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									Good Faith Estimate and
   Truth-in-Lending


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                                                   Good Faith Estimate

The "Good Faith Estimate" represents to the borrower the estimated costs relative to
closing the loan transaction. Under Federal law the Real Estate Settlement Procedures
Act governs these requirements. These regulations require that the Good Faith
Estimate for a transaction be supplied to the borrower within three business days
of the taking of the loan application.

Below you will find an explanation of the items listed on the GFE.

Loan Origination Fee:
This fee is 1 percent of the loan amount in the case of FHA and VA loans and is
generally 1 percent to 1 ½ percent for conventional loans. This is part of the total fees
 charged by the lender to process the loan application.

Loan Discount:
A discount point is based on the interest rate being quoted for a particular loan
amount. The lower the interest rate, the higher the discount points. This is
related to the secondary market and is affected by the price at which the loan can be
sold in the marketplace. When a loan is quoted without points, it is called "Par" pricing.
A par loan would call for -O- discount points at a particular interest rate. If the market
price for a $100,000 loan with an 8 1/8% interest rate is $99,500, the lender will charge
a 1/2% discount point to the borrower to make up the $500.00 in price. In the case of
an interest rate where the yield is more attractive for a loan, the lender will get back an
amount in the transaction, which is called "overage". This overage may or may not be
passed to the borrower and is usually treated as part of the profit in the loan for the
lender.

Appraisal Fee:
The appraisal fee is the fee charged by a professional appraiser to determine the
 market value of the subject property relative to other properties in the area that are
similar in nature and have sold recently (usually the last 12 months). The appraisal fee
will vary depending upon the location and type of property, but usually runs in the
$275.00 to $400.00 range.

Credit Report Fee:
This fee is charged by the third party company to run a credit history on the
borrowers. The fee is generally around $30 to $90 and will be higher if the
borrower is self-employed, or the borrowers are not married.

Lender's Inspection Fee:
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Generally this fee is not required unless there is some circumstance listed in the
appraiser's report indicating the need for repairs, or if the house is under
construction at the time the loan is approved. This fee is around $50.

Mortgage Broker Fee:
This fee is reported if the originating lender is not funding the loan at closing.
Generally the lender funds the loan for the broker at closing and this fee is listed on the
Good Faith Estimate.

"CLO" Access Fee:
This fee is charged to the borrower by a third party, such as a Realtor. The fee is
charged for services relative to assistance in determining the mortgage most
suitable for the borrower. If the borrower agrees to pay the fee, it must be
disclosed on the Good Faith Estimate.

Service Release Premium:
The lender who services the loan (collects the payment from the borrower and
 forwards it to the lender) is paid a fee for the servicing of the loan. If the lender
 who originated the loan releases the servicing right to the lender who purchases the
loan, there is usually a premium paid to the originating lender. If the secondary
(purchasing lender) funds the loan at closing, the fee must be disclosed on the Good
Faith Estimate. This premium is another part of the profit in the loan. It can be used to
reduce the interest rate on a loan for competitiveness. This premium could range from
1.25% to 1.6% for a particular loan.

Yield Spread Premium:
This premium is created by a loan interest rate producing a greater yield, which can be
sold at a higher price in the secondary market. This premium must be disclosed on the
Good Faith Estimate if the purchasing lender is providing funds at the closing. This
overage occurs when interest rates for a loan are higher than the current market. It is
also considered part of the profit in a loan for the originating lender.

Real Estate Tax Service Fee:
If the lender is to escrow property taxes on behalf of the borrower there is a fee to set
up the tax servicing account. Usually there is a tax servicing company that provides the
annual disbursement of taxes on behalf of the lender for the borrower. The lender will
provide this fee information.

Underwriting Fee:
This fee is charged by the lender purchasing the loan. This fee ranges from
$100.00 to $350.00 and is charged since the purchasing lender provides the
 underwriting staff.

Settlement Fee (Closing Fee):
The title company who closes loan will charge this fee. The lender will provide the
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information for this fee.

Title Examination Fee:
If there is an outside or third party title examination, this fee will be charged and
 passed on. It usually ranges from $100 to $150.

Title Insurance Binder:
A binder is issued in lieu of the final title policy at the time of closing. The attorney
issuing the binder usually charges a fee of $20 to $25 for the binder. The final title
policy is issued after the documents are recorded.

Document Preparation Fee:
This fee is charged by the lender for preparation of the closing package that is
delivered to the attorney. It is used by some lenders to supplement the revenue for a
loan.

Attorney's Fees:
The fee charged by an attorney will vary from region to region and may be a flat fee, or
can be a percentage of the loan amount. If a particular attorney is selected by the
borrower, you will need to check with the attorney for a quote on those fees.

Title Insurance (Lender Coverage):
The lender requires that protection be offered for the clear title to a particular
property in the case of default by the borrower, or in the case of claims by third
parties against the property. The cost is based on the loan amount and can be
determined by a chart offered by a title agency in your state.

Title Insurance (Owner's Coverage):
The borrower may choose to purchase a separate policy for protection of the title for the
same reasons the lender chooses to be protected. This would allow the borrower to
transfer or sell the property before any disputes were settled, since the new owner
would be protected by the title insurance company. All borrowers should be advised to
purchase this type of coverage.

Recording Fees:
The county in which the warranty Deed and Mortgage (Security Deed) are recorded will
charge a fee to record the documents. This fee is from $25 to $50 in most cases.

Tax Stamps:
This fee may be charged by a city or county to provide evidence of payment of taxes.

