2005

High Cost Updates: AR, CT, DC, IL, KY, NC, OK, PA, SC, TX, WI, and WV

Thu, 20 Jul 2006 10:42:20 -0700

This month, we add additional high cost information for the states of Arkansas, Connecticut, District of Columbia, Illinois, Kentucky, North Carolina, New York, Oklahoma, Pennsylvania, South Carolina, Texas, Wisconsin, and West Virginia to our High Cost/Predatory Lending Page. DocMagic performs a high-cost analysis for these states and those states whose high-cost memos are already posted on the Compliance page of our website: California, Colorado, Florida, Georgia, Indiana, Maryland, Massachusetts, and Utah.

Proposed Draft of Uniform Closing Instructions; Need Customer Input

Thu, 20 Jul 2006 10:47:49 -0700

At the Annual Mortgage Bankers Association's 92nd Annual Convention and Expo in Orlando, Florida, held in October, 2005, the Legal Issues and Regulatory Compliance Committee introduced a proposed draft of the Uniform Closing Instructions ("Instructions"), which consists of General and Specific Closing Instructions. As Renee Smith-Cleary, Assistant General Counsel with DocMagic, Inc., was the primary drafter of the Specific Closing Instructions and participated in the numerous Committee conference calls related to the development of the Instructions, she attended the Convention meeting at which the Instructions were introduced.

DocMagic Participates in Panel Discussion on Workflow Processes

Thu, 20 Jul 2006 10:50:55 -0700

Mike Sorohan's article, "LOS Vendors Adapt to Changing Conditions," in the MBA's Tech Newslink, featured the opinions of panel participants on various issues facing the industry. Mike Sorohan's article is "Part Two of a panel discussion on workflow process that took place recently at the Mortgage Bankers Association's 92nd Annual Convention & Expo in Orlando, Fla." Renee Smith-Cleary, Assistant General Counsel with DocMagic, Inc., was among the panel participants. To read the full article, click here.

A Man Who Enjoys Working Behind the Scenes

Thu, 20 Jul 2006 11:01:38 -0700

When software programs and web pages work seamlessly, it is sometimes easy to forget the people behind the scenes who were clearly instrumental in creating and maintaining the software and web pages. So, lest we in the Compliance Department forget to express our gratitude before this year comes to an end, we would like to recognize Colin MacDiarmid -- the man who has improved the "Compliance" page on our website and made it possible for the Compliance Department's electronic newsletter, The Compliance Wizard ,to be published on a monthly basis this year.

Your Driver's License Information Is No Monkey Business

Thu, 20 Jul 2006 11:12:33 -0700

As compliance is our job, we in the Compliance Department want to alert our readers to a website that contains driver's license information on a nationwide basis. Check this website out, www.license.shorturl.com/, and make sure your driver's license information and that dreaded picture of yours are not on it. Otherwise, we would recommend that you contact the proper authorities to report that someone is definitely up to some shenanigans!

At Your Service: California's Prepayment Penalty Addendum and Rider

Thu, 20 Jul 2006 11:22:35 -0700

A number of customers have called within the past month to inquire about the California prepayment penalty addendum and rider that DocMagic defaults to when a DocMagic user indicates that a prepayment penalty will apply to a loan where the secured property is located in California. Particularly, customers have asked about the applicability of the following paragraph in the prepayment penalty addendum and rider:

Tech Tip of the Month: Document Imaging as Fraud Deterrent

Thu, 20 Jul 2006 11:28:08 -0700

Document imaging has been a hot topic for some time now, but many companies have found these expensive systems difficult to integrate into their existing origination platforms. The idea of having every document in the mortgage loan file available as an electronic image is attractive, but since the vast majority of loan originators are still managing their business with paper folders, there hasn't been much pressure to implement stand-alone imaging solutions. Fraud mitigation may prompt more lenders to rethink that in the near future.

New/Revised Documents - Nov/Dec 2005

Thu, 20 Jul 2006 11:35:57 -0700

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 October and November, 2005.

IL Supreme Court Decision Eliminates 3% Fee Cap Under IL Interest Act

Thu, 20 Jul 2006 09:38:05 -0700

The Illinois Supreme Court has finally spoken and ended the guessing game played by lower Illinois courts for years. The recent Illinois Supreme Court decision of U.S. Bank National Association, et al. v. Clark, et al. establishes that lenders may legally charge more than 3% of the principal loan amount in points and fees for Illinois mortgage loans that exceed 8% interest.

Clark resolves the question of whether the three percent (3%) limitation on permissible points and fees under Section 4.1a of the Illinois Interest Act (815 ILCS 205/4.1a(f)) (the "Act") has been preempted by the federal Depository Institutions Deregulation and Monetary Control Act of 1980 ("DIDMCA") (12 U.S.C. §1735f-7a (2000)). On September 22, 2005, the Illinois Supreme Court justices unanimously ruled that DIDMCA did, in fact, preempt the 3% cap on points and fees where the nominal interest rate of a mortgage loan in Illinois exceeds 8%. The Court also held that an amendment to Section 4 of the Act in 1981 implicitly repealed Section 4.1a in 1981.

