There is now a memo posted online describing how DocMagic performs its high cost calculations for all states that have some form of predatory/high cost statute or regulation in effect. These states are (some of the memos must be updated to reflect recent upgrades to the DocMagic software products):

Please note that some states have enacted legislation that they have designated as being anti-predatory lending statutes or which are designed to address purported predatory lending abuses but which do not require points and fees and/or APR calculations. These states include:

• Kansas - Revised UCCC--Regulation of Agreements and Practices (Kan. Rev. Stats. §16a-3-301 et seq.): Click Here
• Michigan - The Consumer Mortgage Protection Act (MCL §445.1631 et seq.): Click Here
• Nebraska - The Mortgage Bankers Registration and Licensing Act (Neb. Rev. Stats. §45-701 et seq.): Click Here
• Virginia - The Mortgage Lender and Broker Act (Va. Code §6.1-408 et seq.): Click Here

The provisions of the anti-predatory lending laws in the four states listed immediately above generally limit or prohibit mortgage lenders or mortgage brokers, or both, from engaging in certain practices or from making certain types of loans on specified terms. In the near future, we will post information memos on our website setting forth in greater detail what those limitations and prohibitions are in each of these states.

By process of elimination, the following states have no predatory or high cost legislation in effect:

Please keep the following in mind when taking advantage of the DocMagic high cost tests:

1. The DocMagic Section 32 and state-specific high cost tests have been developed with the goal of identifying those loans that might be considered high cost under the applicable federal or state-specific high cost test so that you don't inadvertently originate a high cost loan. That is why if and when we determine that a particular loan is a high cost loan, we identify the reason(s) for that determination and we provide information on how to get the loan points and fees and/or APR under the applicable threshold. It is important to note that if the DocMagic software determines that a loan is a high cost loan and you decide nonetheless to proceed in originating that loan as a high cost loan, beyond providing any applicable high cost notices and disclosures in your loan package, the DocMagic software does not otherwise audit the loan package for compliance with any substantive limitations or provisions of the applicable high cost loan. By way of example, if a state high cost law prohibits balloon payment loans and you originate a high cost balloon loan in that state, the DocMagic software will not warn or prevent you from doing so.

2. Many states regulate permissible interest rates and/or points and fees that can be assessed in connection with certain types of loans. It is important to note that the DocMagic software generally does not perform any tests to confirm that the loan's interest rate conforms to any applicable state interest rate (usury) limitations, or that any of the points and fees charged by a mortgage lender or a mortgage broker in connection with the loan are permitted under applicable law or regulation. Thus, it is possible for a loan to fall below a state high cost points and fees and/or APR threshold, and yet the loan may exceed state usury limitations or may include the assessment of an impermissible fee by a mortgage lender or broker. While discussions are underway internally at DocMagic to implement appropriate usury and charge audits, the implementation of those audits will not occur soon. However, if you have specific audits that you would like to see implemented for your loans, please contact either a customer service representative or a member of the compliance department to discuss.

Bill Lambropoulos is the General Counsel and Director of Compliance and Legal Services at Document Systems, Inc.