The Certification and Authorization document, in which the borrower authorizes various entities to collect personal information about the borrower, is being significantly revised to better conform with various Federal and state laws. These changes are as follows:
1. Broker and Lender Versions. Primarily due to the provisions of Mass. Regs. Code tit. 940, §8.06(7) and any other similar state regulations, there will be two versions of Cx13 that will print based on whether a client is acting as a lender or as a broker in a loan transaction. The current text (except for the modifications set forth below) will continue to print in the lender version of the document. For the broker version, the text will be slightly modified to clarify that the broker is merely arranging the loan transaction, not funding it or selling it to an investor.
3. New Certification Clauses. Primarily due to the provisions of Vt. Stat. Ann. tit. 9, §2480e and Vt. Code R. 3-2-110:CF 112.03, but also as a good general practice, the following two clauses will be added to the “Certification” sections of Cx13 as Clauses 4 and 5:
“4. I provided a verbal and/or written authorization to order a consumer credit report and verify other credit related information in connection with my loan application, including but not limited to any mortgage or landlord reference and any other source of credit as determined by [client name].
5. I further authorize [client name] to order a consumer credit report and verify other credit related information in connection with my loan application, including but not limited to any mortgage or landlord reference and any other source of credit as determined by [client name]. I understand that the purpose for this order is for [client name] to determine my eligibility and creditworthiness for the loan being applied for, as well as for other legitimate purposes associated with my account.”
4. Conventional Loan and Nonconventional Loan Versions. Due to the provisions of the Federal Financial Privacy Act of 1978 (codified as 12 USCA §§3401 et seq., hereafter referred to as “the Act”), which will be explained below, there will be two versions of Cx13 that will print depending on whether the loan is conventional or nonconventional (e.g. FHA/VA/RD loans).
5. New Language for Nonconventional Loan Versions. Under the Act, the financial records of a borrower may not generally be shared with a government agency unless the borrower authorizes such disclosure and receives a signed and dated statement which discloses the borrower’s rights to revoke such authorization, specifies the records which are to be disclosed and for what purposes, and which also states the customer’s rights under the Act.
Although a statement is included in Cx13 for FHA and VA loans stating the borrower’s rights under the Act, DocuTech’s Legal team believes that this language should be replaced with more language, in order to cover all the rights of the customer under the Act, which is twenty-two sections long.
Therefore, the current language will be replaced with language based on a Customer Authorization form used by the Department of Defense (see 32 CFR Pt. 275, App. J), which should provide more “compliance protection.” Part of this new language will be set forth in a new “Authorization to Release Information to Government Agency” section under which the borrower will authorize release of his information to the relevant government agency in accordance with the disclosure provisions of the Act.
In addition, the “Statement of Customer Rights Under the Right to Financial Privacy Act of 1978” will be expanded to six paragraphs. Due to the length of this text, it will not be repeated in this announcement, but clients may obtain a testprint copy of the document for their review by contacting their Account Manager or DocuTech’s Client Support.
6. Streamlining References to the Borrower. Currently, Cx13 frequently uses “I/We” to refer to the borrower, which makes the document a bit cumbersome to read. In order to make it easier to read, the following sentence will be placed at the beginning of Cx13 and all “I/We” phrases will be replaced with “I”:
“In this document, ‘I,’ ‘me,’ and other first person pronouns refer to the Borrower(s), whether singularly or collectively, who applied for the loan referenced above.”
7. Size of the Document. Currently, Cx13 consists of one page. Due to these edits, it will consist of approximately two pages for the conventional loan version and three pages for the nonconventional loan version. Although this will slightly increase the size of client’s loan packages, the revised content will help ensure accuracy with state and federal law.
These changes will take effect on October 1, 2012. Due to the magnitude of these changes, we strongly invite any comments, questions, or concerns that clients may have concerning them. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
September 21, 2012