates the consumer's
liability for multiple damages or civil penalties, such as by implying that
liability for multiple damages is absolute when the consumer has a right to
tender the amount of the check prior to trial and avoid liability for multiple
damages, or where a statutory notice is a precondition to liability and no
such notice has been given. Stadler v. Devito, 931 P.2d 573 (Colo. App.
1996) (where bad check statute required notice by certified mail before
IX. VIOLATIONS: INABILITY TO PROVE WHAT IS DUE
In In re Maxwell, 281 B.R. 101 (Bankr. D. Mass. 2002), Fairbanks Capital
Corporation obtained a mortgage loan that was allegedly in default. It did not have the note, an
account history, or other information from which the amount due could be accurately computed.
It demanded more money than was due. The court held that it violated 1692f and could not
qualify for a good faith defense.
DISCOVERY
Among the areas that have been held discoverable in FDCPA cases:
1. The source of a debt and the amount a bad debt buyer paid for plaintiff’s debt.
Coppola v. Arrow Financial Services, 302CV577, 2002 WL
(D.Conn., Oct. 29, 2002) (must phrase request clearly); Kimbro v. IC System,
301CV1676, 2002 WL (D.Conn. July 22, 2002).
2. How amount sought was calculated. Coppola v. Arrow Financial Services,
Actual damages include emotional distress. The debt collector may be held "liable for
any mental and emotional stress, embarrassment, and humiliation caused" by improper debt collection
activities. Kleczy v. First Federal Credit Control, Inc., 21 Ohio App.3d 56, 486 N.E.2d 204,); Venes v. Professional Service Bureau, Inc., 353 N.W.2d 671 (Minn. Ct. App. 1984); Baez-
Martinez v. PMS, 1997 U.S. Dist. LEXIS 3314 (D.P.R. 1997); McGrady v. Nissan Motor Accep. Corp.,
40 F.Supp. 2d 1323 (M.D.Ala. 1998); Carrigan v. Central Adjustment Bureau, 502 F.Supp. 468 (N.D.
Ga. 1980); Rawlings v. Dovenmuehle Mtge, Inc., 64 F.Supp.2d 1156 (M.D.Ala. 1999). State law
requirements regarding the proof of intentional or negligent infliction of emotional distress are not
applicable to actual damages under the FDCPA. Smith v. Law Offices of Mitchell N. Kay, 124 B.R.
182, 185 (D.Del. 1991); Howze v. Romano, 92-644, 1994 WL, 1994 U.S. Dist. LEXIS 20547
(D.Del. Dec. 9, 1994); Crossley v. Lieberman, 90 B.R. 682 (E.D.Pa. 1988), aff'd, 868 F.2d 566 (3d Cir.
1989); Teng v. Metropolitan Retail Recovery, 851 F.Supp. 61, 68-9 (E.D.N.Y. 1994); Donahue v. NFS,
Inc., 781 F.Supp. 188, 193-4 (W.D.N.Y. 1991).
D. STATUTORY DAMAGES
In addition to actual damages, if any, the consumer may be awarded "such additional
damages as the court may allow, but not exceeding $1,000." 15 U.S.C. §1692k(a)(2). The consumer need not show any actual damages in order to recover statutory damages. Bartlett v. Heibl, supra; Baker v. G.C. Services Corp., 677 F.2d 775, 780-81 (9th Cir. 1982); Harvey v. United Adjusters, supra, 509 F.Supp. 1218 (D.Or. 1981); Woolfolk v. Van Ru Credit Corp., 783 F.Supp. 724, 725 (D.Conn.
1990); Cacace v. Lucas, 775 F.Supp. 502 (D.Conn. 1990); Riveria v. MAB Collections, Inc., 682
F.Supp. 174, 177 (W.D.N.Y. 1988); Kuhn v. Account Control Technol., 865 F.Supp. 1443, 1450
(D.Nev. 1994). It follows that where only statutory damages are claimed "any FDCPA or related
lawsuits filed in the past by this plaintiff have no bearing on whether the letter sent by [the collector]
violated the FDCPA" and are not discoverable. Lee v. Robins Preston Beckett Taylor & Gugle Co.,
L.P.A., 1999 U.S. Dist. LEXIS 12969 (S.D. Ohio July 9, 1999).
In determining the amount of statutory damages in an individual action the court is to
consider "the frequency and persistence of non-compliance by the debt collector, the nature of such non-compliance, and the extent to which the non-compliance was intentional". 15 U.S.C.
