N.Y. Comp. Codes R. & Regs. Tit. 3 § 38.3 - Application disclosures and procedures

Article 12-D requires and authorizes the superintendent to promulgate regulations governing the disclosures which must be given and the procedures which must be followed at the time an application is taken. No mortgage broker, mortgage banker or exempt organization may take an application, application fee, credit report fee or property appraisal fee prior to making the disclosures set forth in this section. Each entity shall also comply with the procedures set forth in this section regarding the processing of applications. An application may be taken in writing, over the telephone or electronically transmitted. A written application, irrespective of how it is transmitted, should contain the following statement: "It is a crime to intentionally falsify information on this application." For oral applications, the mortgage broker, mortgage banker or exempt organization must make this statement to the borrower(s).

(a) Mortgage broker application disclosures and procedures.

(1) Disclosures. Prior to taking an application or collecting an application fee, credit report fee or property appraisal fee, every mortgage broker shall disclose to the applicant in writing or via electronic media:

(i) that such mortgage broker may not make mortgage loans or commitments;

(ii) that such mortgage broker cannot guarantee acceptance into any particular loan program, nor can that mortgage broker promise any specific loan terms or conditions;

(iii) whether the mortgage broker places loans primarily with any three or fewer lenders, and if so, the name(s) of such lender(s);

(iv) a statement to the effect that the rate, points, fees, and other terms quoted at commitment by or on behalf of the lender encompass the consideration to be received by the mortgage broker from a lender for its services. In addition, the statement shall disclose the specific maximum amount of such consideration to be received;

(v) the amount of the application fee, and the registrant's good faith estimate of the credit report fee, property appraisal fee, processing fee, if any, and the terms and conditions for obtaining a refund of such fees if any;

(vi) the specific services which will be provided or performed for the application fee and/or the processing fee;

(vii)

(a) the maximum consideration, including premium pricing, fees and points, payable by the lender to the mortgage broker;

(b) the maximum of any fees or points to be paid by the applicant directly to the mortgage broker; and

(c) the combined total consideration set forth in clauses (a) and (b) of this subparagraph.

(viii) if applicable, any premiums or bonuses to be paid to the mortgage broker by the lender and/or the basis of its eligibility to receive premiums or bonuses;

(ix) if applicable, a description of the consumer protections and lender disclosures which are lost when the loan is placed with a private investor that is neither an exempt organization nor licensed pursuant to article 12-D of the Banking Law. This disclosure shall include a notice that the requirement that the term of a balloon mortgage be at least three years does not necessarily apply to a loan placed with a private investor. This disclosure shall be no less conspicuous than any other disclosures made pursuant to this section;

(x) if applicable, the fact that fees are being divided between more than one mortgage broker and/or mortgage banker and/or exempt organization acting as a mortgage broker and the dollar amount or the percentage, of if not known, a good faith estimate thereof, of the fee to be received by each mortgage broker, mortgage banker or exempt organization;

(xi) the fact that certain mortgage loan products impose a pre-payment penalty on the borrower and the amount of, or the formula for calculating, the pre-payment penalty, if any, and the terms of the pre-payment penalty, if any, will be disclosed to the borrower as soon as they are known, but no later than the issuance of the commitment (if any), for the loan product chosen by the borrower;

(xii) with regard to written applications, a toll free telephone number of a person in a management position with the mortgage broker who may be contacted about problems with the application or if there is no toll free telephone number, then the circumstances under which a collect call will be accepted. With respect to electronic applications, the disclosure shall include the electronic mail address of the mortgage broker.

(2) Required procedures for mortgage brokers.

(i) The application fee and/or processing fee, if any, shall be denominated as such and shall be reasonably related to the services to be performed on behalf of the applicant. Neither fee may be based upon a percentage of the principal amount of the loan or the amount financed. The separation of application and processing fees is intended to benefit consumers by allowing them to obtain a more complete and accurate itemization of fees charged in the transaction and to thereby more effectively comparison shop when seeking to obtain a residential mortgage.

(ii) Every written application taken by a mortgage broker shall be signed by the employee taking such application, and shall include the name and/or title of such employee.

(iii) Every electronic application form used by a mortgage broker shall include the e-mail address of the mortgage broker.

(iv) No mortgage broker shall take any fee in connection with a mortgage loan other than an application fee, credit report fee and property appraisal fee prior to the acceptance by an applicant of a commitment from a qualified lender nor shall any mortgage broker take any fee, prior to closing, other than an application fee, credit report fee and property appraisal fee when the commitment from the lender is subject to any of the following:

(a) adequate appraisal value;

(b) satisfactory credit history and obligations; and

(c) pre-sale requirement clause in a condominium or co-op mortgage commitment.

