Section
1 Authority, Scope and Purpose
This regulation is promulgated pursuant to Title
9 V.S.A. §
103, and applies to every mortgage loan, as
hereinafter defined. Title
9 V.S.A. §§
103(a) and (b) require that
lenders issue commitment letters in connection with residential mortgage loans.
Title
9 V.S.A. §
103(c) grants the
Commissioner the authority to promulgate rules specifying the form, content,
and timing of commitment letters required by §
§ 103(a) and (b). The
purposes of this regulation are to create the minimum framework within which
commitment letters are to be issued in this state and to encourage complete and
timely disclosure of information in the furtherance of consumer
protection.
Section 2
Definitions
For the purposes of this regulation, the following terms
shall be defined as set forth herein:
Borrower means a person or persons to whom credit is extended
in a transaction in which a lender takes a security interest against
residential real estate used or to be used by such person or persons as a
dwelling.
Closing means the time a borrower executes a note or a
mortgage, or becomes contractually obligated on a credit transaction, whichever
occurs sooner.
Dwelling means an owner occupied residential structure that
contains one to four units. The term includes an individual condominium unit,
cooperative unit, mobile home, and trailer, if it is used as a
residence.
Mortgage loan means any loan primarily for personal, family,
or household purposes that is secured by a first lien on owner occupied
residential real estate, including first and second homes.
NMLS means the Nationwide Multistate Licensing System and
Registry developed and maintained by the Conference of State Bank Supervisors
and the American Association of Residential Mortgage Regulators for the
licensing and registration of licensees, or any successor to the Nationwide
Multistate Licensing System and Registry.
Residential real estate means any real property located in
Vermont, upon which is constructed or intended to be constructed a
dwelling.
Reverse mortgage loan means a mortgage loan that:
(A) is a loan wherein the committed principal
amount is secured by a mortgage on residential real estate owned by the
borrower;
(B) is due upon sale of
the property securing the loan or upon the death of the last surviving borrower
or upon the borrower terminating use of the real property as a principal
residence or upon the borrower's default;
(C) provides cash advances to the borrower
based upon the equity or the value in the borrower's owner occupied principal
residence; and
(D) requires no
payment of principal or interest until the entire loan becomes due and
payable.
Section 3 Form
The information contained in the commitment letter shall be
written in clear, understandable language and easily read
type.
Section 4 Content
All lenders shall issue a commitment letter in connection
with every mortgage loan. The commitment letter shall be signed by the lender.
A commitment letter may be signed electronically pursuant to the Vermont
Uniform Electronic Transactions Act,
9 V.S.A. §§
270 -
290, as
amended from time to time.
The commitment letter shall include, but not be limited to,
the information required by subdivision A, B, or C of this section, as
applicable. The information shall be (i) grouped together in a meaningful way,
and/or (ii) bolded or otherwise made easily distinguishable from the remainder
of the text:
For a lender required to issue a Closing Discourse under
Federal Regulation Z (12 C.F.R. Part 1026), as amended from time to time, the
lender has the option of either:
(i)
issuing a commitment letter that complies with the requirements of subdivision
A; or
(ii) issuing a commitment
letter that complies with the requirements of subdivision B. (A lender is not
required to comply with both subdivision A and subdivision B.)
A. General Commitment Letter Requirements.
Except for commitment letters issued in accordance with
subdivision B or C of this section, the commitment letter shall include the
following information:
1. Name of
borrower
2. Date of issuance of the
commitment letter
3. Property
address and/or any other real property being taken by the lender as security
for the mortgage loan (for a loan that includes a mobile home, include a
description of the mobile home)
4.
Loan type (fixed or adjustable interest rate)
5. Commitment expiration date
6. Principal loan amount or maximum credit
limit, as applicable
7. Loan
term
8.
(a) If the lender is required to use a HUD-1
or HUD-IA Settlement Statement under Federal Regulation X (12 R Part 1024), all
amounts required to be disclosed on lines 801 and 802 of the HUD-1 or HUD-1 A
Settlement Statement, as amended from time to time
(b) If the lender is not required to use a
HUD-1 or HUD-1 A Settlement Statement, disclose:
(i) all amounts for originating services,
including administrative and processing services performed by or on behalf of
the lender;
(ii) any credit or
charge for the specific interest rate chosen; and
(iii) any annual maintenance fee
9. Loan disbursement and
repayment periods
10. Amount of
monthly payment, including but not limited to the following:
a. Principal and interest amount (if
known)
b. Escrow
i. State whether or not escrow will be
required for the loan
ii. If escrow
is required, list all components of the escrow, including the amounts of such
items, if known
c. All
other components of the monthly payment including the amounts of such items, if
known
11. Rate program
(locked or floating)
a. If the interest rate
is not locked as of the date of issuance of the commitment letter, the lender
shall notify the borrower as to the maximum interest rate for which he or she
qualifies or if no maximum rate is stated, then the lender shall state the
conditions upon which the lender may terminate the commitment.
b. Rate lock expiration date (if applicable
and if different than the commitment expiration date)
12. Interest rate
a. The rate (if known); and
b. If the rate is adjustable, the lender
shall state the index, the margin, and the frequency at which such rate may be
adjusted.
13. Prepayment
terms
14. Name and phone number of
the licensed or registered mortgage loan originator whom the borrower may
contact with questions
15. The NMLS
identification number for both the lender and the mortgage loan
originator
16. If a condition to
the loan commitment is that the closing occur more than 24 hours prior to the
commitment expiration date, the commitment letter shall include a closing
deadline
B. Optional
Short Form Commitment Letter When a Closing Disclosure is Required by Federal
Regulation Z.