§1692k(b)(1). One court has held that continued use of an unlawful letter after being placed on notice of its illegality warrants the maximum. Cacace v. Lucas, 775 F. Supp. 502, 507 (D. Conn. 1990).Others hold that the factor requires a court to consider whether the defendant “has a history of violating
the Act.” Blum v. Lawent, 02 C 5596, 2003 WL (N.D.Ill., Sept. 8, 2003). Accord,
Evanauskas v. Strumpf, 300CV1106JCH, 2001 WL (D.Conn. June 27, 2001), *6; Yancey v.
Hooten, 180 F.R.D. 203 (D.Conn. 1998); Miller v. McCalla, Raymer, Padrick Cobb, Nichols & Clark,
LLC, 198 F.R.D. 503, 506 (N.D.Ill. 2001) (“The noncompliance here involved thousands of individual
violations over several years”); Creighton v. Emporia Credit Service, Inc., 981 F.Supp. 411, 417
(E.D.Va. 1997) (lack of other complaints in 19 years collection agency was in operation is favorable
factor). In King v. Int'l Data Servs., 2002 U.S. Dist. LEXIS 26426 (D.Haw.), the court found that the fact that the debt collector had sent out thousands of similar letters to other debtors was the
"frequency" referred to in the statute.
D. TRUTH IN LENDING ACT
1. 15 U.S.C. § 1643(b)
"authorized use" for charges.
the collector must cease further collection efforts until the validation procedure is complied with:
Disputed debts (b) If the consumer notifies the debt collector in writing within the thirty day
period described in subsection (a) of this section that the debt, or any portion
thereof, is disputed, or that the consumer requests the name and address of the
original creditor, the debt collector shall cease collection of the debt, or any
disputed portion thereof, until the debt collector obtains verification of the debt or
a copy of a judgment, or the name and address of the original creditor, and a copy
of such verification or judgment, or name and address of the original creditor, is
mailed to the consumer by the debt collector.
Although the notice literally requires the debt collector to provide validation information, the
Seventh Circuit has held that the debt collector does not violate the statute if it ceases all furthercollection activities without providing the information. Jang v. A. M. Miller & Assoc., Inc.,1996 U.S.Dist. LEXIS 10883 (N.D.Ill., July 30, 1996), aff'd, 122 F.3d 480 (7th Cir. 1997)
Section 1692g is related to §1692e(8). Under §1692e(8), if a consumer disputes a
debt, either orally or in writing, Brady v. Credit Recovery Co., 160 F.3d 64 (1st. Cir. 1998), the
debt collector cannot report it as undisputed to a credit bureau. Thus, if the consumer orally disputes the debt, the debt collector cannot assume that the debt is valid or report it as undisputed to a credit bureau, but need not provide validation information to the debtor.
If the consumer requests a credit bureau to remove a trade line or note that the debt is disputed, the furnisher of information, which can be a debt collector, violates the Fair Credit Reporting Act as well as the FDCPA by verifying or continuing to report it as undisputed.
VI. VIOLATIONS: THREATS OF UNINTENDED, UNAUTHORIZED OR ILLEGAL
ACTION
The FDCPA prohibits "the threat to take any action that cannot legally be taken or
that is not intended to be taken." 15 U.S.C. §1692e(5). Examples of violations include:
1. Threatening criminal prosecution or liability for multiple damages or civil
penalties, when collecting bad checks. If the collector states or implies that
it regularly prosecutes criminally when it does not, its communications
violate §1692e(5). Alger v. Ganick, O'Brien & Sarin, 35 F.Supp. 2d 148
(D.Mass. 1999); Davis v. Commercial Check Control, Inc., 98 C 631, 1999
WL 89556, 1999 U.S. Dist. LEXIS 1682 (N.D.Ill. Feb. 16, 1999).
2. Section 1692e(5) is also violated if the collector misstates the consumer's
liability for multiple damages or civil penalties, such as by implying that
liability for multiple damages is absolute when the consumer has a right to
tender the amount of the check prior to trial and avoid liability for multiple
damages, or where a statutory notice is a precondition to liability and no
such notice has been given. Stadler v. Devito, 931 P.2d 573 (Colo. App.
