Lending, Residential Loans: Payoff Statement Rules

Question 

What are the new payoff statement rules?
 

Answer 

See questions and answers below:

Question: When must we begin to comply with the mortgage statement payoff rules?

Answer: March 15, 2012.

Question: Are we only required to use the form when we receive a request for payoff from a title company?  Or must we use the new form on all mortgage payoff quotes?

Answer: The statue only applies to a mortgage servicer providing a payoff statement to a title insurance company.

The definition of “mortgage servicer” can be found in the Property Code, §51.001 and includes a mortgagee.  That means the rule applies to banks (including national banks!)  that are servicing their own loans.

Question: Do payoff request have to be in writing?

Answer: Yes – a payoff request must be in writing. However it can be submitted by mail, email, or fax to the place designated by the servicer to receive requests.  The request must contain at least the name of the mortgagor, the physical address or legal description of the property, and the proposed closing date of the loan.

Question: I believe this only applies to a “home loan”, which is defined as the consumer’s principal residence.  Correct?

Answer: Correct - the definition refers back to §343.001 of the Texas Finance Code:

(2)  "Home loan" means a loan that is:                                       
made to one or more individuals for personal,
family, or household purposes;  and

(B)  secured in whole or part by:                                           

a manufactured home, as defined by
Section 347.002, used or to be used as the borrower\'s principal
residence;  or

(ii)  real property improved by a dwelling

designed for occupancy by four or fewer families and used or to be
used as the borrower\'s principal residence.

Question: We must deliver the form by the 8th business day, right?

Answer: Correct - Once a valid request meeting the requirements has been received, the servicer then has until the eighth business day following receipt of the request to deliver the completed Payoff Statement Form.

Note: Although Texas law permits eighth business days to provide the payoff statement, Commentary in Regulation Z provides a presumptive safe harbor to 12 CFR 226.36 if it is delivered in five business days.
 
Supplement I to Part 226—Official Staff Interpretations
Section 226.36—Prohibited Acts or Practices in Connection With Credit Secured by a Dwelling

Paragraph 36(c)(1)(iii)

Reasonable time. The payoff statement must be provided to the consumer, or person acting on behalf of the consumer, within a reasonable time after the request. For example, it would be reasonable under most circumstances to provide the statement within five business days of receipt of a consumer\'s request. This time frame might be longer, for example, when the servicer is experiencing an unusually high volume of refinancing requests.

So quoting Karen Neeley – “…just because Texas law permits a longer period doesn’t mean that lenders/servicers should take the longer time to respond.”