From 1995 to March, 2004, lenders originating mortgage loans in Illinois operated under the authoritative opinions of courts, the Illinois Attorney General and the Illinois Office of Banks and Real Estate, which concluded that DIDMCA preempted the 3% cap under the Act. However, the March, 2004 decision of the Illinois Appellate Court (First District) in Clark effectively reversed this prevailing opinion by concluding that Illinois had "opted out" of DIDMCA in 1992 when the Act was modified. Click here to read our June, 2004 article on the Appellate Court decision in Clark and the audit Document Systems, Inc. ("DSI") implemented in response.

The Clark case arose out of separate foreclosure actions brought by the plaintiff creditors. These creditors filed for foreclosure against a number of homeowners who were in arrears with their mortgage payments. The defendant homeowners filed counterclaims and affirmative defenses that included allegations that the creditors had violated the Act by imposing fees in excess of 3% on loans with interest rates greater than 8%. The trial court dismissed those counterclaims, ruling that the homeowners' claims under the Act were preempted by DIDMCA and, in some cases, by the federal Alternative Mortgage Transaction Parity Act of 1982 ("Parity Act") (12 U.S.C. §3803(c) (2000)). The cases were later consolidated, and the homeowners filed an appeal.

The appellate court reversed the trial court decision, relying, in part, on its prior decision in Fidelity Financial Services, Inc. v. Hicks, 214 Ill. App. 3d 398 (1991). The Hicks court held, among other things, that the 3% fee cap in Section 4.1a of the Act was not implicitly repealed when the Illinois legislature amended Section 4 of the Act, by allowing any rate or amount of interest or compensation for loans secured by a real estate mortgage. In addition, the appellate court in Clark declined to follow conflicting federal authority in Currie v. Diamond Mortgage Corp. of Illinois, 859 F.2d 1538 (7th Cir. 1988), which held that Section 501 of DIDMCA preempted Section 4.1a. Instead, the appellate court in Clark held that 1992 amendments to Section 4.1a of the Act and its reenactment reflected the Illinois legislature's intent to "opt out" of DIMCA.

To resolve the issue of whether DIDMCA preempted Section 4.1a and whether Section 4.1a was implicitly repealed by amendments to Section 4, the Illinois Supreme Court accepted the Clark lenders' appeal of the appellate court's decision.

DIDMCA is federal legislation that preempts every existing state limitation on the rate or amount of interest, discount points, finance charges, or other charges (collectively, "points and fees") which may be charged, taken, received, or reserved on any loan, mortgage, credit sale, or advance which is secured by a first lien on residential real property made after March 31, 1980 and described in Section 527(b) of the National Housing Act unless a State "opted out" of the federal preemption. A State could "opt out" in one of two ways. Under one method, a State must have, by April 1, 1983, adopted a law or certified that its voters have voted in favor of any provision, constitutional or otherwise, which states explicitly and by its terms that such State does not want the preemption provisions of DIDMCA to apply. Another method of opting out is for the State, at any time after March 31, 1980, to adopt a statute that places limitations on points and fees on any loan, mortgage, credit sale, or advance described in DIDMCA.

Section 4.1a Implicitly Repealed by 1981 and 1982 Amendments to Section 4 of Act

The creditors in Clark claimed that amendments made to Section 4 of the Act implicitly repealed Section 4.1a of the Act. In 1981, the Illinois legislature had amended Section 4 to enable lenders to "charge, contract for, and receive any rate or amount of interest or compensation with respect to" loans "secured by a mortgage on residential real estate." In 1982, Section 4 was again amended to remove the word "residential" from the foregoing provision, enabling lenders to receive any rate or amount of interest or compensation on any real estate mortgage. By permitting any rate or amount of interest or compensation to be charged on any real estate mortgage, the creditors in Clark contended that the legislature's amendments to Section 4 in 1981 and 1982 implicitly repealed Section 4.1a's 3% cap on mortgage loans bearing interest rates above 8%.

Finding "no functional distinction between the noninterest 'compensation' in Section 4 and the noninterest 'charges' in Section 4.1a of the Act, the Illinois Supreme Court concluded that Section 4 and Section 4.1 were "irreconcilably inconsistent." (citations omitted.) The Supreme Court expressly overruled the reasoning reached in Hicks and ruled that the 1981 amendments to Section 4 implicitly repealed Section 4.1a's limitation on noninterest charges (points and fees) that lenders may impose on residential mortgage loans.

DIDMCA Preempted 3% Cap in Section 4.1a

In reaching its decision that Illinois did not "opt out" of DIDMCA and, therefore, DIDMCA preempted the 3% cap in Section 4.1a, the Supreme Court determined that DIDMCA applied not only to first-lien purchase money loans, but to first-lien, non-purchase money loans (e.g., refinancings) as well. The Court determined that the State of Illinois did not "opt out" of DIDMCA by adopting a law or certifying that its voters voted in favor of a provision which stated explicitly and by its terms that the State did not want DIDMCA to apply.

-- 1992 Amendment to Section 4.1a Was Not an "Opt Out" from DIDMCA

Since the Supreme Court found that Illinois had not expressly "opted out" of DIDMCA by statute or vote, the Court explored the possibility that Illinois may have "opted out" of DIDMCA in 1992 under the alternative method of opting out -- adopting a law after March 31, 1980, that placed limitations on discount points or such other charges on any loan, mortgage, credit sale or advance. In 1992, two fee categories in Section 4.1a, which were unrelated to points and fees, were removed from the types of charges governed by that Section. These amendments allowed lenders to charge fees for dishonored checks and late payments and established that these fees would not be considered lender charges as consideration for the loan (i.e., points and fees) referred to in Section 4.1a.