Nothing in this section shall prohibit a mortgage broker from taking a lock-in fee for transmittal to a mortgage banker or exempt organization subject to the restrictions imposed by section 38.6(c) of this Part.

(v) Any amount collected in excess of the actual cost of the credit report fee and property appraisal fee must be returned at or prior to closing.

(vi) Some or all of the disclosures required by this section may appear on forms used to comply with otherwise applicable State or Federal laws or, at the option of the entity making the disclosure, as separate disclosures.

(vii) All disclosures concerning refundability must be no less conspicuous than any other disclosure made pursuant to this section.

(viii) It shall be the duty of every registrant to familiarize itself and its employees with the qualifications necessary to fulfill lenders' requirements for the loan products and programs available through that mortgage broker.

(ix) For written application, each mortgage broker shall provide each applicant with a duplicate of the signed application within seven business days from the time of receipt of such application by the mortgage broker. Both the applicant's signature and the signature of the employee may be hand-written or digital to the extent such signatures are recognized as binding under New York State law. For electronic applications, each mortgage broker shall provide each applicant with a duplicate copy of the application within seven business days from the time of receipt of such application by the mortgage broker unless the applicant indicates that he or she has the computer capacity to down-load and print such application. The applicant's signature may be hand-written or digital to the extent such signatures are recognized as binding under New York State law.

(x) Each mortgage broker shall submit a copy to the lender of any separate written or electronic fee agreement made with the applicant or a written or electronic statement that there is no separate fee agreement. If applicable, the disclosures in subparagraph (1)(x) of this subdivision shall be included in the fee agreement.

(xi) With regard to written pre-application disclosures, each mortgage broker shall maintain a duplicate copy of the pre-application disclosures signed by the applicant.

(xii) With regard to electronic pre-application disclosures, no mortgage broker shall take an application unless the applicant either digitally signs, to the extent such signatures are recognized as binding under New York State law, the pre-application disclosures he or she has received electronically or acknowledges electronic receipt of the pre-application disclosures through the use of a "required confirm button" without which the transaction may not proceed further. In addition, within three business days of the electronic transmission of the pre-application disclosures, a hard-copy of such pre-application disclosures shall be mailed to each applicant who indicates that he or she does not have the computer capacity to down-load and print such disclosures. The mortgage brokers shall either keep a copy of the pre-application disclosures digitally signed by the applicant or be able to demonstrate that the transaction could not proceed further than the display of the pre-application disclosures without the applicant's use of the "required confirm button". Furthermore, in those instances in which a hard copy of the pre-application disclosures is not mailed to the applicant, the mortgage broker must be able to demonstrate that information was obtained as to the applicant's computer capacity to down-load and print such disclosures.

(xiii) All mail application packages must include the pre-application disclosures and a stamped self-addressed envelope with a request that a signed copy of these disclosures be returned to the mortgage broker. The mortgage broker shall keep a copy of this request.

(xiv) If a mortgage loan involves more than one mortgage broker, mortgage banker or exempt organization, or any combination thereof, the persons or entities involved shall agree among themselves as to who must comply with the disclosure and other requirements imposed under this section. In the absence of a written or electronic co-broker agreement, all such persons or entities shall be liable therefor.

(xv) If there is no toll-free telephone number, then collect calls must be accepted from those applicants who live more than fifty miles from a processing center.

(b) Mortgage banker and exempt organization application disclosures and procedures.

(1) Disclosures. In those instances in which the proceeds of the mortgage loan will be used to finance the acquisition of the dwelling and in all other residential mortgage loan transactions in which a commitment fee or points are paid or will be paid to the lender prior to closing, then prior to the taking of an application, application fee, credit report fee or property appraisal fee, every mortgage banker or exempt organization shall disclose in writing or via electronic media to each applicant for a mortgage loan:

(i) the amount of the application fee, and the mortgage banker or exempt organization's good faith estimate of the credit report fee, property appraisal fee, the processing fee, if any, and the terms and conditions, if any, under which such fees may be refundable. In addition, no fee other than an application fee, credit report fee, property appraisal fee and lock-in fee shall be taken prior to the acceptance by an applicant of a commitment;

(ii) in those instances in which the lender routinely assigns the commitments it has issued in its own name to a third party or parties, the amount of any fee the lender will pay to and/or receive from, the name and address of and the service(s) to be performed by such third party or parties;

(iii) the fact that certain mortgage loan products impose a pre-payment penalty on the borrower and the amount of, or formula for calculating, the pre-payment penalty, if any, and the terms of the pre-payment penalty, if any, will be disclosed to the borrower as soon as they are known, but no later than the issuance of the commitment (if any), for the loan product chosen by the borrower;

