At DocMagic, we take great pride in the ability of our Section 32 and state-specific high cost tests to help keep our customers from making unsalable high cost loans.  That being said, these high cost tests can be extremely complicated, and it is often difficult to figure out the impact a particular fee has on a specific high cost test.  While we believe that the Section 32 and state-specific high cost memos we have posted online here, provide useful information and general guidance as to how our high cost tests are calculated, we also recognize that it would be highly beneficial if we could provide greater detail to our high cost test determinations.  Accordingly, we are pleased to announce the addition of that greater level of detail to our high cost test display screens in DocMagic Online.

Effective July 1, 2008, a couple of disclosures will be required as a result of amendments to the Ohio Administrative Code governing the Second Mortgage Loan Act. 

In March 2008, we wrote an article here about the impact of mortgage insurance premiums on some state high cost loan tests.  In May 2008, we wrote an article here about the treatment of discount points under various state high cost loan tests.  In this article, we explore the impact of non-borrower paid compensation to a mortgage broker, including but not limited to yield spread premiums (YSPs) paid by a lender to a mortgage broker, on various state high cost loan tests. 

Since July 1, 2008, the following audit has been appearing in all Connecticut high cost home loans if the DocMagic user enters any prepayment penalty information in DocMagic:

Based on Senate File No. 44, which became effective on July 1, 2008, and amended W.S. Section 40-23-114, among other provisions of the Wyoming Residential Mortgage Practices Act, DocMagic, Inc.'s Compliance Department has updated the Wyoming Mortgage Broker Agreement (WYMBA.MSC), by adding the following to the Agreement:

In today's business climate when many in the mortgage industry are searching for more cost-cutting measures, DocMagic, Inc.'s eDisclosure product may offer one solution.  Initial disclosures that need to be provided within 72 hours of a borrower submitting a completed application can be delivered electronically through eDisclosure, saving lenders and brokers significant preparation time and postage costs.  For more information about eDisclosure, please visit here.

Please note that last month's article regarding Maryland's prohibition of prepayment penalties has been updated.  To view the updated article, please click here.

Updated: July 31, 2008 (Revisions are highlighted in yellow)

Please note that in response to FHA's risk-based upfront mortgage insurance premiums policy regarding one- to four-unit single family mortgages, DocMagic has made the necessary software programming enhancements.  We will publish additional information regarding these enhancements shortly.  Meanwhile, for more information, please refer to ML 2008-16.  You may also find additional information, policy guidance, and FAQs on FHA's risk-based premiums policy here.  Additional information regarding these enhancements may now be viewed here.

We've received a number of inquiries regarding Indiana Senate Bill 62 (SB 62), which became effective on July 1, 2008.  An early (not final) version of SB 62 included a requirement that a lender provide, together with the good faith estimates required under RESPA, a notice to the applicant stating that the applicant had the right (which could be waived) to receive the closing documents with respect to the loan at least 48 hours prior to closing.  If the loan terms presented at closing differed from the loan terms presented in the earlier provided documents, then the prospective borrower was entitled to delay or reschedule the closing without penalty and without forfeiting the right to enter into the loan.  Civil penalties of $25 per incident could also be assessed.  Please note that the final, enrolled version of SB 62 deleted in their entirety these closing documents notice and disclosure provisions; in its final form, SB 62 deals strictly with Indiana's foreclosure sale requirements.  To view a copy of the entire legislative history of SB 62, please visit here.

Document Systems, Inc. (DSI) is proud to announce that Mortgage Technology Magazine has recognized it as one of the Top 50 Service Providers in 2008 in the mortgage lending industry.  This marks the seventh (7th) consecutive year in a row that DSI has been named in the publication's annual listing of top service providers since the award's inception in 2002.  To be eligible for this list, DSI had to demonstrate that it met the four (4) key criteria of (1) customer satisfaction; (2) functionality; (3) market share, and (4) a viable revenue model.  More emphasis was placed on DSI's ability to provide a strong degree of functional value to mortgage lenders in the industry.  The list of Top 50 Service Providers for 2008 may be viewed here.

This month DSI posts updates to the loan programs of Everbank Mortgage Company and U.S. 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.

NOTE:  DocMagic, Inc.'s Compliance Department has removed the below audit from the DocMagic software based on a conversation with Craig Christensen, Senior Examiner at the Iowa Division of Banking, regarding the interpretation of the phrase "A borrower may be charged by a lender ... a loan origination or processing fee, a broker fee, or both,..."  Mr. Christensen clarified that although awkwardly written, the Division of Banking interprets the foregoing provision as permitting all three types of fees - an origination, processing fee and broker fee - as long as the sum total of these fees does not exceed two percent of the loan principal amount, or one percent of the unpaid balance of the loan if that loan is being assumed or refinanced.

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 June 2008.

The U.S. Treasury security yield values for July 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 August 2008.

Beginning with our July 2008 issue, we will be posting on our Compliance page various industry-related announcements and newsletters that we think may be of interest to you.  To view this month's list of announcements or newsletters, please click here.