Pursuant to our yearly audit of state-specific disclosures, we will be creating one new document for loans secured by property in South Carolina and making edits to two others.
Anti-Coercion Insurance Disclosure (Cx2778)
Most states prohibit lenders from requiring borrowers to purchase insurance through a particular insurance agent. Borrowers are, therefore, free to choose the agent through whom they would like to purchase insurance, though these states do allow lenders the right to approve or disapprove of such agents, based on “reasonable” and uniform standards. DocuTech provides Cx2778 for states which do not require a specific disclosure to help clients demonstrate that the borrower is aware of their rights and that the lender has not coerced the borrower into buying insurance through a particular agent. For the South Carolina-specific version of Cx2778, in order to more fully match the provisions of S.C. Code Ann. § 37-4-109, the following paragraph will appear for second lien loans:
“If insurance is required, upon notice to your creditor, you have the option of providing the required insurance through an existing policy of insurance owned or controlled by you, or through a policy to be obtained and paid by you. Your creditor, however, may for reasonable cause decline such insurance.”
The citation will also be modified for second lien loans to reference S.C. Code Ann. § 37-4-109 in addition to Ibid. § 38-57-110.
SC Mortgage Broker Fee Agreement for Financial Services (Cx3525)
S.C. Reg. 28-400(C)(2) and S.C. Code Ann. §§37-23-45, 37-23-75 & 40-58-78(A) require mortgage brokers to keep on file mortgage broker agreements entered into with borrowers. Mortgage broker agreements are required to contain certain disclosures and terms, such as the amount of any fees, the nature of the services the broker provides to the borrower, and whether a loan may be co-brokered. Cx3525 (SC Mortgage Broker Fee Agreement for Financial Services) is a duplicate of the model form published by the South Carolina Department of Consumer Affairs (http://www.consumer.sc.gov/business/licensing_registration/MortgageBroker/Documents/fee_agreement.pdf) for this purpose. The Department has updated the model form and we are updating Cx3525 to match. The most significant changes are:
- Removal of the title, address, and seal of the Department on the top of the form, replaced by the Branch and Lender/Broker addresses and telephone numbers.
- Inclusion of a section that prints for ARM loans, which consists of a “…listing of the schedule when the loan may be reset, for each and every reset, and a listing of the monthly payment that is owed for each change that is allowed by the terms of the contract. If the consumer escrows the insurance and taxes with each monthly payment, it must be reflected in the payment listed.” (S.C. Code Ann. §§ 37-23-45 & 37-23-75)
- Modification of the language notifying the borrower that broker services “…will be paid for by the person indicated, either you (the borrower), the lender or both,” by including the clause, “…unless applicable law, particularly the Federal Truth in Lending Act and 12 CFR part 1026, prohibits such dual compensation.”
- Changing the address of the South Carolina Department of Consumer Affairs.
SC Conditional Mortgage Loan Commitment Agreement (Cx18481)
South Carolina code forbids any “…person who obtains a license as a mortgage lender…[or a] mortgage lender who also acts as a mortgage broker…”(S.C. Code Ann. § 37-22-140[K]) to “…collect any allowable third party fees excluding appraisals or credit reports before a conditional mortgage loan commitment is obtained by the mortgage broker.” (Ibid. 40-58-70)
In order to help clients extend valid commitments in South Carolina, we will now be providing Cx18481 as an “upon request” document. The document sets forth some of the basic terms of the loan being committed to, a disclosure of the conditions under which the loan will not close, and a disclosure of any commitment fee.
Once requested, the document will print under the following conditions:
- “Document Package Type” equals “Initial Disclosure”;
- “Mortgage Loan Commitment” equals “Yes”; and
- “State Code” equals “South Carolina.”
These changes will be available on June 23, 2015. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
June 17, 2015