Connecticut has created a new category of loan, the so-called "nonprime home loan."  The new law is contained in Connecticut Public Act 08-176 (the "Act").  Below is a description of the audit DocMagic is implementing to identify such nonprime home loans.

Preliminary Note: According to Section 2133 of the Housing and Economic Recovery Act of 2008, beginning on October 1, 2008, and for a period of 12 months thereafter, a moratorium on FHA's implementation of its risk-based premiums policy, as described in ML 2008-16, will become effective. Accordingly, the contents of the article below apply only until September 30, 2008.

DocMagic, Inc.'s Compliance Department has added the following FHA LIBOR Loan Programs under "Generic Plans" as the "Investor" pursuant to Mortgagee Letter 2007-13:

As of the middle of August, 2008, the DocMagic software returns a deed of trust in a closing loan package for all non-FHA loans when New Mexico is the state in which the secured property is located.  Both Fannie Mae and Freddie Mac will mandate on September 1, 2008, that a New Mexico deed of trust be used instead of a mortgage.  DocMagic, Inc.'s Compliance Department changed the New Mexico Uniform Instrument from a mortgage to a deed of trust, as Fannie Mae and Freddie Mac documents are considered Uniform Instruments under DocMagic's License and User Agreement.

The California Department of Real Estate (DRE) has amended its regulations, effective August 15, 2008, pertaining to DRE Forms 882, 883 and 885.  The most obvious change to each one of these DRE Forms is the addition of an Informational Sheet.  Please click here to access the text of the DRE's adopted changes and the updated versions of DRE Forms 882, 883, and 885.

On July 30, 2008, the Board of Governors of the Federal Reserve Board (the "Board") published a final rule amending Regulation Z.  The final rule, the main provisions of which do not become mandatory until October 1, 2009, is available here.  The stated goals of the final rule are: (1) to protect consumers from unfair, deceptive and abusive lending and servicing practices; (2) to improve mortgage advertising; and (3) to provide consumers with disclosures early.

Periodically, DocMagic, Inc.'s Compliance Department reviews its form selection, print, signature and header default rules for its core loan documents (i.e., documents returning in all closing loan packages) to determine whether the rules need updating based on new legal requirements, customary practice, or for other reasons. After a recent periodic review, the Compliance Department modified the print and/or header (the top of page 1 of the form identifying the borrowers, lender, loan number, etc.) default rules for certain core loan documents, because it was determined that lenders seldom request the forms identified below for those borrower types that were excluded from the rules. Changes to these default rules will be implemented in the coming weeks.

Effective September 1, 2008, FIS Flood Services is changing its name to LPS National Flood.  The name change is being made in connection with the spin-off of Lender Processing Services, Inc. from Fidelity National Information Services, Inc. that was completed on July 2, 2008.  We have been assured that there will be no service interruptions, key personnel changes, customer service center location changes or database location changes as a result of either the spin-off or the name change.  In other words, with the exception of the name change and some changes in marketing materials, we expect that customers will continue to receive the same level of excellent service from LPS National Flood to which they have grown accustomed.  For additional information about Lender Processing Services, Inc., click here.  For additional information about LPS National Flood, click here.

The article regarding Maryland's prohibition of prepayment penalties, originally published in the June, 2008 issue of The Compliance Wizard and updated in the July, 2008 issue, has once again been updated.  To view the updated article, please click here.  We thank Maryland attorney Marjorie A. Corwin, Esq., of Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC, for her valuable input on this topic. 

This month DSI posts updates to the loan programs of CitiMortgage, Inc. (Correspondent Division), GMAC Bank, and SunTrust Mortgage 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.

In our June, 2008 issue, we published an article about a new model disclosure prescribed by WAC 208-600-200, which was adopted, in draft form, pursuant to new Section 3(1) in Substitute House Bill 2770.  Section 3(1) requires a separate, residential mortgage loan disclosure summary of all material terms to be provided to the borrower and, pursuant to Section 3(2), mandates that the Washington Department of Financial Institutions (DFI) adopt, by rule, a model mortgage loan summary disclosure meeting the requirements of Section 3(2).

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 July 2008.

The U.S. Treasury security yield values for August 2008 may be viewed online here.  The yield is determined as of the 15th day of the month immediately preceding the month in which the creditor receives the application.  The yield value is used for Section 32 and most state high-cost tests.  These values will, therefore, be used for loan applications received by the creditor in September 2008.

To view this month's list of announcements or newsletters related to our mortgage industry, please click here.