The homeowners contended that if the relevant portion of Section 4.1a was implicitly repealed in 1981 by the amendment to Section 4 of the Act, the 1992 amendment constituted its "readoption" and reflected the legislature's intent to revive the preempted points and fees limitation. The creditors, on the other hand, argued that the 1991 amendment could not be considered new opt-out legislation. Secondly, the creditors maintained that the amendment did not limit points as required by one of the "opt-out" provisions of DIDMCA, because the 1992 amendment amended a portion of Section 4.1a that is unrelated to the points and fees limitations.

Relying on a prior Illinois Supreme Court decision which held that the legislature "must expressly reenact a statute which has been repealed by implication to render it valid and enforceable again," the Supreme Court declined to follow the homeowners' line of argument that Section 4.1a was readopted or reenacted. The Court found that the text of the amendment or its legislative history did not reflect the legislature's "express" intent to "reenact" the 3% cap on lender charges. Accordingly, the Supreme Court determined that Illinois had not "opted out" of DIDMCA by adopting a law that placed limitations on points and fees.

By reversing the appellate court's decision in Clark, the Illinois Supreme Court has ended approximately 20 years of uncertainty and litigation about whether "points and fees" are limited to a 3% cap under Illinois law and whether DIDMCA has preempted Section 4.1a of the Act.

The Clark decision resolves many questions and establishes the following:

DIDMCA applies to non-purchase money as well as purchase money first-lien transactions.
The 1992 amendment to Section 4.1a, which removed dishonored check fees and late fees from the ambit of "points and fees" charges did not result in Illinois "opting out" of DIDMCA.
The 1981 amendment to Section 4 of the Act implicitly repealed Section 4.1a. Because the Illinois Supreme Court held that the 1981 amendment to Section 4 operated to eliminate interest rate ceilings and other lender compensation on all mortgage loans, Section 4 applies to all junior lien transactions. Thus, junior lien mortgage loans are also not subject to Section 4.1a's 3% cap.

It will be interesting to watch how the Illinois legislature responds to the Clark decision and whether it repeals Section 4.1a or adopts other legislation to affirmatively "opt out" of DIDMCA by placing limitations on points and fees imposed on mortgage loans.

As a result of the Clark decision, Document Systems, Inc. ("DSI") will eliminate only that portion of the Illinois Interest Act audit pertaining to the 3% cap on Illinois mortgage loans exceeding an interest rate of 8%, regardless of lien priority, once the Clark decision is released for publication and considered "final." Other portions of the test, such as auditing for the existence of prepayment penalties for mortgage loans above 8% interest, will remain intact. While many investors and competitors have already eliminated their tests, DSI will not eliminate the 3% test until the decision is considered a "final" one. Meanwhile, DocMagic customers have the option of disregarding our test results in accordance with their internal policy.

Melanie A. Feliciano is Assistant General Counsel of Document Systems, Inc. ad a member of its Compliance Department.

Scope of California Predatory Loan Law Expanded

Thu, 20 Jul 2006 09:48:51 -0700

If you originate loans in California, expect more of your loans to be subject to the limitations imposed under California's covered loan law (California Financial Code Section 4970 et seq.) courtesy of California Assembly Bill No. 901. Currently, California's covered loan law applies to a consumer loan only if the original principal balance does not exceed $250,000. Effective January 1, 2006, California's covered loan law will apply to "a consumer loan in which the original principal balance of the loan does not exceed the most current conforming loan limit for a single-family first mortgage loan established by [Fannie Mae]." While Fannie Mae has yet to establish its conforming loan limits for 2006 (expect that to occur sometime in November), many analysts believe Fannie Mae will raise its current (2005) conforming loan limit from $359,650 to about $400,000. For additional information regarding California's covered loan law, visit Compliance Update: California Covered Loan Law and YSPs Not Included In California's Covered Loan Law Calculations.

High Cost Updates: Indiana and Utah

Thu, 20 Jul 2006 09:51:50 -0700

This month, we add detailed high cost information for the states of Indiana and Utah to our High Cost/Predatory Lending Page.

Every month we will be adding detailed high cost information for additional states. So, be sure to check back often.

DocMagic Late Fee Matrix and Updates

Thu, 20 Jul 2006 09:54:56 -0700

At DocMagic, we pride ourselves on our superior compliance process. To better accommodate our customers' needs and meet investors' requirements, effective November 1, 2005, we're making changes to our default late fee matrix for first and junior lien loans.1 Note that the current fees are not out of compliance -- most of the states where changes have been made allow a "reasonable" or "agreed upon" fee. As many of our investors have shown a preference for the standard 5% late fee2, we're making some minor tweaks.

Here is the matrix: Default Late Fees Matrix.

As always, our flexible customization permits you to override these default values because your company or investor specific plans may have different requirements. To make changes to these default late fees for your account, email or call customer service at (800) 564-1362 before the November 1, 2005 effective date to retain the existing values or to make changes to your account.

All existing customization for late fees in your account will remain in place.

