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NOTICE TO END USERS OF CONSUMER REPORTS THAT TAKE AFFECT
DECEMBER 1 2004
 
THE FAIR AND ACCURATE CREDIT TRANSACTIONS ACT OF 2004
 
As a user of consumer reports there are many new requirements of you to properly use consumer credit information in accordance to the Fair and Accurate Credit Transactions Act of 2003 (FACTA).
 
While various portions of this law have various effective dates since March 1, 2004, many changes that will have the greatest impact on your operations become effective December 1, 2004.
 

Some of the changes that you should be familiar with include:  

• Your duty to provide a consumer a copy of his credit score and a “Notice to the Home Loan Applicant” under §609(g)
   
• Your duty to notify consumers if you grant a credit extension on material terms that are materially less favorable than the most favorable terms available to a substantial proportion of consumers that you serve, based on a consumer report under §615(H)
   
• Your duty to formulate policies and procedures to employ when receiving a notice of discrepancy in address under §605(H)
   
• Your duty to formulate policies and procedures to verify the consumer’s identity and confirm that the application is not the result of identity theft under §605A(H) and related duties under §§515(e) and (f)
   
• Your duty to provide transaction records to persons claiming to be a victim of identity theft under §609(e)
  
• Your duties to report accurate information to consumer reporting agencies under §623
   
• Your duties to properly dispose of consumer information under §628
  If you are not familiar with your new responsibilities above under this new law contact your credit reporting representative or the FTC website at www.ftc.gov to obtain more information on how to comply with this law.
   
   

        Rules and Regulations - Rules Are Not Limited To Below
 

We at MTG ensures all residential borrows receive these rights.  plus more.!
 

Colorado Loans (MTG is Based out of Colorado)
closing costs including origination and discount can NOT exceed 5% - No Exceptions

Federal Law
$10,000 fine to pull a credit report without authorization (Ask for Spouse or Mother Maiden Name).

Mortgage Loan Application Laws
An application, according to the Federal Government, is when 3 things take place between you and a prospect.

1.    Names have been exchanged
(i.e. personal, company name, or even passing out a business card)

2.    Any type of finance has been discussed
(i.e. rates, payment, buying a home, income, credit, etc...)

3.    Method of contacting the prospect is specified
(i.e. phone number, address, email, etc.)

Real Estate Settlement Procedures Act (RESPA):

http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm
Enforced by HUD's Office of RESPA & Interstate Land Sales.  It covers Federally Regulated Loans secured with a mortgage placed on a one-to-four family residential property (most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit).

RESPA is a federal law (a consumer protection statute) first passed in 1974, that allows consumers to review information on known or estimated settlement cost once after application and once prior to or at a settlement.  The intention is to help consumers become better shoppers for settlement services and to eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.

RESPA REQUIRED DISCLOSURES - At the time of loan application:

Good Faith Estimate (GFE) of settlement costs, which lists the charges the buyer is likely to pay at settlement.  This is only an estimate and the actual charges may differ.  and

Truth in lending (TIL) discloses particulars about APR (Annual Percentage Rate), any terms of a loan program such as with ARM's (Adjustable Rate Mortgages) that spells out a lender margin, and dates of interest rate adjustments.  The TIL must be provided to the customer along with a good faith estimate.  A final GFE and TIL must also be provided to the customer at the closing table.  The lender produces the final GFE & TIL. and

Mortgage Servicing Disclosure Statement, which discloses to the borrower whether the lender intends to service the loan or transfer it to another lender.  It also provides information about complaint resolution.

When borrowers apply for a mortgage loan for purchase transactions, mortgage brokers and/or lenders must also give the borrowers: a Special Information Booklet ("When Your Home Is On The Line") http://www.federalreserve.gov/pubs/homeline/ which contains consumer information regarding various real estate settlement services.

If the borrowers don't get these documents at the time of application, the lender must mail them within three business days of receiving the loan application.  If the lender turns down the loan within three days, however, then RESPA does not require the lender to provide these documents. 

The terms "settlement" and "closing" can be and are used interchangeably.

RESPA Section 8: prohibits a person from giving or accepting any thing of value for referrals of settlement service business (prohibits certain practices that increase the cost of settlement services).   In a criminal case a person who violates Section 8 may be fined up to $10,000 and imprisoned up to one year.  It also prohibits a person from giving or accepting any part of a charge for services that are not performed.

RESPA Section 9: Seller Required Title Insurance -  prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.  Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance.

RESPA Section 6: provides borrowers with important consumer protections relating to the servicing of their loans.  A Servicing Transfer Statement is required if the loan servicer sells or assigns the servicing rights to a borrower's loan to another loan servicer.  Generally, the loan servicer must notify the borrower 15 days before the effective date of the loan transfer.  As long the borrower makes a timely payment to the old servicer within 60 days of the loan transfer, the borrower cannot be penalized.  The notice must include the name and address of the new servicer, toll-free telephone numbers, and the date the new servicer will begin accepting payments. 