(iv) with regard to written applications, a toll free telephone number of a person in a management position with the mortgage banker or exempt organization who may be contacted about problems with the application or if there is no toll free telephone number, then the circumstances under which a collect call will be accepted. With respect to electronic applications, the disclosure shall include the electronic mail address of the mortgage banker or exempt organization;

(v) in those instances in which the lender charges discount points, the following statement: Discount points should lower the interest rate paid on the loan but may not lower the overall cost of the loan. If you refinance or pay off your loan quickly, you will lose the benefit of any lower interest rate provided by the discount points. Furthermore, if you finance the discount points, this will increase the amount of money that you must repay to the lender and you will have to pay interest on the discount points as part of the amount you have borrowed;

(2) Required procedures for mortgage bankers and exempt organizations.

(i) The application fee and/or processing fee, if any, shall be denominated as such and shall be reasonably related to the services to be performed on behalf of the applicant. Neither fee may be based upon a percentage of the principal amount of the loan or the amount financed. The separation of application and processing fees is intended to benefit consumers by allowing them to obtain a more complete and accurate itemization of fees charged in the transaction and to thereby more effectively comparison shop when seeking to obtain a residential mortgage.

(ii) Any amount collected in excess of the actual cost of the credit report fee and the property appraisal fee must be returned at or prior to closing.

(iii) A mortgage banker or exempt organization may satisfy the disclosure requirements of this section by making such disclosures in one or more documents, including but not limited to any form or document used to comply with otherwise applicable State or Federal laws or regulations.

(iv) Every written application taken by a mortgage banker or exempt organization shall be signed by the employee taking such application, and shall include the name and/or title of such employee.

(v) Every electronic application form used by a mortgage banker or exempt organization shall include the e-mail address of the mortgage banker or exempt organization.

(vi) For written applications, each mortgage banker or exempt organization shall provide each applicant with a duplicate of the signed application within seven business days from the time of receipt of such application by the mortgage banker or exempt organization. Both the applicant's signature and the signature of the employee may be hand-written or digital to the extent such signatures are recognized as binding under New York State law. For electronic applications, each mortgage banker or exempt organization shall provide each applicant with a duplicate copy of the application within seven business days from the time of receipt of such application by the mortgage banker or exempt organization unless the applicant indicates that he or she has the computer capacity to down-load and print such application. The applicant's signature may be hand-written or digital to the extent such signatures are recognized as binding under New York State law.

(vii) All disclosures concerning refundability must be no less conspicuous than any other disclosure made pursuant to this section.

(viii) With regard to written pre-application disclosures, every applicant shall sign a duplicate copy of the pre-application disclosures he or she has received which shall be kept by the mortgage banker or exempt organization.

(ix) With regard to electronic pre-application disclosures, no mortgage banker or exempt organization shall take an application unless the applicant either digitally signs, to the extent such signatures are recognized as binding under New York State law, the pre-application disclosures he or she has received electronically or acknowledges electronic receipt of the pre-application disclosures through the use of a "required confirm button" without which the transaction may not proceed further. In addition, within three business days, a hard-copy of such pre-application disclosures shall be mailed to each applicant who indicates that he or she does not have the computer capacity to down-load and print such disclosures. The mortgage banker or exempt organization shall either keep a copy of the pre-application disclosures digitally signed by the applicant or be able to demonstrate that the transaction could not proceed further than the display of the pre-application disclosures without the applicant's use of the "required confirm button". Furthermore, in those instances in which a hard copy of the pre-application disclosures is not mailed to the applicant, then the mortgage banker or exempt organization must be able to demonstrate that information was obtained as to the applicant's computer capacity to down-load and print such disclosures.

(x) All mail application packages must include the pre-application disclosures and a stamped self-addressed envelope with a request that a signed copy of these disclosures be returned to the mortgage banker or exempt organization. The mortgage banker or exempt organization shall keep a copy of this request.

(xi) If a mortgage loan involves more than one mortgage broker, mortgage banker or exempt organization, or any combination thereof, the persons or entities involved shall agree among themselves as to who must comply with the disclosure and other requirements imposed under this section. In the absence of a written or electronic co-broker agreement, all such persons or entities shall be liable therefor.

(xii) If there is no toll-free telephone number, then collect calls must be accepted from those applicants who live more than fifty miles from a processing center.

(c) Mortgage banker or exempt organization acting in a mortgage brokerage capacity.

