Home is Where You Make It: RV Loan Disclosure Rules; New HMDA Tool
Happy Monday! The perils of winter often lead my mind to drift back to last summer when I spent time exploring some of the beautiful American landscape with my brother and his bandmates aboard a funky-looking RV. Being more settled into my role as a compliance practitioner, I sometimes find myself wondering about the nuances in the rules and how the financing disclosures cover similar yet slightly different secured transactions. I recently embarked upon a journey to fully investigate the disclosure rules with regard to recreational vehicles and found that the more I read, the more tripped up I became. Upon returning from this expedition, I've decided to share what I learned with you, my compliance friends. This blog will discuss the disclosure rules for recreational vehicles, boats and trailers.
The confusion when it comes to recreational vehicles arises from the fact that their characterization as either personal property versus real property is state specific, with most states taking the personal property approach. This tends to get even hazier when a borrower decides to make the RV their primary dwelling. Thus, it can be difficult to figure out which regulations apply since every situation does not neatly fit into either category, which is something the TILA-RESPA integrated disclosure (TRID) rules don't seem to want anything to do with. It seems the Bureau only intended for TRID to apply to loans secured by land (and cooperatives starting October 2018). The TRID preamble explains that applying the integrated disclosure rules to loans secured by personal property, including "chattel-dwelling" loans, "could reduce the intended consumer benefit of the disclosures because of those loans' unique characteristics. Excluding them from coverage of these integrated disclosures, however, would not excuse them from [TILA/Regulation Z's general] disclosure requirements."
Although an RV would not be considered a dwelling for TRID as well as most RESPA rules, it could be considered a dwelling for other purposes under sections 1026.17 and 1026.18 of Reg Z. These rules apply to all closed-end consumer credit transactions, including those that are secured by personal property that is not a dwelling and those that are secured by personal property that is a dwelling, but is not also real property. These disclosure would include things like the itemization of the amount financed, the finance charge, the annual percentage rate, the interest rate, the payment schedule, the number of payments, and any applicable late and prepayment fees among other requirements. See, 12 C.F.R. §1026.18 and related commentary.
Parts of Regulation Z have specific scope provisions, so there are rules that discuss applicability to a “dwelling” or a “principal dwelling” depending on the rule. Meanwhile, the staff commentary to the definition of "dwelling" clarifies that this can include RVs. Here's an excerpt from the commentary for reference:
- Scope. A dwelling need not be the consumer's principal residence to fit the definition, and thus a vacation or second home could be a dwelling. However, for purposes of the definition of residential mortgage transaction and the right to rescind, a dwelling must be the principal residence of the consumer. (See the commentary to §§1026.2(a)(24), 1026.15, and 1026.23.)
- Use as a residence. Mobile homes, boats, and trailers are dwellings if they are in fact used as residences, just as are condominium and cooperative units. Recreational vehicles, campers, and the like not used as residences are not dwellings. (Emphasis added).
Determining that an RV is used as a residence, or a principal residence, will impact when a loan on an RV or boat would be subject to a particular rule(i.e. the right to rescind only attaches if the dwelling is the borrower's principal residence).As another example, the requirement to provide periodic statements for residential mortgages applies for closed-end loans secured by a dwelling. The higher-priced mortgage loan escrow rule applies to certain loans secured by a first position lien on a principal dwelling. Generally, the regulations permit a consumer to have only one "principal dwelling," which is discussed in further detail in the CFPB’s staff commentary.
What about rules besides Reg Z and RESPA? Looking at both Regulation B's appraisal disclosure rules and HMDA's reporting rules, these have exclusions for recreational vehicles and boats. See, 12 C.F.R. 1002.14(b)(2), and Interp 1 to 12 C.F.R. §1003.2(f)-Comment 3. I hope you enjoy this photo of the RV from last summer's tour, somewhere in West Virginia I presume:
HMDA LAR Formatting Tool
CFPB has launched a new formatting tool intended to help credit unions, typically those with small volumes of covered loans and applications, create an electronic file that can be submitted to the HMDA Platform. The 2018 LAR Formatting Tool should be used for data collected in 2018 and reported in 2019. The 2018 LAR Formatting Tool and the updated 2018 Filing Instructions Guide can be accessed from the Bureau's HMDA resources website.