Pursuant to an internal audit of our Alabama-specific disclosures, we will be making the following changes.

New Documents

According to the provisions of Alabama’s “Mini-Code” (Ala. Stat. §§ 5-19-1 through 5-19-33), “no disclosures are required by this chapter to be made by a creditor with respect to any transaction other than disclosures required by regulations made by the [Superintendent of Banks of the State Banking Department] pursuant to Section 5-19-21 and disclosures required by [Ibid. § 5-19-6{a}] and by Sections 5-19-12(a) and 5-19-20(e).” (Ibid. § 5-19-6[b])

Under the regulations made by the Superintendent, “each licensee shall maintain adequate files at each licensed location containing all information necessary to verify compliance with the Alabama Consumer Credit Act and regulations” (Ala. Admin. Code r. 155-2-2-.10[1][i]). The Alabama State Banking Department publishes a “Stacking Order” (available at: https://banking.alabama.gov/bol_mortage_record.aspx), which lists the documents which should be maintained in each borrower’s file. Two of these documents are:

• • An “Explanation of Nontraditional Mortgage Products”; and
  • A “Nontraditional Mortgage Payment Comparison”.

The Banking Department publishes models of both forms (see link above). According to the “Stacking Order”, both documents must be maintained for “each nontraditional closed loan, except not required for 15 year fixed-rate or for traditional adjustable rate.”

“Nontraditional closed loan” is not defined, but the contents of both disclosures are directed towards two types of nontraditional loans: interest-only and graduated payment. Also, while one of the exemptions applies to 15 year fixed-rate loans, we presume this exemption also includes fixed-rate loans with shorter terms.

To comply with these indirect requirements, we will be duplicating these two model forms. Please note that we do not support graduated payment mortgage loans at this time, so these documents will only print for interest-only loans. Both “AL Explanation of Nontraditional Mortgage Products” (Cx24641) and “AL Nontraditional Mortgage Payment Comparison” (Cx24642) will print under the following two conditions:

• • Condition 1:
    • Amortization Term (FI 18122) = 20, 25, 30, 40, 45, or 50 yrs.
    • Amortization Type (FI 2275) = Fixed Rate
    • Document Package Type (FI 18215) = Closing
    • Interest Only Indicator (FI 27620) = Yes
    • State Code (FI 2279) = Alabama
  • Condition 2:
    • Amortization Type (FI 2275) = AdjustableRate
    • Document Package Type (FI 18215) = Closing
    • Interest Only Indicator (FI 27620) = Yes
    • State Code (FI 2279) = Alabama

Modifications to Existing Documents

We will be making the following modifications to the following documents:

• • Fixed Rate Note Alabama Second (Cx1033). We will make a minor modification to the “Caution Notice” which appears at the end of the document, by including an extra hyphen, so that the text matches exactly with the statutorily-prescribed text under Ala. Code § 5-19-6(a).
  • Anti-Coercion Insurance Disclosure (Cx2778). The last clauses of the second-to-last sentence will be slightly modified from “the premiums approved by the administrator or the rates filed by the insurer with the Alabama Department of Insurance, as applicable” to “premiums approved by the administrator, or the rates filed by the insurer with, the Alabama Department of Insurance (as applicable).”

We are also modifying the acknowledgment area by including a subheading (“Acknowledgment”) and revising the acknowledgment statement from “By signing below, you acknowledge receipt of this Disclosure” to “Borrower acknowledges receipt of this document as of the date indicated.”

• • AL Mortgage Broker Agreement (Cx4068). As part of our effort to make the narrative of our State-specific disclosures match those of the uniform conventional promissory note and security instrument used for the same State (unless otherwise required by law or promulgated in an official/model/sample form), we will be changing the narrative in Cx4068 from second person (g., “you” and “our”) to third person (“Borrower” and “Broker”).

We will also be adding another print condition for this form. Under Ala. Code § 5-25-12(a), this document must be disclosed to the “borrower”. A “borrower” is defined as “a natural person who submits an application for a loan secured by a first or subordinate mortgage or deed of trust on a single-family to four-family home to be occupied by the borrower as the borrower’s primary residence” (Ibid. § 5-25-2[1]).

Thus, this document is only required in connection with a loan secured by the borrower’s primary residence. Currently, Cx4068 is printing regardless of occupancy, so we will be adding the condition “Occupancy (FI 1161) = Primary Residence”, so that it only prints when required.

• • AL Commitment Agreement (Cx17166). Similar to the changes being made to Cx4068, we will be modifying the narrative of Cx17166 from second person to third person.

In addition, we will be changing the citation by adding Ala. Code § 8-9-2 (Alabama’s “Statute of Frauds”), as well as modifying the “Execution” area by including both borrower and lender signature areas. The execution statements for both parties will state one the following (as applicable):

“By signing below, Borrower agrees to the terms, conditions, and considerations of this Agreement.”

“By signing below, Lender (or an authorized representative of Lender) agrees to the terms, conditions, and considerations of this Agreement.”

• • Closing Disclosure (Cx18566). According to the “Stacking Order” published by the Alabama State Department of Banking (see previous subsection for details), a “signed Closing Disclosure” is required to be kept in each borrower’s file. Similar to what we have done for other States which have required the Closing Disclosure to be signed (click here for Maryland and Tennessee; click here for Montana and Texas ), we will be adding “Alabama” as a global standard mapping in the field “Closing Disclosure Signature Lines Indicator” (FI 95191).

These changes will take effect on April 13, 2021 and our State Disclosure Matrix will reflect them on April 1, 2021. Questions or concerns about these changes may be directed towards Client Support at 1.800.497.3584.

[i]  This citation is used by Westlaw (Thomson Reuters). The Rules of the Alabama Banking Department are not part of the Alabama Administrative Code.

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