The Virginia High-Risk Mortgage Loan Law (Code of Virginia, Title 55, Chapter 4, Section 55-59.1:1; available here) (the "Virginia HRMLL") became effective on July 1, 2008.  The Virginia HRMLL is quite unlike any other state-specific high cost loan law in that it only becomes relevant following a borrower's default for failing to make any payment under the loan agreement.  Because the Virginia HRMLL did not impose any restrictions or limitations on the terms of the loan at origination, at the time the law became effective, DocMagic determined not to create a separate Virginia HRMLL test.  However, at the request of some of our customers, DocMagic has created a Virginia HRMLL test and display.  Please note that the Virginia HRMLL, unless extended, will expire by its terms on July 1, 2010.

A "high-risk mortgage loan" is defined as a first lien deed of trust or mortgage secured by owner-occupied real property that is:

• Not subject to an active bankruptcy proceeding; and
• Not in active foreclosure with sale scheduled to occur in less than 30 days; and
• Either:
  • Had an APR in effect at origination that exceeded the yield in effect on the date the loan was originated on U.S. Treasury yields having comparable periods of maturity by 5% or more; or
  • Had total points and fees (as defined under TILA) payable on the loan at or before closing greater than 7% of the total loan amount as shown on the borrower's note or debt instrument.

If a loan is a high-risk mortgage loan, then at least 10 business days before a mortgage lender (defined as any person making four or more loans in any period of 12 consecutive months) or servicer sends a notice of acceleration following a borrower default for failing to make any payment under the loan agreement, it must provide written notice to the borrower and any other person liable for repayment.  The written notice must contain certain required information, most notably that if the borrower contacts the mortgage lender or servicer on or before the date specified in the notice to request additional time to pursue options to foreclosure, then the mortgage lender or service must provide a one-time additional 30 calendar day period before sending a notice of acceleration.  If the borrower requests additional time, the borrower must make good faith efforts to repay amounts due and avoid foreclosure.

Failure on the part a mortgage lender or service to provide the 10-day written notice, or to provide the 30-day extension prior to sending notice of acceleration, shall not affect the validity of any sale under the deed of trust.  In addition, no liability is imposed on a mortgage lender or servicer for an inadvertent failure to comply with the foregoing requirements.

If a loan falls within the definition of a high-risk mortgage loan, then at the time the worksheet is audited, a warning substantially similar to the following will display:

WARNING: THIS IS A VIRGINIA HIGH-RISK MORTGAGE LOAN SUBJECT TO SPECIAL NOTICE PROVISIONS AND AT LEAST A 30-DAY GRACE PERIOD FOR THE BORROWER TO PURSUE OPTIONS TO AVOID FORECLOSURE BEFORE NOTICE OF ACCELERATION AFTER BORROWER'S DEFAULT FOR NON-PAYMENT CAN BE SENT.  VA CODE SECTION 55-59.1:1.

Please feel free to contact DocMagic's Compliance Department if you have any questions or comments regarding this audit.