The provisions of the Kansas Uniform Consumer Credit Code (UCCC) apply to “consumer loans” which, in relevant part, are defined as debt secured by an interest in land. However, “consumer loans” do not include first mortgages, unless:
1. The loan-to-value (LTV) of such mortgages exceed 100%; or
2. They are secured by the consumer’s principal residence and the annual percentage rate (APR) exceeds the Kansas code mortgage rate, which is the greater of either 12% or the sum of the yield of 30-year fixed rate conventional mortgage loans plus 5%, but which are not:
a. Open-end credit transactions;
b. Purchase-money loans incurred to acquire or construct a consumer’s principal residence; or
c. Reverse mortgage transactions.
(see Kan. U.C.C. Ann. §§16a-1-301 & 16a-3-308a)
In addition, any mortgage may be subject to the UCCC by contract (see Kan. Stat. Ann. §16-207[b]). If a mortgage is subject to the UCCC (contractually or otherwise), certain disclosures are required to be given to the borrower in the transaction.
In the past, DocuTech has considered a loan secured by property in Kansas to be subject to the UCCC if “Subject to Kansas Uniform Consumer Credit Code” in ConformX is set to “Yes.” However, in order to streamline processes and help prevent human errors, loans secured by property in Kansas that meet the following criterion will automatically be considered subject to the UCCC:
1. All second mortgages;
2. All first mortgages which have an LTV ratio greater than 100%; or
3. All first mortgages which are secured by owner-occupied property and which have an APR greater than 12%, which are not:
a. HELOCs; or
b. Purchase or New Construction loans secured by the borrower’s principal residence.
However, the “Subject to Kansas Uniform Consumer Credit Code” option will still be available for clients to use for loans that are contractually subject to the UCCC.
Another change that will be made in regards to transactions subject to the UCCC is the configurations for printing the “KS High LTV Consumer Notice” (Cx1595), which discloses to the borrower that their loan has a high LTV ratio and suggests that the borrower consider credit counseling, pursuant to Kan. U.C.C. Ann. §16a-3-207(3)(b) & (4). This notice is required to be given three days before closing when, based on the appraisal of the secured property, the LTV is greater than 100%.
In the past, Cx1595 has printed when “Subject to Kansas Uniform Consumer Credit Code” is “Yes” for a loan. In the future, however, since all mortgages with an LTV greater than 100% are automatically subject to the UCCC, Cx1595 will now print based upon the LTV ratio of a loan.
Since Cx1595 must be given three days before closing, it will only print in initial packages. This may be problematic for cases where the LTV of a loan may be below 100% at the time initial disclosures are provided, but increase above 100% by the time of closing. To help circumvent this problem, the following ConformX warning will trigger in the closing document screen when the LTV ratio of the loan is greater than 100%:
“This loan has an LTV over 100%. Per the Kansas Uniform Consumer Credit Code, a Kansas High LTV Consumer Notice (such as ConformX document cx1595) must be given no less than three days prior to the time the borrower receives loan funds. Please verify that the borrower has received this notice as required.”
These changes will take effect on March 2, 2012.
February 23, 2012