Regarding the third column in the attached matrix, the Late Fee Addendum to Promissory Note (LFAPN.MSC), is available upon request. This Addendum contains more detailed late fee information for first lien loans.

Renee Smith Cleary is Assistant General Counsel of Document Systems, Inc. and a member of its Compliance Department.

1 These are not necessarily the default late fees for HELOCs, which may be separately regulated under state law.
2 Per the Fannie May Selling Guide, IV, 201.01: "Late Charge Provision (04/11/00): The note for a conventional first mortgage must provide for the borrower to pay a 5% late charge on any installment that is not received by the 15th day after it is due. If state law does not allow a charge that high, the maximum amount that is allowed should be used. If the mortgage has a late charge of more than 5%, it will be acceptable as long as the amount assessed during the time we hold the mortgage does not exceed 5%. The late charge should be computed on the principal and interest (P&I) installment only, not on the full monthly payment (PITI). This same late charge policy applies for an RHS-guaranteed mortgage that is closed on our conventional mortgage instruments."

Mike Zarrilli, Thank You for 15 Years of Great Service to DSI!

Thu, 20 Jul 2006 10:18:32 -0700

He ensures that all systems, from Customer Service to Technical Support to Information Technology, at Document Systems, Inc. ("DSI") are working properly and efficiently. He's the first one in the office and still there when half the office has already left for the day. Almost every customer who has called into the office has probably spoken with him at one time or another and been greeted with a smile over the phone.

At Your Service: MERS and the Missouri Recorder's Cover Page

Thu, 20 Jul 2006 10:26:31 -0700

The Customer Service Department has received telephone calls from customers over the past month inquiring into whether the lender or MERS' name and address would be inserted into the "Grantee(s)" fields on the Missouri Recorder's Cover Page when MERS is the beneficiary under the deed of trust.

Tech Tip of the Month: Enhanced Key Factors Lists for Consumer Credit Score Disclosure

Thu, 20 Jul 2006 10:32:20 -0700

By early November, 2005, DocMagic users will notice enhancements to the menu of credit score factors (also known as key factors, reason codes, or adverse action codes) used to generate a borrower's consumer credit score disclosure. The Consumer Credit Score Disclosure consists of the Notice to Home Loan Applicant and the Credit Scoring Information, which are requirements under the Fair and Accurate Credit Transactions Act of 2003 (the "FACT Act") and California and Colorado laws.

New/Revised Documents - October 2005

Thu, 20 Jul 2006 10:36:31 -0700

Wells Fargo HELOC Documents

Wed, 19 Jul 2006 14:43:48 -0700

DocMagic has NEW documents and plan codes for the Wells Fargo HELOC programs. To add these loan programs, click on the "Add" button next to loan program, scroll down to and select Wells Fargo HELOC (WFH7), and then add the appropriate loan programs. It's fast and easy, so download these plans today!

Nationwide TotalFlood To Provide Flood Determinations Through DocMagic

Wed, 19 Jul 2006 14:44:57 -0700

For over six years now, DocMagic® clients have been able to order flood zone determinations directly through DocMagic with just a couple of mouse clicks. Despite the success of this simple and seamless flood determination service, we continually monitor our systems and seek ways to improve the service to ensure the highest level of connectivity and automation available in the market. As part of that ongoing effort, Document Systems, Inc. is pleased to announce that, effective October 1, 2005, the new primary, but not exclusive, flood determination provider will be Nationwide TotalFlood Services, Inc. (NTSI). NTSI has been in business for over 15 years, maintains a $10 million errors and omissions policy, and was awarded Certification by the National Flood Determination Association in January 2005. For additional information about NTSI, please visit: www.totalflood.com.

Spanish Version of TILA Statement Available to Comply With TX's H.B. 1547; Informe De Prestamo Form

Wed, 19 Jul 2006 14:52:32 -0700

Spanish Version of TILA Statement

Since September 1, 2005, the Spanish version of the TILA statement has been available in DocMagic to comply with Texas H.B. 1547, which became effective on the same date. H.B. 1547 amended Texas Finance Code Section 341.502 by adding a new subparagraph (a-1), which requires lenders to give a summary, in Spanish, of loan terms of a secondary mortgage loan transaction under Chapter 342, Subchapter G, or a home equity loan regulated by the Texas Office of Consumer Credit Commissioner ("OCCC") to the borrower in a form identical to the disclosures required by 12 C.F.R. Section 226.18, if the loan terms were negotiated in the Spanish language. This form complies with the Texas Office of Consumer Credit Commissioner's ("OCCC's") Proposed Rules 7 TAC Sections 1.1251-1.1256 and Figure: 7 TAC 1.1253(a)(4). Please read our August, 2005 article for more detailed information about Texas H.B. 1547 Adopted. Click here for a copy of the Proposed Rules.

If you would like this form to be placed in your plan or a particular loan transaction, please contact Customer Service, at (800) 649-1362, to request it.

Informe de Prestamo Form

Rudy Aguilar, the Director of Consumer Protection at the OCCC, informally advised Document Systems, Inc.'s Compliance Department that the Informe De Prestamo form, which is posted on the OCCC's website as a required disclosure for secondary mortgage loan transactions, will no longer need to be given to the borrower if the lender provides the Spanish version of the TIL statement to the borrower. He further advised that his office will soon propose the repeal of Rule 7 TAC 1.827, which requires the Informe de Prestamo form.

