Pursuant to our yearly audit of state-specific disclosures, we will be making the following changes to the following documents provided in connection with loans secured by property in California:
New Disclosures
We will be providing a new Request for Fair Lending Information (Cx18014) document, pursuant to the provisions of Cal. Health & Safety Code § 35830 and Cal. Code Regs. tit. 21, § 7114.1, the latter of which prescribes some language which must be included in the form.
The purpose of this form is to request from the borrower personal information, such as their race or national origin, sex, and marital status. The prescribed language notifies the borrower that providing this information is optional.
We are currently providing this Request in Cx991, but are “splitting it out” into its own document for maintenance reasons. The document will print in all Initial Disclosure packages and for all licensing types (i.e. under the same conditions as the CA Fair Lending Notice [Cx16170]). The Request will no longer print in Cx991.
Current Disclosures
CA Mortgage Brokerage Agreement (Cx2784): This document is required under Cal. Fin. Code §§ 22338(a), 50700(c), & 50701(a) through (f) and, as it name implies, is a broker agreement. We will now be providing two versions of this document. One version will continue to print the current text of the document when “California License Type” equals “CA Residential Mortgage Lending Act.” The other version will print substantially similar text when “California License Type” equals “CA Finance Lenders Law,” except that the last paragraph will state the following:
“A broker may not require a borrower to pay fees or charges before the consumer loan closing, except in certain cases for an administrative fee. If the Borrower is charged an administrative fee, the amount of this fee will be included in the fee disclosed in Block 1 of the Good Faith Estimate provided pursuant to Federal law. This fee, if charged to the Borrower, will be due and payable upon making the consumer loan, regardless of any other provision of this agreement.
Cal. Fin. Code § 22338(a) (West 2012)”
CA Disclosure Receipt (Cx2687): This document contains two disclosures, one provided in connection with a section under the Real Estate Law (Cal. Bus. & Prof. Code § 10240[c]) and the other under administrative law created under the California Residential Mortgage Lending Act (Cal. Code Regs. tit. 10, § 1950.204).
Under the Real Estate Law, in certain federally regulated residential mortgage loan transactions, some Federal disclosures can be used in lieu of the Re882, Re883, and Re885 forms (though as a practical matter, this is no longer possible due to the 2010 changes to RESPA which do not allow for the inclusion of a certain notice required under California’s law, on the GFE). Cx2687 is, therefore, a borrower’s acknowledgment of receipt of certain Federal disclosures under Regulations X and Z and contains a citation to Supra.
While having the borrower acknowledge receipt of these documents is a good practice for all clients, the citation should only be disclosed if the receipt is given to the borrower pursuant to such law – which means that it should only print if the client printing it is licensed under the Real Estate Law.
We will, therefore, be modifying the citation so that it will only print when “California License Type” equals “CA Real Estate Law.”
The part of the document provided due to the Residential Mortgage Lending Act is a notice informing the borrower that it is their responsibility to obtain machine copies of forms furnished for application before such forms are returned to a licensee. Since this notice is only required under the Residential Mortgage Lending Act, we are configuring it only to print when “California License Type” equals “CA Residential Mortgage Lending Act.” or “Not Selected.”
CA Loan Commitment (Cx16083): This document is required under Cal. Fin. Code § 50203(a)(4). We will be providing a general “catch all” phrase to the section of the document disclosing the refunding of a commitment fee, so that the selection “Nonrefundable” will now say, “Nonrefundable, unless applicable law provides otherwise.” We will also be adjusting the legal citation to match Blue Book standards, as well as to print in bold.
CA Credit Disability Claim Procedure (Cx15326): This document is required under Cal. Civ. Code § 1812.402(f)(1) to be provided by a creditor who directly arranges or participates in the sale, or receives compensation for the sale of credit disability insurance. Other than formatting the legal citation in the document to match Blue Book standards, the only other changes are for correcting minor typographical errors.
CA Finance Lenders Law Statement of Loan – Finance Lenders (Cx14027): This document is required under Cal. Fin. Code §§ 22337 & 22400(b) and Cal. Code Regs. tit. 10, § 1454. We will be making the following changes to it:
1. In addition to a disclosure of the California license number for the broker and the lender of the loan, there will also be disclosures of their NMLS numbers.
