Minn. Stat. Ann. §58.16(2)(a) requires a residential mortgage originator to enter into a written contract with each borrower from whom the originator either requires an advance fee or for whom the originator offers to act as an agent to help obtain a loan secured by a lien on real estate. Clause (2) of this subsection requires the contract to “specifically identify whether the residential mortgage originator may receive compensation from sources other than the borrower in connection with the loan transaction.”
DocuTech’s generic MN Residential Mortgage Originator Contract (Cx1907) complies with this provision with the following language:
“The residential mortgage originator [ ] may [ ] will not receive compensation from sources other than the borrower in connection with the loan transaction.”
Although this language complies with Minnesota law, it is vague enough that a reasonable person could misinterpret it to mean that the originator is receiving compensation both from the borrower from another person, which is prohibited under 12 CFR §1026.36(d)(2).
In order to make this language more objective and to prevent any possibilities that the contract could be deemed to be in violation of 12 CFR §1026.36(d)(2), it will be modified to state the following:
“The residential mortgage originator [ ] may [ ] will not receive compensation from sources other than the borrower in connection with the loan transaction. If the residential mortgage originator receives compensation from another source, no compensation can be paid by the borrower, pursuant to 12 CFR §1026.36(d)(2).”
Since this document is a contract, it needs to be signed by both the borrower and the mortgage originator. A signature area has been added to Cx1907 for the residential mortgage originator or authorized agent.
This change will take effect on March 21, 2012.
March 13, 2012
DR 119903 and 120652