High Cost Updates: Colorado, Florida and Maryland

Wed, 19 Jul 2006 14:56:54 -0700

This month, we added detailed high cost information for the states of Colorado, Florida and Maryland to our High Cost/Predatory Lending Page.

Every month we will be adding detailed high cost information for additional states. So, be sure to check back often.

Revised Uniform Residential Loan Application (Form 1003) Ready for Use

Wed, 19 Jul 2006 14:58:11 -0700

As of September 1, 2005, DocMagic has been using the revised Uniform Residential Loan Application (Form 1003) that Fannie Mae and Freddie Mac published on their websites in August, 2005. Although this form will not be required to be used until January 1, 2006, Document Systems, Inc. has already implemented it into the DocMagic system in response to customer requests.

At Your Service: Wisconsin Calculation Audits

Wed, 19 Jul 2006 15:00:32 -0700

The Customer Service Department has received telephone calls from customers over the past month about a recently implemented audit for Wisconsin loans. Many customers processing Wisconsin loans have called to inquire about the following warning:

FINANCE CHARGES TO LENDER > 2% MAY BE SUBJECT TO REFUND UPON PREPAYMENT; REDUCE BELOW 2%

This warning advises the user that the borrower may be entitled to a refund if the borrower prepays the loan in full, because finance charges exceed 2% of the principal amount of the loan. If the DocMagic user wants to minimize the possibility of having to refund the borrower in the event of prepayment, then finance charges should be reduced below 2% of the loan amount.

Tech Tip of the Month: You can Generate Reports Using Any Data Elements in DocMagic

Thu, 20 Jul 2006 09:28:33 -0700

Using any of the data elements in DocMagic, you can generate your own customized reports. Do you want to know how many loans one of your correspondents has originated in one month before even having received all the loan documents for that month? Or, would you like to know how many fixed-rate loans you originated in one week? Or, how about how many loans you made in Houston, Texas? You can generate reports to answer these questions and more by customizing your own reports. The types of reports that can be generated from the data elements entered in DocMagic are almost limitless.

New/Revised Documents - September 2005

Thu, 20 Jul 2006 09:32:11 -0700

High Cost Updates: Georgia, Massachusetts and Section 32

Wed, 19 Jul 2006 13:02:22 -0700

We receive numerous calls on a daily basis from our DocMagic customers asking us how we arrive at our high cost determinations. In an effort to better explain our calculations, we have decided to publish detailed information regarding our calculations online.

In the past, we have published detailed information about our California Covered Loan Law calculations in our articles Compliance Update: CA Covered Loan Law and YSP's Not Included In CA's Covered Loan Law Calculations. This month, we add detailed high cost information for the states of Georgia and Massachusetts. In addition, we add detailed information about our Section 32 high cost calculations. The Section 32 information is useful, not only because it explains our Section 32 calculations, but also because a number of states have adopted high cost provisions that simply track Section 32 in terms of how high cost home loans are defined. Those states include, for example, Maine, Nevada and Ohio.

Texas H.B. 1547 Adopted; Becomes Effective September 1, 2005

Wed, 19 Jul 2006 13:09:36 -0700

Document Systems, Inc. ("DSI") is in the process of creating the disclosure forms required by Texas House Bill 1547 (H.B. 1547) in accordance with proposed rules and regulations of the Texas Office of Consumer Credit Commissioner ("OCCC"). You may recall that our May, 2005 issue of The Compliance Wizard, we introduced H.B. 1547 to our readers in an article entitled TX Legislature Proposes Amendmenr to "Plain Language" Statute Involving Consumer Loan Contracts. H.B. 1547, which amends Texas Finance Code Section 341.502, passed and becomes effective on September 1, 2005.

Did You Know...

Wed, 19 Jul 2006 13:23:33 -0700

If you have been following coverage on Supreme Court Justice nominee, John G. Roberts, a case entitled National Collegiate Athletic Association ("NCAA") v. Smith is one of the cases highlighted by the media in which Roberts argued before the U.S. Supreme Court on behalf of the NCAA. What is important about the NCAA v. Smith case is not that Justice nominee Roberts was involved, but that Document Systems, Inc.'s ("DSI's") very own Renee M. Smith was the "Smith" in that case!

At Your Service: When a Prepay Penalty Includes a Soft Prepay Provision

Wed, 19 Jul 2006 13:32:26 -0700

ATTENTION: Please Contact Customer Service When an Investor's Prepayment Penalty Addendum/Rider Includes a Soft Prepayment Provision

When entering data for a loan that involves a "soft prepayment" provision, the DocMagic user normally enters the number of months in the "Prepayment" field to represent the period of time under which the borrower is subject to a prepayment penalty on their loan and the number of months in the "Soft Prepayment" field to indicate the number of months under which the "soft prepayment" period applies. (See "Screen Shot 1" below.) The multistate prepayment addendum and/or rider that include a "soft prepayment" provision then automatically generates in the loan package.

Tech Tip of the Month: DocMagic's Plan Selection Filter

Wed, 19 Jul 2006 13:54:53 -0700

DSI has added another enhancement to DocMagic - the Plan Selection Filter. This enhancement enables DocMagic users to search loan programs faster than ever before. With competition in the mortgage industry heating up, lenders have been forced to offer a greater number of loan program types to facilitate the needs of an increasingly diverse customer base. With more loan programs to choose from, selection of the correct loan program at document processing time can become time consuming and error prone.