2. The citation to Regulation Z in Section 1 of the document will be changed from the Federal Reserve Board’s version of the regulation to the CFPB’s.
3. A citation will be included in Section 3 for the reference made in it to RESPA.
4. The legal citations on the document will be formatted to match Blue Book standards.
5. The document will be configured to print only if “California License Type” equals “CA Finance Lenders Law” or “Not Selected.”
CA Finance Lenders Law Statement of Loan – Brokers (Cx5188): This document is required to be provided by licensed brokers under the California Finance Lenders Law, pursuant to Cal. Fin. Code §§ 22314 & 22338 and Cal. Code Regs. tit. 10, § 1454.
Ibid. requires that the form include the unique identifier (i.e. NMLS number) of the mortgage lender, mortgage broker, or mortgage loan originator to be disclosed. We will be adding this information after the state license number for the lender and broker.
Under Supra § 22314(g), disclosures are to be made in this Statement of Loan when a borrower procures credit insurance through the licensee, promulgating the costs of such insurance. This only applies to loans with a principal amount of less than $10,000.
We are changing Cx5188 to include the following new Section 4, which will print when such conditions exist:
“Credit Insurance: You may be able to obtain credit life, disability, or loss-of-income insurance (or a combination of any of these) through the broker. You are not required to obtain this insurance, either through the broker or through another person. If you choose to obtain any of these insurances through the broker, the monthly costs will be:
Credit life: $X.XX
Disability: $X.XX
Loss-of-Income: $X.XX
Total: $X.XX
Cal. Fin. Code § 22314(g) (West 2012)”
We will also be updating the citations on the form to match Blue Book standards.
We will also be updating the configurations for Cx5188 to print only when “California License Type” equals “CA Finance Lenders Law” or “Not Selected.”
CA Mortgage Brokerage Agreement (Cx2784): This document is required under Cal. Fin. Code §§ 50700(c) & 50701(a) through (f). In addition to adding appropriate legal citations (and updating currently disclosed ones to match Blue Book standards), we will be printing the following sentence from the fourth paragraph in bold:
“The Borrower(s) are obligated to pay the fee(s) at the time of closing, or out of the loan proceeds. The Borrower(s) shall not be obligated to pay the fee(s) if the loan fails to close.”
CA Insurance Disclosure (Cx2350): This document is required under Cal. Civ. Code § 2955.5(a) & (b), Cal. Ins. Code §§ 770 & 772, and Cal. Code Regs. tit. 10, § 1492. In addition to updating the format of the legal citations to match Blue Book standards, we will be configuring the second paragraph, which is an “anti-coercion” clause for hazard insurance, to print only when hazard insurance is required in connection with the loan.
In addition, a new paragraph will be added to the signature recital, which will also only print when hazard insurance is required or if the indicator for the field is not set:
“You also declare that you are voluntarily choosing the insurance agent or broker through whom the insurance is or will be transacted and that the choice of such insurance agent or broker was not made a condition precedent to the loan you have applied for.”
HELOC Agreement – CA (Cx1360): This document is the most used California HELOC Agreement in our library. Pursuant to the provisions of Cal. Fin. Code § 22457, we will be disclosing the lender’s name, address, and license number before the title of the document, when “California License Type” equals “CA Finance Lenders Law.” If clients extend HELOCs in California, are licensed under the California Finance Lenders Law, and provide their own custom HELOC agreements, they may contact their Account Manager or Client Support to request that this notice print on their HELOC agreements.
CA Statement of Loan (Cx883): Finally, this document is required under Cal. Fin. Code § 18231 and Cal. Code Regs. tit. 10, § 40.600 to be provided by “industrial loan companies.” We will be removing the first sentence in the Statement and replacing it with the following text, which will print in 12-point boldface type, in capital letters:
“FOR INFORMATION CONTACT THE DEPARTMENT OF BUSINESS OVERSIGHT, STATE OF CALIFORNIA”
We will also be disclosing the California license number and the name of the loan closer in the section entitled “Lender Name and Addresses,” as well as including legal citations just before the signature recitals.
These changes will all take effect on January 18, 2014. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
January 3, 2014
Various Document Requests