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. 

Statutory Authority Disclosure

Beginning July 1, 2008, registrants under the Second Mortgage Loan Act must clearly indicate by prominently disclosing on, or in, the loan documents, the federal or state statutory authority pursuant to which a loan is made.  Registrants shall be required to provide this prominent disclosure on loans made:

1. Solely in reliance on the provisions of sections 1321.51 to 1321.60 of the Revised Code;
   
2. Partially in reliance on the provisions of sections 1321.51 to 1321.60 of the Revised Code; or
   
3. In reliance on any combination of federal or state provisions that do not include sections 1321.51 to 1321.60 of the Revised Code.  (See Ohio Administrative Code §1301:8-3-07(H).)

As there was some ambiguity on the meaning of "loan documents" (that is, whether the disclosure had to be in the promissory note or other loan document, or could be in the form of a separate disclosure) and whether or not a registrant had to cite the specific federal or state statutory authority pursuant to which a loan was being made, DocMagic, Inc.'s Compliance Department contacted the Chief Examiner of the Consumer Finance Section of the Financial Institutions Division of the Ohio Department of Commerce for clarification.  The Chief Examiner advised that the disclosure could be separate or on the promissory note itself.  He further advised that if the registrant is not making a loan wholly under the Ohio Second Mortgage Loan Act, then the specific federal or state statutory authority upon which the loan was being made had to be cited.

Accordingly, DocMagic's Compliance Department has prepared a Statutory Authority Disclosure (OHSAD.MSC) that will return in all lender-originated, closing loan packages regardless of lien priority and occupancy status.  The lender will need to mark the applicable box on the disclosure to indicate whether the lender is making the loan: (1) solely in reliance on the provisions of sections 1321.51 to 1321.60 of the Revised Code; (2) partially in reliance on the provisions of sections 1321.51 to 1321.60 of the Revised Code; or (3) in reliance on any combination of federal or state provisions that do not include sections 1321.51 to 1321.60 of the Revised Code.  If either one of the last two options is marked, then the DocMagic user will need to annotate the specific statutory authority pursuant to which the loan is being made at the end of the applicable paragraph.  The citation may be added using the annotation feature in DocMaster, DocMagic's proprietary viewing software.

Ohio Disclosure of Credit Life, Credit Accident and Health, and Unemployment Insurance Cancellation Rights

Pursuant to Ohio Administrative Code §1301:8-3-17(B):

If a registrant furnishes or places credit life insurance, credit accident and health insurance or unemployment insurance on behalf of the borrower at the borrower's expense, the registrant shall give written notice to the borrower at the time the loan is made.  The notice shall disclose the borrower's right to cancel the insurance within twenty-five days of the purchase of the insurance with a full refund of the premium or identifiable charge for the insurance.  The notice shall further disclose that the cancellation may be effected upon the written request of the borrower together with the return of the policy or certificate of insurance to the registrant.

Based on the above provision, DocMagic's Compliance Department has prepared a Disclosure of Credit Life, Credit Accident and Health, and Unemployment Insurance Cancellation Rights (OHDCR.MSC).  The above provision has been a preexisting requirement; so this Disclosure is not based on a new requirement that becomes effective on July 1.  Rather, it is a new Disclosure that DocMagic is offering in its closing loan packages when the origination type selected is "Lender," provided that the borrower pays for any one of the following listed in the Fees/Charges section of DocMagic, with the corresponding fee code:

1. Accident Insurance (AI)
   
2. Credit Life Insurance (CLI)
   
3. Health Insurance (HI), or
   
4. Unemployment Insurance (UI)

Subject to the above circumstances, the Disclosure will select regardless of lien priority and occupancy status.

Ohio Disclosure Between Lender and Insurer

Effective July 1, 2008, in any transaction in which the registrant furnishes or places insurance on behalf of the borrower at the borrower's expense, the registrant shall, prior to furnishing or placing insurance, provide written disclosure to the borrower of the business relationship, beneficial ownership or affiliation, whether direct or indirect, between the registrant and the insurer. 

Accordingly, DocMagic's Compliance Department has prepared a Disclosure Between Lender and Insurer (OHDBLI.MSC) pursuant to Ohio Administrative Code §1301:8-3-17(D).  If a lender does have a business relationship, beneficial ownership or affiliation, whether direct or indirect, with the insurer, the DocMagic user will have to add to the Disclosure a description of the nature of that relationship by using the annotation feature in DocMaster, DocMagic's proprietary viewing software.

This Disclosure will appear in all predisclosure and closing packages if the origination type entered in the DocMagic worksheet is "Lender," regardless of occupancy status and lien priority, provided that the Borrower pays for any one of the following listed in the Fees/Charges section of DocMagic, with the corresponding fee code:

1. Accident Insurance (AI)
   
2. Credit Life Insurance (CLI)
   
3. Health Insurance (HI), or
   
4. Unemployment Insurance (UI)