1996) (where bad check statute required notice by certified mail before
IX. VIOLATIONS: INABILITY TO PROVE WHAT IS DUE
In In re Maxwell, 281 B.R. 101 (Bankr. D. Mass. 2002), Fairbanks Capital
Corporation obtained a mortgage loan that was allegedly in default. It did not have the note, an
account history, or other information from which the amount due could be accurately computed.
It demanded more money than was due. The court held that it violated 1692f and could not
qualify for a good faith defense.
DISCOVERY
Among the areas that have been held discoverable in FDCPA cases:
1. The source of a debt and the amount a bad debt buyer paid for plaintiff’s debt.
Coppola v. Arrow Financial Services, 302CV577, 2002 WL
(D.Conn., Oct. 29, 2002) (must phrase request clearly); Kimbro v. IC System,
301CV1676, 2002 WL (D.Conn. July 22, 2002).
2. How amount sought was calculated. Coppola v. Arrow Financial Services,
Actual damages include emotional distress. The debt collector may be held "liable for
any mental and emotional stress, embarrassment, and humiliation caused" by improper debt collection
activities. Kleczy v. First Federal Credit Control, Inc., 21 Ohio App.3d 56, 486 N.E.2d 204,); Venes v. Professional Service Bureau, Inc., 353 N.W.2d 671 (Minn. Ct. App. 1984); Baez-
Martinez v. PMS, 1997 U.S. Dist. LEXIS 3314 (D.P.R. 1997); McGrady v. Nissan Motor Accep. Corp.,
40 F.Supp. 2d 1323 (M.D.Ala. 1998); Carrigan v. Central Adjustment Bureau, 502 F.Supp. 468 (N.D.
Ga. 1980); Rawlings v. Dovenmuehle Mtge, Inc., 64 F.Supp.2d 1156 (M.D.Ala. 1999). State law
requirements regarding the proof of intentional or negligent infliction of emotional distress are not
applicable to actual damages under the FDCPA. Smith v. Law Offices of Mitchell N. Kay, 124 B.R.
182, 185 (D.Del. 1991); Howze v. Romano, 92-644, 1994 WL, 1994 U.S. Dist. LEXIS 20547
(D.Del. Dec. 9, 1994); Crossley v. Lieberman, 90 B.R. 682 (E.D.Pa. 1988), aff'd, 868 F.2d 566 (3d Cir.
1989); Teng v. Metropolitan Retail Recovery, 851 F.Supp. 61, 68-9 (E.D.N.Y. 1994); Donahue v. NFS,
Inc., 781 F.Supp. 188, 193-4 (W.D.N.Y. 1991).
D. STATUTORY DAMAGES
In addition to actual damages, if any, the consumer may be awarded "such additional
damages as the court may allow, but not exceeding $1,000." 15 U.S.C. §1692k(a)(2). The consumer need not show any actual damages in order to recover statutory damages. Bartlett v. Heibl, supra; Baker v. G.C. Services Corp., 677 F.2d 775, 780-81 (9th Cir. 1982); Harvey v. United Adjusters, supra, 509 F.Supp. 1218 (D.Or. 1981); Woolfolk v. Van Ru Credit Corp., 783 F.Supp. 724, 725 (D.Conn.
1990); Cacace v. Lucas, 775 F.Supp. 502 (D.Conn. 1990); Riveria v. MAB Collections, Inc., 682
F.Supp. 174, 177 (W.D.N.Y. 1988); Kuhn v. Account Control Technol., 865 F.Supp. 1443, 1450
(D.Nev. 1994). It follows that where only statutory damages are claimed "any FDCPA or related
lawsuits filed in the past by this plaintiff have no bearing on whether the letter sent by [the collector]
violated the FDCPA" and are not discoverable. Lee v. Robins Preston Beckett Taylor & Gugle Co.,
L.P.A., 1999 U.S. Dist. LEXIS 12969 (S.D. Ohio July 9, 1999).
In determining the amount of statutory damages in an individual action the court is to
consider "the frequency and persistence of non-compliance by the debt collector, the nature of such non-compliance, and the extent to which the non-compliance was intentional". 15 U.S.C.
§1692k(b)(1). One court has held that continued use of an unlawful letter after being placed on notice of its illegality warrants the maximum. Cacace v. Lucas, 775 F. Supp. 502, 507 (D. Conn. 1990).Others hold that the factor requires a court to consider whether the defendant “has a history of violating
the Act.” Blum v. Lawent, 02 C 5596, 2003 WL (N.D.Ill., Sept. 8, 2003). Accord,
Evanauskas v. Strumpf, 300CV1106JCH, 2001 WL (D.Conn. June 27, 2001), *6; Yancey v.