New/Revised Documents - August 2005

Wed, 19 Jul 2006 13:58:04 -0700

Three New Wyoming Forms Added

Wed, 19 Jul 2006 12:39:03 -0700

In response to the enactment of the Wyoming Residential Mortgages Practices Act ("Act"), which Governor Dave Freudenthal signed into law on February 25, 2005, Document Systems, Inc. has prepared three (3) new forms that are required by the Act. To view the complete copy Act, click here. Compliance with the Act became mandatory beginning on July 1, 2005.

New Illinois Rental Housing Surcharge

Wed, 19 Jul 2006 12:45:25 -0700

Illinois Governor Blagojevich signed 2005 IL SB 0075 into law on July 5, 2005. Beginning August 1, 2005, this law requires that Illinois County Recorders collect a Rental Housing Support Program Fund state surcharge in the amount of $10.00 with the recording of all real estate-related documents executed or signed on or after August 1, 2005. A "real estate-related document" includes any recorded document that affects an interest in real property (e.g., deeds, easements, leases, mortgages and other liens), excluding documents solely related to an easement for a public utility or any documents from a state agency, unit of local government, federal government or school district.

At Your Service: CA Residential Mortgage Lenders Licensed

Wed, 19 Jul 2006 12:47:04 -0700

ATTENTION CA Residential Mortgage Lenders Licensed by CA Dept of Corporations: You May Want the Prior Version of the CA Fair Lending Notice Form

Since publishing notice of our updated California Fair Lending Notice form in our June, 2005 issue of The Compliance Wizard, a customer who is licensed by the California Department of Corporations ("DOC") under the California Residential Mortgage Lending Act contacted our Compliance Department to advise that the DOC takes exception to listing the DOC, the California Department of Real Estate, and Department of Financial Institutions all on one form. As indicated in our June issue, the updated California Fair Lending Notice, which was implemented into all loan-closing packages on July 1, 2005, does list the names and addresses of all of the foregoing agencies on the form, requiring the DocMagic user to mark the box next to the agency by which the DocMagic user is licensed.

Tech Tip of the Month: Aggregate Adjustment

Wed, 19 Jul 2006 12:51:53 -0700

Did you know that when your low balance exceeds the cushion, you only need to click the aggregate adjustment field for the default difference to be automatically calculated? It is magic! You can also reduce the number of months impounded, to lower your low balance to equal or be less than your cushion, as long as the low balance stays above zero.

New/Revised Documents - July 2005

Wed, 19 Jul 2006 12:54:59 -0700

The Value of Strong Investor-Service Provider Relationships

Wed, 19 Jul 2006 11:44:30 -0700

As an independent document preparation company, DocMagic personnel interact with thousands of customers involved in the mortgage origination process, be they mortgage brokers, mortgage lenders or secondary mortgage market purchasers. Indeed, DocMagic will often have some type of relationship with all the parties involved in a particular mortgage loan origination: broker, lender and purchaser. Because of the widespread penetration of our products in the mortgage lending industry, DocMagic can assist greatly to prevent many, if not most, of the problems that create points of friction between mortgage originators. However, many investors are unaware, or otherwise choose to ignore, the benefits of dealing directly with service providers to resolve issues before they arise.

Massachusetts High Cost Analysis

Wed, 19 Jul 2006 11:52:12 -0700

Over the past month, Document Systems, Inc., has received a number of calls from customers inquiring into the prepayment penalty component of the "Points and Fees Test" for Massachusetts' State High Cost Analysis in DocMagic.

Employee Of The Quarter - Mickie Schafer

Wed, 19 Jul 2006 11:54:22 -0700

Mickie Schafer was selected as Document Systems, Inc.'s ("DSI's") Employee of the Quarter for the first quarter of 2005. This is not the first time that Mickie has been recognized by DSI's executive management team for her superior performance. Previously, she has been designated Employee of the Month and Employee of the Quarter.

New California Fair Lending Notice Form

Wed, 19 Jul 2006 12:07:12 -0700

Beginning July 1, 2005, customers making California loans will notice an updated California Fair Lending Notice in their loan-closing package. The form was updated primarily to address changes of address for the California Department of Corporations, Department of Real Estate, and Department of Financial Institutions. Another change to the form that customers will notice is that the names and addresses of all of the foregoing agencies will appear on the form. The DocMagic user will have to mark the applicable agency and its contact information so that the borrower may contact that agency in the event of a complaint. If you have any questions about this form, please contact Alan Brisbane, Center Manager at Document Systems, Inc.

Training - All Aboard!

Wed, 19 Jul 2006 12:19:02 -0700

All your questions answered. One time. One place. DocMagic demonstrations are conducted online, Monday through Friday. The two-hour sessions are quick, easy and packed full of useful information. All that is necessary for your introduction to DocMagic is an Internet connection and a phone line. As you view the live demonstration via the Internet, our representative will talk you through the power of DocMagic and answer all of your questions. If you require a time outside of our schedule, please contact our Customer Service Department at (800) 649-1362.

For more information, including a schedule of the demonstrations, click here.

