FHA Single Family Handbook ch. 6.B.3.a requires the following:
“Lenders must use the Model Note Form, and footnotes accompanying the form, adapting the form only as necessary to conform to state or local requirements.” (emphasis in original)
The Model ARM Note is set forth in Ibid. ch. 12.A.4, Exh. 3. In addition to the foregoing instructions, the Chapter 12 instructions further stipulate the following:
“The form should not be adapted for jurisdictions in which the multistate version of the FNMA/FHLMC note is used. For other jurisdictions, adaptations should generally follow the corresponding provisions in the FNMA/FHLMC note form approved for use in the jurisdiction, with any additional adaptations that may be necessary to conform to requirements of law and practices in the jurisdiction.”
One of the versions of the Model ARM Note that we use for FHA loans is Cx861, which prints in all states, including West Virginia. Section 7(C) of this note permits a lender to require payment in full under the terms of the note and to require the borrower to pay costs and expenses for enforcing the note, to the extent not prohibited by law.
Under W. Va. Code § 46A-2-115, a consumer loan “may not provide for charges as a result of default by the consumer other than those authorized by [Chapter 46A]” (except for reasonable fees which are authorized by statute). Chapter 46A provides a list of permitted fees which may be charged, but does not explicitly allow for the collection of attorney’s fees in regards to defaults on a loan.
While the current language of Section 7(C) is in conformance with West Virginia law on this matter, we will be enhancing the language to explicitly exclude attorney’s fees from collection upon a borrower’s default on the note.
This is being done not only in regards to West Virginia’s laws, but also in accordance with the FHA Single Family Handbook Chapter 12 requirement that the language of the note should “generally follow the corresponding provisions in the FNMA/FHLMC note form approved for use in the jurisdiction.” FNMA provides separate note forms for West Virginia, which explicitly exclude attorney’s fees from collection upon default (see FNMA Form 3501.49, Section 7[E] for an example).
This change will take effect on July 15, 2013. If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.
July 10, 2013
DR 138007