Hooten, 180 F.R.D. 203 (D.Conn. 1998); Miller v. McCalla, Raymer, Padrick Cobb, Nichols & Clark,
LLC, 198 F.R.D. 503, 506 (N.D.Ill. 2001) (“The noncompliance here involved thousands of individual
violations over several years”); Creighton v. Emporia Credit Service, Inc., 981 F.Supp. 411, 417
(E.D.Va. 1997) (lack of other complaints in 19 years collection agency was in operation is favorable
factor). In King v. Int'l Data Servs., 2002 U.S. Dist. LEXIS 26426 (D.Haw.), the court found that the fact that the debt collector had sent out thousands of similar letters to other debtors was the
"frequency" referred to in the statute.
D. TRUTH IN LENDING ACT
1. 15 U.S.C. § 1643(b)
"authorized use" for charges.
Wednesday, May 9, 2007
III. LEAST SOPHISTICATED
III. LEAST SOPHISTICATED OR UNSOPHISTICATED CONSUMER STANDARD
Most courts have held that whether a communication or other conduct violates the
FDCPA is to be determined by analyzing it from the perspective of the "least sophisticated
debtor." Clomon v. Jackson, 988 F.2d 1314 (2d Cir. 1993); Taylor v. Perrin, Landry, de Launay
& Durand, 103 F.3d 1232 (5th Cir. 1997); Graziano v. Harrison, 950 F.2d 107, 111 (3d Cir.
1991); Smith v. Transworld Systems, Inc., 953 F.2d 1025, 1028-29 (6th Cir. 1992); Swanson v.
Southern Oregon Credit Service, Inc., 869 F.2d 1222, 1225-26 (9th Cir. 1988); Jeter v. Credit
Most courts have held that whether a communication or other conduct violates the
FDCPA is to be determined by analyzing it from the perspective of the "least sophisticated
debtor." Clomon v. Jackson, 988 F.2d 1314 (2d Cir. 1993); Taylor v. Perrin, Landry, de Launay
& Durand, 103 F.3d 1232 (5th Cir. 1997); Graziano v. Harrison, 950 F.2d 107, 111 (3d Cir.
1991); Smith v. Transworld Systems, Inc., 953 F.2d 1025, 1028-29 (6th Cir. 1992); Swanson v.
Southern Oregon Credit Service, Inc., 869 F.2d 1222, 1225-26 (9th Cir. 1988); Jeter v. Credit
“Any false representation of material facts made with knowledge
“Any false representation of material facts made with knowledge of falsity and with intent that it shall be acted on by another in entering into contract, and which is so acted upon, constitutes ‘fraud,’ and entitles party deceived to avoid contract or recover damages.” Barnsdall Refining Corn. v. Birnam wood Oil Co., 92 F 2d 817.
“In the federal courts, it is well established that a national bank has not power to lend its credit to another by becoming surety, indorser, or guarantor for him.” Farmers and Miners Bank v. Bluefield Nat ‘l Bank, 11 F 2d 83, 271 U.S. 669.
“A national bank has no power to lend its credit to any person or corporation.” Bowen v. Needles Nat. Bank, 94 F 925, 36 CCA 553, certiorari denied in 20 S.Ct 1024, 176 US 682, 44 LED 637.
“Mr. Justice Marshall said: The doctrine of ultra vires is a most powerful weapon to keep private corporations within their legitimate spheres and to punish them for violations of their corporate charters, and it probably is not invoked too often . . . Zinc Carbonate Co. v. First National Bank, 103 Wis 125, 79 NW 229.” American Express Co. v. Citizens State Bank, 194 NW 430.
“It has been settled beyond controversy that a national bank, under federal law being limited in its powers and capacity, cannot lend its credit by guaranteeing the debts of another. All such contracts entered into by its officers are ultra vires . . .” Howard & Foster Co. v. Citizens Nat’l Bank of Union, 133 SC 202, 130 SE).
“It is not within those statutory powers for a national bank, even though solvent, to lend its credit to another in any of the various ways in which that might be done.” Federal Intermediate Credit Bank v. L ‘Herrison, 33 F 2d 841,).
