Written by Renee M. SmithThe Wyoming State Banking Commissioner now has the responsibility for licensing and regulating mortgage lenders and brokers in the state as authorized by the Wyoming Residential Mortgages Practices Act, which was signed into law by Governor Dave Freudenthal on February 25, 2005. According to a press release from the Wyoming Department of Audit, Division of Banking, compliance with the Act is mandatory beginning July 1, 2005.

In addition to providing for licensing and recordkeeping requirements, the Act requires lenders and brokers to make certain disclosures to the borrower. A summary of the most important disclosures is set forth below.

Licensing

The Wyoming Residential Mortgage Practices Act, W.S. 40-23-101 through 40-23-123, requires that any person engaged in mortgage lending activities or mortgage brokering activities must obtain a license by July 1, 2005. (W.S. 40-23-104.) However, Section 40-23-106 states that a "person conducting mortgage lending or mortgage brokering activities, as of July 1, 2005 shall, not later than September 30, 2005, apply to the commissioner for a license." The rationalization for this discrepancy is unclear; meeting the earlier deadline is recommended.

Disclosures

Within three working days of taking a mortgage loan application and prior to collecting any consideration, the lender must disclose mortgage lending fees, including (i) terms of the loan (similar to TIL requirements); and (ii) prepayment penalty information in a form prescribed by the commissioner. A licensed lender may require only the following reasonable and customary fees prior to loan closing: (i) third-party fees necessary to process the application; (ii) rate lock-in fee; (iii) a commitment fee upon loan approval; and (iv) a loan cancellation fee.

Within three business days of the borrower signing a completed mortgage loan application, the licensee must deliver a mortgage broker agreement to the borrower in addition to the documents required to comply with TIL and RESPA and other state and federal laws. The only fees permitted to be paid by the borrower prior to closing are those fees "actually incurred by the licensed mortgage broker on behalf of the borrower for services from third parties necessary to process the mortgage loan application, such as credit reports and appraisals." Generally, the broker may not charge any fee that exceeds the fee disclosed on the most recent good faith estimate.

Finally, mortgage brokers must make additional disclosures prior to entering into a written brokerage agreement or accepting consideration from the borrower, including that it may not make loans in its own name. However, the broker may issue a loan commitment in the same form as the lock-in commitment from the mortgage lender and must identify the lender by name. The broker must also disclose that he cannot guarantee a loan program or specific terms; he must provide a good faith estimate of fees and terms, including conditions for receiving a refund of services by third parties; and prepayment penalty terms, if known, or the fact that a prepayment penalty may be imposed.

Renee M. Smith is Assistant General Counsel of Document Systems, Inc. and a member of its Compliance Department.