Each year, DocuTech performs a quality control audit of all its state-specific disclosures, not only to ensure that these disclosures are in compliance with applicable state and federal law, but also to improve their quality.
DocuTech’s Maryland Broker Contract, which is required under Md. Code Ann., Com. Law §12-805, has been review pursuant to this audit and the following changes will be:
1. The disclosure of processing fees and all provisions related thereto will be removed from the contract, due to the ambiguity created by the fee restrictions set forth in Ibid. §§12-804 & 12-805 as to whether a processing fee is considered a good or service that the borrower must specifically request or whether it is considered a part of the finder’s fee (i.e. whether it is considered a compensation or commission). To be conservative, it will be treated as a good or service in the contract.
2. Related to the foregoing, the following language will be added concerning goods or services:
“We may require additional charges for the actual costs of acquiring additional goods or services (at your written request) which are necessary for completing your loan application process, as permitted by applicable law. The specific amount for these charges will be disclosed to you in the Federal HUD-1 Settlement Statement required under 12 CFR §1024.8”
3. The following paragraph will be added to the contract (as the third paragraph), in order to ensure that the document is compliant with the new loan originator compensation restrictions imposed by federal law:
“Notwithstanding the foregoing, if another person will by paying us the Loan Fee (such as your lender), you are not obligated to pay it or any other type of compensation to us and are prohibited from doing so, pursuant to Federal law (12 CFR §1026.36[d]). We agree to inform you at or before closing if we will be receiving compensation form anyone other than you.”
4. Ibid. §12-806 states that a borrower is entitled to a refund of the finder’s fee if the loan transaction is not closed or if the borrower exercises his right of rescission under 12 CFR §1026.23 (or any other similar Federal or Maryland law). Although this fact is not required to be disclosed in the contract (Ibid. §12-805[c], which does require disclosure of this fact, only requires it of lenders and not brokers), it has been decided to add such a disclosure not only improve the quality of the contract, but to help prevent any litigation which may arise against the broker for not informing the borrower of his right to a refund. The language concerning refunds will appear in the middle of the second paragraph and be as follows:
“If you exercise your right to rescind the loan transaction under the Federal Truth in Lending Act (15 USCA §§1601 et seq.) or any other similar Federal or Maryland law or regulation, you are entitled to a prompt refund of all of the Loan Fee.”
5. The following clause will be modified in the second to last paragraph to better clarify to the borrower that the broker is not acting as a lender in the transaction:
“Additionally, you acknowledge that [name of broker] is acting as a mortgage broker and not as a mortgage lender in your loan transaction and cannot make loans or commitments or guarantee acceptance into specific programs, terms or conditions of any loan.”
6. The last two sentences of the acknowledgement clause will be deleted (since they are redundant and do not add anything of substance to the contract) and a date line has been added to the loan officer’s signature line.
7. Cosmetic changes will be made to improve the grammatical structure of the document, as well as to conform legal citations to Blue Book standards.
This change will take effect on March 29, 2012. If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584
March 27, 2012