“A bank can lend its money, but not its credit.” First National Bank of Tallapoosa v. Monroe, 135 Ga 614, 69 SE 1124, 32 LRA (NS) 550.
“. . . the bank is allowed to lend money upon personal security; but it must be money that it loans, not its credit.” Seligman v. Charlottesville Nat. Bank, 3 Hughes 647, Fed Case No.12, 642, 1039.
“The contract is void if it is only in part connected with the illegal transaction and the promise single or entire.” Guardian Agency v. Guardian Mutual. Savings Bank, 227 Wis 550, 279 NW 83.
"Banking Associations from the very nature of their business are prohibited from lending credit." St. Louis Savings Bank vs. Parmalee 95 U. S. 557
Case Law (The Truth In Lending Act)
Case Law (The Truth In Lending Act)
Purpose of Truth in Lending Act is for customers to be able to make informed decisions. Truth in Lending Act Section 102, 15 U.S.C. Section 1601. Griggs v. Provident Consumer Discount Co. 680 F.2d 927, certiarari granted, vacated 103 S.Ct. 400, 459 U.S. 56, 74 L.Ed,2d 225, on remand 699 F,2d 642,
Truth in Lending Act is strictly liability statute liberally construed in favor of consumers. Truth in Lending Act Section 102 et seq., 15 U.S.C. Section 1601 et seq. Brophv v. Chase Manhattan Mortgage Co, 947 F.Supp. 879.
Truth in Lending Act should be construed liberally to ensure achievement of goal of aiding unsophisticated consumers so that consumers are not easily misled as to total costs of financing. Truth in Lending Act, Sections 102 et seq, 102(a), 105 as amended, I5 U.S.C. Sections 1601 et seq., 1601(a), 1604; Truth in Lending Regulations, Regulation Z, Sections 226.1 et seq., 226.18, 15 U.S.C. Section 1700, Basile v. H&R Block. Jlt(L. 897 F.Supp. 194.
Truth in Lending Act must be strictly construed and liability imposed for any violation, no matter how technical. Truth in Lending Act Section 102 et seq., as amended, 15 U.S.C. Section 1601 et seq, Abele v. Mid-Penn Consumer Discount. 77 B.R. 460, affirmed S45 F.2d 1009.
Truth in Lending Act must be liberally construed to effectuate remedial purposes of protecting consumer against inaccurate and unfair credit billing and credit card practices and of promoting intelligent comparison shopping by consumers contemplating the use of credit by full disclosure of terms and conditions of credit card charges, Truth in Lending Act Section 102 et seq, as amended, 15 U.S.C. Section 1601 et seq Lifschitz v. American Exp. Co. 560 F.Supp. 458
To qualify for protection of Truth in Lending Act [15 U.S.C. Section 1601 et seq.], plaintiff must show that disputed transaction was a consumer credit transaction not a business transaction, Truth b Lending Act, Section 102 et seq., 15 U.S.C. Section 1601 et seq. Quino v. A-I CredjlCom. 635 F.Supp. 151
Requirements of Truth in Lending Act are highly technical, but full compliance is required; even minor violations of Act cannot be ignored, Truth in Lending Act, Section 102 et seq. as amended, 15 U.S.C. Section 1601 et seq.; Truth in Lending Act Regulations, Regulation Z Section 226.1 et seq., 15 U.S.C. foil. Section 1700. Griggs v. Providence Consumer Discount Co. 503 F.Supp. 246, appeal dismissed 672 F2d 903, appeal after remand 680 F.2d 927, certiorari granted, vacated 103 S.Ct, 400, 459 U.S. 56, 74 L.Ed.2d 225, on remand 699 F,2d 642.
A valid rescission of a "credit sale" contract does not render inoperative the disclosure requirements of the Truth in Lending Act, as creditor's obligations to make specific disclosures arises prior to consummation of transaction. Truth in Lending Act Section 102 et seq., 15 U.S.C. Section 1601 et seq.; Truth in Lending Regulations, Regulation Z, Sections 226.2(c) 226.8(a), 15 U.S.C., following section 1700. O'Neil 484 F.Supp. 18.
Under truth in lending regulation providing that disclosure of consumer credit loan shall not be "stated, utilized or placed so as to mislead or confuse" consumer, placement of disclosures is to be considered along with their statement and use. Truth in Lending Regulations, Regulation Z, Section 226.6(c), 15 U.S.C. following section 1700. Geimuso v. Commercial Bank & Trust Co. 566 F.2d 437.
