Question: Our member is purchasing a mobile home as a primary dwelling with 30% down making our loan amount $40,000. There is no land involved, just a lot space rent each month. Are we required to use consumer loan documents or mortgage loan documents? What regulations apply? Are we required to ATR this baby? By the way, this will be a closed-end loan.
Answer: Well, this is a little confusing, isn’t it? On one hand you’re taking someone’s dwelling as collateral, but not the land. I don’t mean to be giddy, but this scenario is an EXCELLENT example of how different rules and definitions apply across various regulations. Anyone want to guess before I give you the answer? Anyone?
Let’s consider lending regulations one by one:
Real Estate Settlement Procedures Act (RESPA)
RESPA applies only to “Federally Related Mortgage Loans.” In order to meet the definition of “Federally Related” the loan has to be secured by real property, or land. No land = No RESPA. And in relation to this example, it also means:
Truth In Lending (Reg Z)
The biggest break here, is that TRID disclosures only apply to RESPA covered loans. But don’t get too excited. Reg Z doesn’t give you a complete out if a loan is not secured by land. Many Reg Z mortgage rules apply when a consumer loan is secured by a DWELLING. In this case, a mobile home is a dwelling under Reg Z. So here’s how the Reg Z will apply:
Regulation B (Reg B)
Reg B rules also are not dependent on whether you take land as part of the collateral. So the following will apply:
Home Mortgage Disclosure Act (HMDA)
HMDA doesn’t care about land either!!! If your credit union is subject to HMDA, this loan would be reportable as purchase.
Even without the land, this transaction would be considered a “Residential Mortgage Loan Application” under SAFE Act definitions. So only properly trained and registered Mortgage Loan Originators should be handling these applications.
Believe it or not, land doesn’t matter in this case either. Under mandatory purchase of flood insurance guidelines, mobile homes must be covered by flood insurance if they are located or to be located in a Special Flood Hazard Area (SFHA). So:
I think that’s all. Whew!