Instead of issuing the commitment letter required by
subdivision A, a lender that is required to issue a Closing Disclosure under
Federal Regulation Z, at its option, may issue a short form commitment letter
that includes the following information:
1. Name of the borrower
2. Date of issuance of the commitment
letter
3. Commitment expiration
date
4. Rate lock expiration date
(if applicable and if different than the commitment expiration date)
5. If a condition to the loan commitment is
that the closing occur more than 24 hours prior to the commitment expiration
date, the commitment letter shall include a closing deadline
6. A statement that the Closing Disclosure
issued with the commitment letter contains the interest rate and additional
terms of the mortgage loan, and the commitment letter is delivered concurrently
with the Closing Disclosure
C. Reverse Mortgage Loans.
For a reverse mortgage loan, the commitment letter shall
include the following information:
1.
Name of borrower
2. Date of
issuance of the commitment letter
3. Property address and/or any other real
property being taken by the lender as security for the reverse mortgage loan
(for a loan that includes a mobile home, include a description of the mobile
home)
4. Loan type (fixed or
adjustable interest rate)
5.
Commitment expiration date
6.
Principal limit the borrower may draw under the reverse mortgage loan
7. Initial disbursement limit
8. Disbursement program (lump-sum, monthly
draw, or other options)
9. A
description of when the reverse mortgage loan must be repaid
10. All charges and discounts
11. All amounts required to be disclosed on
lines 801 and 802 of the HUD-1 or HUD-1 A Settlement Statement, as amended from
time to time
12. Rate program
(locked or floating)
a. If the interest rate
is not locked as of the date of issuance of the commitment letter, the lender
shall notify the borrower as to the maximum interest rate for which he or she
qualifies or if no maximum rate is stated, then the lender shall state the
conditions upon which the lender may terminate the commitment
b. Rate lock expiration date (if applicable
and if different than the commitment expiration date)
13. Interest rate
a. The rate (if known); and
b. If the rate is adjustable, the lender
shall state the index, the margin, and the frequency at which such rate may be
adjusted
14. Escrow
a. State whether or not escrow will be
required for the loan
b. If escrow
is required, list all components of the escrow, including the amounts of such
items, if known
c. State whether
the escrow account will be funded from draws on the reverse mortgage loan or
the borrower will be required to make escrow payments
d. If there is no escrow, a statement that
the borrower is responsible for property tax payments and homeowner's
insurance
15. Prepayment
terms
16. Name and phone number of
the licensed or registered mortgage loan originator whom the borrower may
contact with questions
17. The NMLS
identification number for both the lender and the mortgage loan
originator
18. If a condition to
the loan commitment is that the closing occur more than 24 hours prior to the
commitment expiration date, the commitment letter shall include a closing
deadline
Section
5 Timing of Issuance
All commitment letters, except as provided in sub sections
5(A),
5(B),
and
5(C) of
this regulation, shall be delivered to the borrower no less than three business
days prior to the closing, provided, however:
A. A lender may deliver a commitment letter
less than three business days prior to the closing, only when it has sufficient
cause to do so and failure to close the mortgage loan within less than three
business days after the delivery of the letter, shall create a hardship for the
borrower. This exception shall apply only to the timing of the delivery of the
commitment letter, and shall in no way exempt any lender from all other
requirements of this regulation;
B.
For every transaction in which a commitment letter is delivered less than three
business days before the closing, the lender shall document and keep on file
for examination purposes, a written explanation stating the circumstances and
reasons for the application of subsection 5A to the transaction; and
C. A borrower may waive or modify the three
business day period only after the lender has delivered the commitment letter.
The borrower must have a bona fide personal financial emergency that
necessitates closing the mortgage loan before the end of the three business day
period. The facts surrounding the individual situation will determine whether a
bona fide personal financial emergency exists; for example, the imminent sale
of the borrower's home in foreclosure where the foreclosure sale will proceed
unless the mortgage loan proceeds are made available to the borrower during the
three business day period. To modify or waive the waiting period, the borrower
must give the lender a dated written statement that describes the emergency,
specifically waives or modifies the three business day period, and bears the
signature of all borrowers who are primarily liable on the mortgage loan.
Printed forms for this purpose are prohibited. The lender shall keep the
borrower's statement on file for examination purposes.
For the purpose of this section:
"Deliver" (including any form of the word) means the time at
which the borrower has received the commitment letter. A commitment letter may
be delivered electronically pursuant to the Vermont Uniform Electronic
Transactions Act,
9 V.S.A. §§
270 -
290, as
amended from time to time, including the requirement that the borrower has
consented to the electronic delivery of the commitment letter and has not
withdrawn such consent.
"Business day" means all calendar days except Sundays and
legal public holidays referenced in 12 C.F.R. § 1026. 2(a)(6), as amended
from time to time.
If the commitment letter is not provided to the borrower in
person, the borrower is considered to have received the commitment letter three
business days after it is placed in the mail. Likewise, the borrower is
considered to have received the commitment letter three business days after the
lender sends it by email. Alternatively, the lender may rely on evidence that
the borrower received the commitment letter earlier, such as an acknowledgement
from a courier that the borrower has received the commitment letter, or an
acknowledgment by the borrower of receipt of the emailed commitment
letter.
Section 6
Effective Date
This regulation is effective October 1, 2018. Lenders shall
be in compliance with the provisions of this regulation commencing 90 days from
the effective date hereof (During the 90-day transition period, a lender may
comply with either this regulation or prior Regulation B-98-1.) The
commissioner may waive compliance with this regulation for a lender for
additional 30 days,, not to exceed 120 days from adoption, for good cause
shown.
Section 7
Severability
If any provision of this regulation, or the application of it
to any person or circumstance, is determined to be invalid by a court of
competent jurisdiction, such invalidity shall not affect other provisions of
this regulation which can be given effect without the invalid provision or
application, and to that end the provisions of this regulation are
severable.
