As mentioned in a recent update concerning the Arkansas-version of the Notice of Servicing Transfer (Cx17905), Ark. Admin Code § 214.002-5010-1, which is made pursuant to the Arkansas Fair Mortgage Lending Act, was recently amended and re-enacted by 2013 Ar. Reg. Text 6635. Subsection (a) of this Section now requires the following:
“New loans. Payment instructions shall be issued in time to reasonably assure receipt by the customer at least fifteen days before the first payment is due and shall include, but not limited [sic] to the following:
(1) The name, address, and telephone number of the entity to which payments are to be made as well as the name of the person to whom inquiries should be directed. Such telephone numbers shall be toll free to the customer;
(2) Any notice required under federal law or regulation;
(3) The exact amount of the monthly payment including a breakdown of the principle and interest, any escrow amounts, if applicable, and an explanation of the method of calculation that a reasonable person can understand, and a schedule of the ranges and categories of the mortgage servicer’s costs and fees for its servicing-related activities;
(4) A clear and conspicuous statement as to the monthly due date of each payment, regardless of the interval between the due date and assessment of any late payment penalty; and
(5) A notice in the form and content acceptable to the Department that the mortgage servicer is licensed in Arkansas and that complaints about the mortgage servicer may be submitted to the Department.”
As a result of this amendment, we will be creating an Arkansas-specific version of our standard First Payment Letter (Cx7606) to include these additional items, as follows:
1. After the disclosure, in the third paragraph, concerning when the first monthly payment is due, a disclosure will follow specifying when each subsequent payment will be due. This language will vary depending on whether payments are due monthly or biweekly. Following this, an explanatory sentence will print informing the borrower of how their periodic payment is calculated.
2. Since the amount of the monthly payment must be exact, the second sentence in the third paragraph will be changed to state the following:
“Based on the information now available for the amount of taxes and insurance, the undersigned understands that the EXACT AMOUNT of the total monthly payment is as follows:”
3. The itemization of the payment following paragraph three has been modified to disclose the individual payment amounts for principal and interest, rather than lumping these together, as it does currently.
4. Following the itemization, two new paragraphs will print which will state the following:
“Attached to this document is a schedule of the ranges and categories of the costs and fees charged (if any) for servicing-related activities.
Please note that [name of lender] is licensed in Arkansas and that complaints about [name of lender] may be submitted to the Arkansas Securities Department via the Department’s website (http://www.securities.arkansas.gov/) or toll-free (800-981-4429).”
5. Following the contact information in the “Payment Must Be Sent To:” section, the following will print:
“Toll-free Telephone Number: [telephone number]
If you have any questions concerning your payment, please call [name of designated contact] toll free at [telephone number].”
In addition to Cx7606, we will also be making similar changes to the following documents (for loans in Arkansas, only):
- First Payment Letter w/coupon (Cx1567)
- First Payment Letter – Coupon (Cx1805)
- First Payment Letter with 2 coupons (Cx2105)
- First Payment Letter (Cx5736)
- First Payment Coupon (Cx6750)
- First Payment Letter (Cx8312)
- First Payment Letter (Cx8696)
- First Payment Letter (Cx9173)
- First Payment Letter – Coupon (Cx9926)
- First Payment Letter Enhanced Fees – Non Generic (Cx12482)
- First Payment Statement (Cx13142)
- First Payment Letter – 2nd Lien (Cx13587)
- First Payment Notice (Cx13623)
- First Payment Letter With Coupons – Enhanced Fees (Cx13674)
- First Payment Letter – Lender (Cx13990)
- First Payment Letter (Cx15672)
We will also be contacting clients who have custom first payment letters and see whether they want these changes made to their letter or not.
Please note that the new requirements do require “a schedule of the ranges and categories of the mortgage servicer’s costs and fees for its servicing-related activities” to be included with the first payment letter. This type of information is not passed to us from any LOS and is too detailed and too varied from client-to-client to effectively prompt for in ConformX, so lenders will need to ensure that such a schedule is included with their first payment letter.
Clients who are exempt from the provisions of the Fair Mortgage Lending Act (e.g. state or federally chartered banks, savings banks, credit unions, etc.) and believe this requirement does not apply to them should contact their Account Manager or Client Support to have the paragraph concerning the Arkansas Securities Department configured not to print for them.
Because these regulations take effect on February 9, 2014, these changes will also take effect on this date. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
February 7, 2014