Any violation of the Truth in Lending Act, regardless of technical nature, must result in finding of liability against lender. Truth in Lending Regulations, Regulation Z Section 226.1 et seq., 15 U.S.C. Section 1700; Truth in Lending Act Section 130 (a, e), IS U.S.C. Section 1640 (a, e). In Re Steinbrecher. 110 BR. 155, 116 A.L.R. Fed. 881.
Question of whether lender's Truth in Lending Act disclosures are inaccurate, misleading or confusing ordinarily will be for fact finder; however, where confusing, misleading and inaccurate character of disputed disclosure is so clear that it cannot reasonably be disputed, summary judgment for plaintiff is appropriate Truth in Lending Act Section 102 et seq-; Truth in Lending Regulations, Regulation Z, Section 226.1 et seq., 15 U.S.C. Section 1700. Griggs v. Provident Consumer Discount Co. 503 F, Supp 246, appeal dismissed 672 F.2d 903, appeal after remand 680 F.2d 927, certiorari granted, vacated 103 S.Ct, 400, 459 U.S. 56, 74 L.Ed.2d 225, on remand 699 E2d 642.
Pursuant to regulations promulgated under Truth in Lending Act, violator of disclosure requirements is held to standard of strict liability, and therefore, borrower need not show that creditor in fact deceived biro by making substandard disclosures. Truth in Lending Act, Sections 102-186, as amended, 15 U.S.C. Section 1601-1667(e); Truth in
Lending Regulations, Regulation Z, Section 226,8(b-d), 15 U.S.C. Section 1700 Soils v. Fidelity Consumer Discount Co., 58 B.R. 983,
Once a creditor violates the Truth In Lending Act, no matter how technical violation appears, unless one of statutory defenses applies, Court has no discretion in imposing liability Truth in Lending Act, Sections 102-186 as amended, 15 U.S.C. Section 1601-1667e. Solis v. Fidelity Consumer Discount Co. 58 BR, 983.
“It is not necessary for recession of a contract that the party making the misrepresentation should have known that it was false, but recovery is allowed even though misrepresentation is innocently made, because it would be unjust to allow one who made false representations, even innocently, to retain the fruits of a bargain induced by such representations.” Whipp v. Iverson, 43 Wis 2d 166.
“If any part of the consideration for a promise be illegal, or if there are several considerations for an unseverable promise one of which is illegal, the promise, whether written or oral, is wholly void, as it is impossible to say what part or which one of the considerations induced the promise.” Menominee River Co. v. Augustus Spies L & C Co., 147 Wis 559, 572; 132 NW 1122
"When an instrument [notes] lacks an unconditional promise to pay a sum certain at a fixed and determined time, it is only an acknowledgement of the debt and statutory presumptions like the presence of a valuable consideration, are not applicable." Bader vs. Williams, 61 A 2d 637
“Any false representation of material facts made with knowledge of falsity and with intent that it shall be acted on by another in entering into contract, and which is so acted upon, constitutes ‘fraud,’ and entitles party deceived to avoid contract or recover damages.” Barnsdall Refining Corn. v. Birnam wood Oil Co., 92 F 2d 817.
“In the federal courts, it is well established that a national bank has not power to lend its credit to another by becoming surety, indorser, or guarantor for him.” Farmers and Miners Bank v. Bluefield Nat ‘l Bank, 11 F 2d 83, 271 U.S. 669.
“A national bank has no power to lend its credit to any person or corporation.” Bowen v. Needles Nat. Bank, 94 F 925, 36 CCA 553, certiorari denied in 20 S.Ct 1024, 176 US 682, 44 LED 637.
“Mr. Justice Marshall said: The doctrine of ultra vires is a most powerful weapon to keep private corporations within their legitimate spheres and to punish them for violations of their corporate charters, and it probably is not invoked too often . . . Zinc Carbonate Co. v. First National Bank, 103 Wis 125, 79 NW 229.” American Express Co. v. Citizens State Bank, 194 NW 430.
“It has been settled beyond controversy that a national bank, under federal law being limited in its powers and capacity, cannot lend its credit by guaranteeing the debts of another. All such contracts entered into by its officers are ultra vires . . .” Howard & Foster Co. v. Citizens Nat’l Bank of Union, 133 SC 202, 130 SE 759(1926).
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