Homeowners Protection Act

The Homeowners Protection Act of 1999 requires home lenders to cancel a requirement for private mortgage insurance (PMI) if the borrower has equity of at least 22% in their home (This is equal to a loan-to-value ratio of below 78%).  The law allows the borrower to request dropping PMI when equity reaches 20% of home value.  A current appraisal may be required to ascertain the home value.  For more information, see the Web site of the U.S. Dept. of Housing and Urban Development (www.hud.gov.)

HUD-1 Settlement Statement is a standard form that clearly shows all charges imposed on borrowers and sellers in connection with the settlement.  RESPA allows the borrower to request to see the HUD-1 Settlement Statement one day before the actual settlement.  The settlement agent must then provide the borrowers with a completed HUD-1 Settlement Statement based on information known to the agent at that time.

Initial Escrow Statement itemizes the estimated taxes, insurance premiums and other charges anticipated to be paid from the Escrow Account during the first twelve months of the loan.  It lists the Escrow payment amount and any required cushion.  Although the statement is usually given at settlement, the lender has 45 days from settlement to deliver it.

 
Affiliated Business Arrangement (AfBA) Disclosure is required whenever a settlement service provider involved in a RESPA covered transaction refers the consumer to a provider with whom the referring party has an ownership or other beneficial interest.  The referring party must give the AfBA disclosure to the consumer at or prior to the time of referral.  The disclosure must describe the business arrangement that exists between the two providers and give the borrower an estimate of the second provider's charges.  Except in cases where a lender refers a borrower to an attorney, credit reporting agency or real estate appraiser to represent the lender's interest in the transaction, the referring party may not require the consumer to use the particular provider being referred.

RESPA Enforcement

Borrowers who have a problem with the servicing of their loan (including escrow account questions), should contact their loan servicer in writing, outlining the nature of their complaint.  The servicer must acknowledge the complaint in writing within 20 business days of receipt of the complaint.  Within 60 business days the servicer must resolve the complaint by correcting the account or giving a statement of the reasons for its position.  Until the complaint is resolved, borrowers should continue to make the servicer's required payment.

 
Civil law suits

1.       Individuals have one (1) year to bring a private law suit to enforce violations of Section 8 or 9.

2.       A person may bring an action for violations of Section 6 within three years.

3.       Lawsuits for violations of Section 6, 8, or 9 may be brought in any federal district court in the district in which the property is located or where the violation is alleged to have occurred.

HUD, a State Attorney General or State insurance commissioner may bring an injunctive action to enforce violations of Section 6, 8 or 9 of RESPA within three (3) years.

Filing a RESPA Complaint

Persons who believe a settlement service provider has violated RESPA in an area in which the Department has enforcement authority (primarily sections 6, 8 and 9), may wish to file a complaint.  The complaint should outline the violation and identify the violators by name, address and phone number.  Complainants should also provide their own name and phone number for follow up questions from HUD.  Requests for confidentiality will be honored. 

Complaints should be sent to:

Director, Office of RESPA and Interstate Land Sales
US Department of Housing and Urban Development
Room 9154
451 7th Street, SW,
Washington, DC 20410

ECOA and Fair Lending Act:  Federal & State laws prohibit discrimination of any kind. 

Origination laws:  MTG Brokers Corp. commission must be disclosed to the customer within the GFE at all times (also disclosed at the closing table in the HUD-1 by the settlement agent).

Appraisal laws:  The customer must receive an original copy of the appraisal within 90 days of the appraisal being performed (deliver a copy to the borrower at the closing table).

Privacy laws:  Respect of a client's privacy must be upheld at all times.  Information is only shared to approve the loan (i.e. Lender, Title Agents, Processing, or any other as needed to facilitate loan delivery to and for a client).  This permission is part of the Certification and Authorization form.

Right of Rescission laws:  All loans except purchases, farm property greater than 5 acres, and commercial properties, carry a 3-day Right of Rescission period in which the client can cancel the loan at any time within that period for any reason.

Therefore, a lender will not release the funds for the loan until the 4^th business day after closing.

1. Saturdays are included in this rescission period but not considered a 4^th business day.
2. Sundays are not considered at all.
3. Any Legal holiday in which the Title Company is not open cannot count as a 4^th business day..

If this happens where the 4^th business day should happen at any of the mentioned events, then the lender will fund the loan on the next available business day below is a list in which you can follow

In the event a client rescinds the loan, the client is still responsible for the cost of appraisal if incurred, and the credit bureau tri-merge reports, and not limited to and including lender charges for additional equerries, HOA doc's, VOE, VOD, Subordinations, courier fees, and all other actual expenses incurred in obtaining the client a loan, etc.