(1) Disclosures. Prior to taking an application or collecting an application fee, credit report fee or appraisal fee, every mortgage banker or exempt organization acting as a mortgage broker shall disclose to the applicant in writing or via electronic media:

(i) that such mortgage banker or exempt organization will not be making the mortgage loan;

(ii) that such mortgage banker or exempt organization can neither guarantee acceptance into any particular loan program nor promise any specific loan terms or conditions;

(iii) whether the mortgage banker or exempt organization places loans primarily with any three or fewer lenders, and if so, the name(s) of such lender(s);

(iv) a statement to the effect that the rate, points, fees, and other terms quoted at commitment by or on behalf of the lender encompass the consideration to be received by the mortgage banker or exempt organization from a lender for its services. In addition, this statement shall disclose the specific maximum amount of such consideration to be received;

(v) the amount of the application fee, and the good faith estimate of the credit report, property appraisal fee, processing fee, if any, and the terms and conditions, if any, under which such fees may be refundable. In addition, no fee other than an application fee, credit report fee and property appraisal fee shall be taken prior to the acceptance by an applicant of a commitment.

(vi) the specific services which will be provided or performed for the application fee and/or the processing fee;

(vii) if applicable, a description of the consumer protections and lender disclosures which are lost when the loan is placed with a private investor that is neither an exempt organization nor licensed pursuant to article 12-D of the Banking Law. A statement must be included to the effect that if a loan is placed with a private lender, certain consumer protections and lender disclosures required by New York law and regulations do not apply to the loan. The statement shall include a notice the requirement that the term of a balloon mortgage be at least three years does not necessarily apply to a loan placed with a private investor. This statement shall be no less conspicuous than any other disclosures made pursuant to this section;

(viii) if applicable, the fact that fees are being divided between more than one mortgage broker and/or mortgage banker and/or exempt organization and the dollar amount or the percentage, or if not known, a good faith estimate thereof, of the fee to be received by each mortgage broker, mortgage banker and/or exempt organization;

(ix) no mortgage banker or exempt organization shall take any fee in connection with a mortgage loan other than an application fee, credit report fee and property appraisal fee prior to the acceptance by an applicant of a commitment from a qualified lender nor shall any mortgage banker or exempt organization take any fee, prior to closing, other than an application fee, credit report fee and property appraisal fee when the commitment from the lender is subject to any of the following:

(a) adequate appraisal value;

(b) satisfactory credit history and obligations;

(c) pre-sale requirement clause in a condominium or co-op mortgage commitment;

(x) the fact that certain mortgage loan products impose a pre-payment penalty on the borrower in the amount of, or formula for calculating, the pre-payment penalty, if any, and the terms of the pre-payment penalty, if any, will be disclosed to the borrower as soon as they are known, but no later than the issuance of the commitment (if any), for the loan product chosen by the borrower;

(xi) with regard to written application, a toll free telephone number of a person in a management position with the mortgage banker or exempt organization who may be contacted about problems with the application. If there is no toll free telephone number, then collect calls must be accepted from those applicants who live more than fifty miles from a processing center. The circumstances under which a collect call will be accepted must be disclosed to the applicant. With respect to electronic applications, the disclosure shall include the electronic mail address of the mortgage banker or exempt organization.

(2) Required procedures for mortgage bankers and exempt organizations acting in a mortgage brokerage capacity. Mortgage bankers or exempt organizations which act in a mortgage brokerage capacity shall comply with the procedures set forth in paragraph (a)(2) of this section. Nothing in this section shall prohibit a mortgage banker or exempt organization from taking a lock-in fee for transmittal to a mortgage banker or exempt organization subject to the restrictions imposed by section 38.6(c) of this Part.

(d) Separate application disclosure and procedures.

In addition to the disclosures required by this section, each mortgage banker and exempt organization shall disclose in writing or via electronic media to each applicant for a mortgage loan when the interest rate for the loan will be set. If it is the policy of the mortgage banker or exempt organization to allow the applicant to choose when the rate will be set, then the disclosure shall contain a statement to this effect. The disclosure required by this subdivision must be no less conspicuous than the other disclosures made pursuant to this section.

(e) Telephone applications.

Nothing in this section shall be construed to prohibit the taking of telephone applications. However, within 10 days of the taking of such application or filling out a borrower's worksheet, and in any event prior to the taking of any fee, the applicant must be given two copies of the application or the worksheet and of the appropriate disclosures for review by the applicant. The applicant must also be provided with a stamped self-addressed return envelope and a written request that the applicant sign and return one copy of the application and the disclosures to the mortgage broker, mortgage banker or exempt organization. In those instances in which a worksheet and pre-application disclosures are provided to the applicant, the applicant need only sign and return the disclosures.

Notes

N.Y. Comp. Codes R. & Regs. Tit. 3 § 38.3