At Your Service: Help! - Help Is Available in Many Forms

Wed, 19 Jul 2006 12:26:52 -0700

Not sure what to input into a particular field of DocMagic? Like what to enter in the "ARM Floor (Min) Rate" field? Did you know that the "Help" menu in the "Worksheet" window of DocMagic may answer your question? When your cursor is in the field about which you have a question, either click on the "Help" menu or hit the "F1" key for quicker access.

Tech Tip of the Month: Email Confirmations

Wed, 19 Jul 2006 12:29:47 -0700

Our Technical Support Department has received a number of questions from customers recently, inquiring into why they did not receive a confirmation message after emailing documents to a third party.

New/Revised Documents - June 2005

Wed, 19 Jul 2006 12:32:56 -0700

What is a Finance Charge? Part III

Wed, 19 Jul 2006 10:04:20 -0700

In this final part of our series on the rudiments of the Finance Charge, as defined under the Truth in Lending Act, we describe the process for determining whether a particular cost or fee is a Finance Charge. If you recall, in our March 2005 issue of The Compliance Wizard, we defined, in general terms, what a Finance Charge is relative to home equity lines of credit (HELOCs) and residential mortgage transactions. Our April 2005 issue discussed the types of charges, fees, and costs that must be excluded from the definition and calculation of a Finance Charge pursuant to Regulation Z Section 226.4 and the Official Board and Staff Interpretations issued by the Federal Reserve Board.

DocMagic Audits

Wed, 19 Jul 2006 10:14:23 -0700

Audits are automated verification processes that occur each time a worksheet is processed in the DocMagic software. The purpose of an audit is to confirm that data entries are within predefined parameters. Audits help to minimize errors from the outset of the document preparation process. There are virtually no limits on the amount or type of audits that can be implemented to address any data element.

Which Notice of Right to Cancel Should Be Provided to the Borrower?

Wed, 19 Jul 2006 10:17:28 -0700

Pursuant to the Truth in Lending (TIL) Act, a borrower has the right to rescind consumer credit transactions, which create a non-purchase lien on the consumer's principal dwelling.1 If the important TIL disclosures are given at the time of the original credit transaction, the rescission right is three days.2 However, improper disclosure may extend this rescission period up to three years.3 Accordingly, a creditor has significant motivation to ensure that the proper notice of right to cancel is provided to the consumer at the requisite time.

Methods Used By Our Compliance Department to Maintain Compliance

Wed, 19 Jul 2006 10:26:26 -0700

Every now and then, our Compliance Department is posed the following questions, "How do you maintain compliance? What resources do you use?"

TX Legislature Proposes Amendment to "Plain Language" Statute

Wed, 19 Jul 2006 10:35:03 -0700

In our February, 2005 issue of The Compliance Wizard, we identified the States that have adopted "plain language" statutes and highlighted some of those statutes for our readers. In this issue, we feature a proposed amendment to a pre-existing Texas "plain language" statute.

At Your Service: CA Domestic Partnership Addendum

Wed, 19 Jul 2006 11:38:22 -0700

Our Customer Service Department has received many calls recently about our California Domestic Partnership Addendum ("Addendum") to Uniform Residential Loan Application (Form 1003). Many of you have noticed that the document generates on all California loans and inquired into the purpose of this Addendum.

Tech Tip of the Month: Web Docs

Wed, 19 Jul 2006 11:41:48 -0700

If your client has internet access, you can choose to have your documents available for web pickup. After DocMagic assembles your set of documents, a web pickup code is generated. By accessing this unique code, your client will be able to download the set of documents from our website.

Convince Your Investors That You've Picked The Best Compliance Program

Tue, 18 Jul 2006 12:56:12 -0700

The following article is reprinted with permission from the March 2005 issue of Secondary Marketing Executive®.

You know you're working with trusted advisors, but how do you convince your investors that you've selected the best solution?

If there is one thing everyone knows about the predatory lending landscape, it's that being found on the wrong side of the line means significant negative consequences. Now, where that line is exactly varies by jurisdiction and is often subject to debate. Ultimately, the final decision could rest with a court of law, but if it goes that far, the lender - and its secondary market investors - have already lost.

What is a Finance Charge? Part II

Tue, 18 Jul 2006 13:04:30 -0700

In the last issue of The Compliance Wizard, the Compliance Department launched the first of its three-part series on the rudiments of the Finance Charge, as defined under the Truth in Lending Act1, to respond to a growing number of telephone calls from customers inquiring into whether a particular fee, cost or charge may be excluded from the calculation of a Finance Charge.

We Need Your Input...

Tue, 18 Jul 2006 13:11:39 -0700

DSI needs your input on several matters that may affect your business. If you make loans in Kentucky, we need the name of the county in which your office is located so that DocMagic may populate your county information into future Kentucky mortgages and/or assignments. If you are a California Finance Lender, we now have a disclosure form that complies with California Financial Code Section 22337(a) that you may use. Finally, we want to know what you think about eliminating the credit scoring disclosure information from DocMagic since a copy of the credit scoring information obtained from a consumer reporting agency is provided to the borrower anyway.

At Your Service: Common User Errors Most Recently Noticed

Tue, 18 Jul 2006 13:31:50 -0700

DSI Customer Service offers solutions to common issues or questions, ranging from user errors to using our software. Common user errors that our Customer Service Department has noticed recently are discussed below.

