Earlier this year, the Colorado legislature passed legislation (HB 07-1322 and SB 07-216) that, among other things, impose an affirmative duty of good faith and fair dealing by mortgage brokers with borrowers, including, without limitation, the duty (a) to make a "reasonable inquiry" into a borrower's current and prospective financial condition based on information submitted by the borrower, and (b) to not recommend or induce a borrower into a loan transaction that does not have a "reasonable, tangible net benefit" to the borrower.  These duties are codified in new C.R.S. Section 12-61-904.5.  In order to "clarify uncertainties regarding reasonable inquiry and tangible net benefit" requirements in the new law, the Colorado Director of the Division of Real Estate has adopted an emergency rule (a copy of which is available here).  The emergency rule became effective on September 4, 2007.  The emergency rule should be read in its entirely.  This article will highlight some of the more interesting and important provisions of the emergency rule.

The State of New York has amended their predatory lending law, effective October 14, 2007.  Senate Bill Number 5618 raises the principal loan amount threshold above which the predatory lending law would not apply from $300,000 to $417,000, increasing the number of loans potentially covered by the law's provisions.

As DocMagic, Inc.'s Washington security instruments list the name of the trustee as a "grantee" on the first page, a customer questioned the validity of adding the trustee's name. To assure the customer that DocMagic was in compliance, DocMagic's Compliance Department contacted a few county auditor's offices to determine whether or not the trustee must be listed in addition to providing the customer with the following legal explanation.

On December 29, 2006, the Board of Governors of the Federal Reserve System announced the availability of a revised version of the Consumer Handbook on Adjustable Rate Mortgages ("CHARM booklet") by the Board and the Office of Thrift Supervision (OTS). The CHARM booklet provides information to consumers about the features and risks of adjustable rate mortgage loans. Under Regulation Z, lenders must provide a copy of the CHARM booklet or a suitable substitute to borrowers of every application for an ARM loan.

In Mortgagee Letter 2006-04, FHA rescinded paragraph 5-2 of handbook HUD 4000.2 REV-3 that lists the closing costs and fees that may be charged by the mortgagee to the mortgagor on an FHA loan. According to ML 2006-04, "mortgagees may charge and collect from mortgagors those customary and reasonable costs necessary to close the mortgage." It is up to the mortgagee to decide what fees are customary and reasonable for each transaction. Please be aware though that FHA will not allow "mark ups." Only the actual cost for the service may be charged to the mortgagor. Fees that may not be included are tax service fees and origination fees that are greater than 1% on forward mortgages.

DocMagic, Inc. is now making available in Maine predisclosure packages where the origination type is broker a Maine Notice to Consumers ("Notice") (MENTC.DSC). The Notice mirrors the model form provided by the Office of Consumer Credit Regulation and is based on Me. Rev. Stat. Ann. tit. 9-A, Section 10-303, which states:

A Tennessee Affidavit of Affixation ("Affidavit") (TNAOAMH.MSC) is now available in lenders' closing packages whenever the secured property is a manufactured home. The Affidavit was prepared in accordance with Tenn. Code Ann. § 55-3-138 and is used so that the borrower may certify, among other things, that the manufactured home is affixed to real property. Customers wishing to request removal of this Affidavit from Tennessee closing packages when the secured property is a manufactured home should contact Customer Service, at (800) 649-1362.

This month DSI posts updates to the loan programs of 1st National Lending Services, Aurora Loan Services, LLC, First National Bank of Arizona, Freedom Mortgage Corporation, Homecomings Financial, LLC, U.S. Bank, N.A. and Wells Fargo Bank, N.A. to its Compliance page. Find out the description of each investor's loan program, which promissory notes, prepayment riders and addenda are used, and what the rate caps and interest-only periods are for variable rate loans by visiting our Investor Updates page.

At the end of DocMagic, Inc.'s California junior-lien security instruments is a Request for Notice of Default and Foreclosure under Superior Mortgages or Deeds of Trust ("Request for Notice").  The Request for Notice is a form that enables the junior-lien lender to request that any holder of a lien that is superior to the junior-lien holder's lien notify that junior-lien holder of any default by the borrower under the superior encumbrance and of any sale or other foreclosure action.

In order to keep DocMagic software users better apprised of document changes and additions as they occur, DSI posts listings of all newly created and revised documents. Here is the list of forms created or modified in August 2007.