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:

• No Homeownership Counseling Notice
• No to escrow account disclosures and analysis rules

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:

• Yes for Ability to Repay (be sure to include the lot rental in your D to I calculation)
• Yes to Final TIL (CAUTION** you are required to use the “old” mortgage version of the TIL, the one we had to use to disclose mortgage loans prior to TRID. Surprise!  It still exists, and this scenario is when you need to use it. Don’t use the TIL statement for consumer loans. See Model forms H-4(E) through H-7 and H-16 of Reg Z.)
• Yes to Higher Price Mortgage Loan or High Cost Mortgage Loan restrictions and disclosures if triggered.  (Watch out for these!  Mobile Homes are usually priced much higher than conventional mortgages.)
• No to the Loan Estimate, Closing Disclosure and all related waiting periods (Hooray!)
• No to the shopping list and settlement cost brochure
• No to rescission (because it is a purchase—this would be a Yes, if it were a refinance or an equity loan)

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:

• Yes to a written application
• Yes to appraisal/valuation notice (since a Loan Estimate is not required, this notice must be a stand-alone version)
• Yes to providing appraisal/valuation 3 business days prior to closing
• Yes to all other Reg B timing, notification and non-discrimination rules

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.

SAFE Act

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.

Flood Insurance

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:

• Yes to getting a flood determination (use the location where the mobile is located or will be located)
• Yes to the flood insurance notification if the mobile home is located in a SFHA
• Yes to proof of flood insurance prior to closing if the mobile home is located in a SFHA.

I think that’s all.  Whew!