Tech Tip of the Month: DSI Knowledge Base

Tue, 18 Jul 2006 13:45:39 -0700

The Knowledge Base offers DocMagic users a wealth of support information and self-help tools pertaining to DocMagic products, updates, tips and more. Here you may search our database of support articles designed to answer your product questions:

New/Revised Documents - April 2005

Tue, 18 Jul 2006 14:15:34 -0700

ESIGN Basics

Tue, 18 Jul 2006 12:32:51 -0700

The Electronic Signatures in Global and National Commerce Act ("ESIGN" or the "Act") has been in effect since October 1, 2000. The purpose of the Act is to facilitate the use of electronic records, signatures and contracts in commerce by placing them on the same legal footing as their paper analogues. ESIGN creates a tremendous opportunity for mortgage originators to achieve greater efficiencies and cost savings, particularly in the area of consumer disclosures. Few mortgage originators, however, appear to be taking advantage of these ESIGN benefits.

What Is a Finance Charge? Part I

Tue, 18 Jul 2006 12:38:45 -0700

With this article, Document Systems, Inc.'s ("DSI's") Compliance Department launches a three-part series on the rudiments of the Finance Charge, as defined under the Truth in Lending Act1, to respond to a growing number of telephone calls from customers inquiring into whether a particular fee, cost or charge may be excluded from the calculation of a Finance Charge.

Wyoming Residential Mortgage Practices Act

Fri, 29 Sep 2006 11:58:11 -0700

The Wyoming State Banking Commissioner now has the responsibility for licensing and regulating mortgage lenders and brokers in the state as authorized by the Wyoming Residential Mortgages Practices Act, which was signed into law by Governor Dave Freudenthal on February 25, 2005. According to a press release from the Wyoming Department of Audit, Division of Banking, compliance with the Act is mandatory beginning July 1, 2005.

New/Revised Documents - March 2005

Fri, 29 Sep 2006 11:58:12 -0700

CA Supreme Court Strikes Down Municipal Predatory Lending Ordinance

Tue, 18 Jul 2006 10:06:12 -0700

On January 31, 2005, the California Supreme Court delivered its much-anticipated decision in American Financial Services Association (AFSA) v. City of Oakland. The Court held that the Oakland ordinance regulating predatory lending practices within the city of Oakland (the "Ordinance") was preempted by the California predatory lending law (CA Financial Code Sections 4970-4979.8) ("Division 1.6"). The favorable outcome of this case for the mortgage lending industry was far from a forgone conclusion, as evidenced by the divided Court's 4-3 majority decision opinion and thoughtful dissent.

HMDA 2004 Reporting Requirements

Tue, 18 Jul 2006 10:08:19 -0700

Effective January 1, 2004, a number of changes have been made to the Home Mortgage Disclosure Act (HMDA) reporting requirements. Some of the changes include the following: (1) lenders subject to HMDA reporting requirements are required to report the "rate spread" for each loan they originate and applications that do not result in an origination (the rate spread is defined as the difference between the APR on a loan and the rate on Treasury securities with comparable maturity periods for loan originations in which the APR exceeds the applicable rate by a percentage specified by the Federal Reserve Board); and (2) lenders must report whether a particular loan is subject to the Home Ownership and Equity Protection Act of 1994 (HOEPA). The rate spread and HOEPA status information have been incorporated into DocMagic's HMDA-LAR reporting capabilities.

Early and Initial Disclosures for Home Equity Lines of Credit

Tue, 18 Jul 2006 10:14:49 -0700

The Truth in Lending Act, Subpart B, governs open-end credit lines secured by a borrower's dwelling. This article assumes that the lender or broker has compliant Early and Initial Disclosures in place and elaborates upon the sections and values that should be updated on a periodic basis.1 Lenders and brokers must periodically review and update these Disclosures for their home equity line of credit (HELOC) programs to ensure that accurate information is provided to the applicant or borrower at the required time. Failure to provide accurate disclosures pursuant to 15 U.S.C. §1637 may result in civil liability, including actual and statutory damages of $200 to $2,000 per individual case or $500,000 or 1% of the net worth of the creditor in a class action suit, attorneys' fees, and enhanced rescission rights.2 However, failure to provide the information as mandated in 15 U.S.C. §1637a, such as the historical example, will not trigger civil liability penalties for creditors.3

Contracting and Disclosing Plainly in Mortgage Lending

Tue, 18 Jul 2006 10:28:58 -0700

Statutory plain-language is, essentially, a borrower-oriented language: Clear and conspicuous, reasonably understandable, and noticeable in relation to legislative findings and intent and the information required by law. Federal Regulation P, dealing with the Privacy of Consumer Financial Information, defines "clear and conspicuous" as a notice that is reasonably understandable and "designed to call attention to the nature and significance of the information in the notice" [12 C.F.R. 216.3(b)(1)] by using simple, short sentences and paragraphs, direct speech, active voice, everyday words with commonplace meanings, principles of readability, communications graphics, honest intent, and full and fair disclosure of all material terms and conditions. In the author's opinion, the public policy goals of plain language statutes as they apply to residential mortgage lending are: (1) to enforce honest market-place standards, (2) improve consumer understanding and access, (3) encourage participation, and (4) demystify lending.