Beginning February 29, 2008, new disclosure requirements pursuant to the "Mortgage Disclosure Amendment Act of 2007" (the "Act") will go into effect.  The Act amends the Mortgage Lender and Broker Act of 1996.  Within 3 business days of an application for a "non-conventional mortgage loan," the mortgage lender must provide the borrower with written disclosures required under new subsection (a-1) under D.C. Official Code Section 26-1113.

A "non-conventional mortgage loan" was previously undefined, but is now defined by the Act as "any mortgage loan that is not a fixed-rate mortgage loan with an amortization period of 30 years or less."  The new disclosures required by the Act consist of (1) disclosures related to the features of the non-conventional mortgage loan, including the fully indexed rate, index value, and specific monthly payment examples that take into account different scenarios, such as taxes and insurance, the fully-indexed rate, and maximum possible interest rate, plus a warning that monthly payments under the three (3) different payment examples should not exceed 28% of the borrower's gross monthly income; and (2) a list of definitions of the terms used in the foregoing disclosures.  These disclosures are encompassed on one form entitled a "Mortgage Disclosure Form."

Both the Act and Mortgage Disclosure Form provide that the borrower may cancel his/her mortgage application within 5 business days of receiving this Form, excluding a reasonable application processing fee. 

Depository institutions such as banks are generally exempt from the disclosure requirements under the Act.

DocMagic, Inc.'s Compliance Department is in the process of preparing the Mortgage Disclosure Form (DCMDF.MSC) and will have this Form available on or before February 29, 2008.  This Form will appear in all initial and closing packages for all lender - and correspondent lender - origination types where a D.C. loan is an adjustable rate loan with an amortization period of 30 years or less.  Further note that this Form will be programmed to print in duplex (front and back), as required under the Act.  However, if a DocMagic user does not have duplex printing capabilities, then the Form will print on 2 pages.  Note that this would be a violation of the Act.  DocMagic's Compliance Department is in the process of obtaining clarification from the Commissioner of D.C. Office of Banking and Financial Institutions on this requirement.  In addition, note that the Act requires the Form to be printed on red paper measuring 8.5 inches by 11 inches if the Form is physically provided to the borrower.

If you have any questions regarding the Mortgage Disclosure Form, please contact the Compliance Department.