This is not legal advice for your situation*

Vermont

Vermont High Rate, High Point Law

Vermont's high rate, high point law (the "Act") applies to all first lien loans secured by residential real estate in Vermont.  To access a copy of the Act, click here.

The Act authorizes the Commissioner of the Department of Banking, Insurance, Securities, and Health Care Administration to promulgate disclosure rules, which rules are set forth in Regulation B-98-2.  To access a copy of Regulation B-98-1, click here.

The Act requires lenders to provide a separate disclosure whenever "the borrower is expected to be charged in excess of four points or interest in excess of three percent over the rate established pursuant to 32 V.S.A. § 3108, or both, on the loan."  The Vermont Commissioner of Taxes establishes the rate pursuant to 32 V.S.A. § 3108 (referred to in Regulation B-98-2 as the "Declared Rate") annually, but not later than December 15th.  To access both current and historical information regarding the Declared Rate, click here.  The Declared Rate for 2008 is 9.6%.

While the Act does not define "points," Regulation B-98-2 clarifies any ambiguity by defining "points" to mean all amounts disclosed on lines 801 (loan origination fee) and 802 (loan discount) on form HUD-1A, regardless of who is paying those items. 

Lenders must provide the disclosure to the borrower in conjunction with the Good Faith Estimate or at any time that the lender notifies the borrower that the lender will only offer the borrower a high rate, high point loan. The disclosure must meet the formatting standards and contain the information set forth below:

  1. Be printed on a single sheet of colored sheet that is easily distinguished from all other disclosures, applications or other loan documents presented to the borrower.
  2. Contain the following notice in uppercase letters and in at least 14-point bold type and otherwise distinguishable from all other text of the disclosure:

    YOU MAY BE ELIGIBLE FOR A LOAN WITH EITHER A LOWER INTEREST RATE, FEWER POINTS, OR BOTH, FROM ANOTHER LENDER

  3. Inform the borrower(s) that they are applying for a loan with an interest rate that exceeds the Declared Rate by more than three percent (3%) and/or for which the lender shall charge more than four (4) points.
  4. Include a statement informing the borrower(s) that they can obtain a list of other lenders by calling or writing to the Department of Banking, Insurance, Securities and Health Care Administration, including the Department's telephone number and mailing address.
  5. Be signed and dated by the lender and all borrowers to be obligated under the note.

The Commissioner may impose an administrative penalty of not more than $5,000.00 on any person that fails to comply with the disclosure rules under the Act.  The Commissioner may also order a lender to refund any discount points or other charges paid by a borrower who has not received the required disclosures.

In response to the Act, DocMagic has implemented the following audits for first-lien loans secured by one-to-four family residences (whether they be single family dwellings, condominiums, planned unit developments or manufactured homes) located in Vermont and occupied by the borrower as either a principal dwelling or a second home:

  1. If the aggregate amount of the loan origination fees and/or loan discounts payable by any person in connection with a loan exceeds four percent (4%) of the loan amount, a warning audit will display as follows:

    THIS IS A VERMONT HIGH RATE/HIGH COST LOAN BECAUSE YOU ARE CHARGING IN EXCESS OF FOUR (4) POINTS

  2. If the interest rate being charged on the loan exceeds the then-current Declared Rate by more than three percent (3%), a warning audit will display as follows:

    THIS IS A VERMONT HIGH RATE/HIGH COST LOAN BECAUSE YOUR INTEREST RATE EXCEEDS THE DECLARED RATE OF [9.6%] BY MORE THAN 3.000%

  3. If both thresholds are exceeded, both warning audits will display.

In addition to displaying the audit(s) above, a High Rate, High Point Disclosure (file name: VTHRHP.DSC) will automatically be included in both the predisclosure and closing loan packages whenever a loan is a Vermont high rate and/or a high point loan.

Please contact DocMagic's Compliance Department if you have any questions or comments regarding the above.



*This article is distributed to provide general information about the subject matter covered and should not be utilized as a substitute for professional advice in specific situations. If you require such advice, please consult with your own professional advisers.


Syndicate content RSS