High-Rate, High-Fee Loans (HOEPA/Section 32 Mortgages)

Home Ownership and Equity Protection Act of 1994 (HOEPA). The law addresses certain deceptive and unfair practices in home equity lending.  It amends the Truth in Lending Act (TILA) and establishes requirements for certain loans with high rates and/or high fees.  These rules for loans are in Section 32 of Regulation Z.

Note: Colorado 5% max charged to borrower

What Loans Are Covered per HOEPA?

A loan is covered by the law if it meets the following tests:

·        first-lien loan, the annual percentage rate (APR) exceeds by more than eight percentage points the rates on Treasury securities of comparable maturity;

·        second-lien loan, the APR exceeds by more than 10 percentage points the rates in Treasury securities of comparable maturity; or

·        the total fees and points payable by the consumer at or before closing exceed the larger of $499 or eight percent of the total loan amount. (The $499 figure is for 2004, adjusted annually by the Federal Reserve Board, based on changes in the Consumer Price Index.).  NOTE: If an interest rate reduction is conditioned upon purchase of credit insurance then credit insurance is counted as a fee.

The rules primarily affect refinancing and home equity installment loans that also meet the definition of a high-rate or high-fee loan.  The rules do not cover loans to buy or build your home, reverse mortgages or home equity lines of credit (similar to revolving credit accounts).

What Disclosures Are Required per HOEPA?

If loan meets above tests, you must receive disclosures at least three business days before the loan is finalized:

·        The lender must give you a written notice stating that the loan need not be completed, even though you've signed the loan application and received the required disclosures.  You have three business days to decide whether to sign the loan agreement after you receive the special Section 32 disclosures.

·        The notice must warn you that, because the lender will have a mortgage on your home, you could lose the residence and any money put into it, if you fail to make payments.

·        The lender must disclose the APR, the regular payment amount (including any balloon payment where the law permits balloon payments, discussed below), and the loan amount (plus where the amount borrowed includes credit insurance premiums, that fact must be stated).  For variable rate loans, the lender must disclose that the rate and monthly payment may increase and state the amount of the maximum monthly payment.

These disclosures are in addition to the other TILA disclosures that you must receive no later than the closing of the loan.

High-Rate, High-Fee Loans (HOEPA/Section 32 Mortgages) Cont'd

What Practices Are Prohibited per HOEPA?
The following features are banned from high-rate, high-fee loans:

·        All balloon payments - for loans with less than five-year terms when a lump sum payment of more than twice the amount of the regular payments is required.  Bridge loans of less than one year used by consumers to buy or build a home are the exception for less then five year term loans.

·        Negative amortization, which involves smaller monthly payments that increases the total principal debt.

·        Default interest rates higher than pre-default rates.

·       Rebates of interest upon default calculated by any method less favorable than the actuarial method.

·        A repayment schedule consolidating more than two payments paid in advance from the loan proceeds.

·          Most prepayment penalties, including refunds of unearned interest calculated by any method less favorable than the actuarial method. The exception is if:

• Your total monthly debt (including the mortgage) is 50 percent or less of your monthly gross income;
• you get the money to prepay the loan from a source other than the lender or an affiliate lender; and
• the lender exercises the penalty clause during the first five years following execution of the mortgage.

·          A due-on-demand clause. The exceptions are if:

• there is fraud or material misrepresentation by the consumer in connection with the loan;
• the consumer fails to meet the repayment terms of the agreement; or
• there is any action by the consumer that adversely affects the creditor's security.

Creditors also MAY NOT (per HOEPA)

·       make loans based on the collateral value of your property without regard to your ability to repay the loan.  In addition, proceeds for home improvement loans must be disbursed either directly to you, jointly to you and the home improvement contractor or, in some instances, to the escrow agent.

·       refinance a HOEPA loan into another HOEPA loan within the first 12 months of origination, unless the new loan is in the borrower's best interest (such as a rate or term reduction). 

·        wrongfully document a closed-end, high-cost loan as an open-end loan.  For example, a high-cost mortgage may not be structured as a home equity line of credit if there is no reasonable expectation that repeat transactions will occur (meaning no revolving account-like activity).

How Are Compliance Violations of HOEPA Handled?

You may have the right to sue a lender for violations of these new requirements.  In a successful suit, you may be able to recover statutory and actual damages, court costs and attorney's fees.  In addition, a violation of the high-rate, high-fee requirements of the TILA may enable you to rescind (or cancel) the loan up to three years.

Where to Go for More Information

The FTC works for consumers to prevent fraudulent, deceptive and unfair business practices. To file complaint or get free information, visit www.ftc.gov
or call toll-free, 1-877-FTC-HELP (1-877-382-4357);
TTY: 1-866-653-4261.  The FTC reports Internet, telemarketing, identity theft, and fraud-related complaints

Into the Consumer Sentinel  <http://www.consumer.gov/sentinel>, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

For Commercial Mortgage industry...
see our page on CMBS (Commercial Mortgage Backed Securities)