State Tax Stamps (Transfer Tax):
Some states require the seller to pay a tax to the state for transferring of property. It is
based on the sales price of the property. In some states there is also a tax called
"Intangible Tax", that is also based on the loan amount.
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Transfer And Assignment Fee:
This fee may be charged in the case of the originating lender closing in its name and
the purchasing or secondary lender purchasing the loan simultaneously. The lender will
provide this information.

Survey:
The survey is required at the option of the lender. If should be done to determine
whether the property is encroached, or is in the flood plain. This fee will run from $175
and up.

Pest Inspection:
The seller must provide a report as to whether there is infestation of the wood in the
property and that the property is free from termites. In the case of a refinance, the
borrower pays for the pest inspection.

VA Funding Fee:
A veteran is charged a fee of 1.25% of the loan for the VA Insured Loan. This fee may
be added to the loan amount, or paid by the veteran at closing. The Good Faith
Estimate will show the "out of pocket" payment.

Hazard Insurance Escrow:
The borrower pays at closing the cost of hazard insurance for a 12-month period. The
lender will collect each month an amount equal to 1/12 of the annual premium and add
it to the escrow account. Each year at renewal time, the lender will pay the annual
premium from the escrow funds. Since the first loan payment will not be due until the
second month after the loan closes, the lender will collect at closing an additional two
months of hazard insurance premium. Adding the two months to the ten months that
will be collected before the annual premium comes due assures the lender of having
sufficient funds in the escrow account to pay the annual premium. The Good Faith
Estimate will reflect a total of fourteen months of hazard insurance premium for the
reasons stated above.

Mortgage Insurance Escrow:
For the same reasons stated above the lender will collect two months of mortgage
insurance premium for the two initial months of the loan in which no payments are
made to the lender. The calculations should be made using the mortgage insurance
premium charts.

Property Tax Escrow:
The amount of property taxes collected for escrow at closing will vary depending upon
the rates in the county in which the property is located and the number of months to be
collected. There is a property tax chart below used for the purpose of making the
calculations for the number of months. You will need to check with either the lender or
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your local county taxing authority to get the property tax rates in the respective county.

Flood Insurance Escrow:
In the case of a property located in a flood plain, the lender will require flood insurance
and will collect two months in escrow at closing.


PREPAIDS, ITEMS PAID IN ADVANCE AT CLOSING
Prepaid Interest:
Mortgage interest is computed at the end of the month and is payable in arrears. If the
loan closes during the month, interest is not due until the end of the month. The lender
may allow for a payment at the end of the next month. The short period interest, in the
case of deferring until the second month is then collected at closing. The lender will
estimate the interest due on the Good Faith Estimate to be 30-days at the most. The
actual amount collected will depend on the closing date. If a loan were to close on the
15th day of the month, the lender would collect at closing the interest due for the
balance of the month. The "daily rate of interest" is calculated by multiplying the loan
amount by the interest rate and dividing by 365 (loan amount x interest rate / 365).

Monthly Mortgage Insurance:
The private mortgage insurance premium is usually paid per month. At closing two
months will usually be escrowed.

Prepaid Hazard Insurance:
The lender requires that the hazard insurance premium be paid annually and will collect
at closing an extra two months of premium to provide that the full annual premium will
be in escrow at the time the renewal premium comes due. In the case of a refinance of
an existing mortgage there are circumstances when the premium may be less due to
rebate of unused premium.

Prepaid Flood Insurance:
In the case of the property being located in a flood zone or plain, flood insurance is
required. The insurance is offered through Federal programs and coverage is offered
up to $185,000. The hazard insurance company can provide access to the flood
insurance coverage.




Sample of Prepaid Expense Section of Good Faith Estimate:
Estimated Prepaid Expenses

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____Days of interest                                                                                      $_____________
Mortgage Insurance Premium                                                                                $_____________
First Year Hazard Insurance Premium                                                                       $_____________
VA Funding Fee                                                                                            $_____________
____Months of Hazard Insurance                                                                                 $_____________
____Months of Property Taxes                                                                              $_____________
____Months of Flood Insurance                                                                             $_____________
Other Prepaid Items _____________                                                                         $_____________

TOTAL ESTIMATED PREPAID EXPENSES                                                                          $_____________


Sample of Estimated Monthly Payment Section of Good Faith Estimate:
Estimated Monthly Payment

Principal and Interest                                                                                    $________________
1/12 of Annual Hazard Insurance                                                                                $________________
1/12 of Annual Property Taxes                                                                             $________________
1/12 of Annual Mortgage Insurance                                                                         $________________
1/12 of Annual Flood Insurance                                                                                 $________________
Other (Assn. Dues, etc.)                                                                                  $________________

TOTAL ESTIMATED MONTHLY PAYMENT                                                                           $________________




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Sample of Estimated Closing Cost Section of Good Faith Estimate:

Loan Origination Fee (___ %)       (Base Loan Amount)                                                                                $_______________
Loan Discount (___ %)        (Gross Loan Amount)                                                                                     $_______________
Appraisal Fee                                                                                                                        $_______________
Credit Report Fee                                                                                                                    $_______________
Lender's Inspection Fee                                                                                                              $_______________
Mortgage Broker's Fee                                                                                                                $_______________
CLO Access Fee                                                                                                                       $_______________
Service Release Premium
        $__________(POC)
Yield Spread Premium                                                                                                                 $__________(POC)
Real Estate Tax Service Fee                                                                                                          $_______________
Underwriting Fee                                                                                                                     $_______________
Settlement Fee (Closing Fee)                                                                                                         $_______________
Title Examination Fee                                                                                                                $_______________
Title Insurance Binder Fee                                                                                                           $_______________
Document Preparation Fee
        $_______________
Attorney Fees                                                                                                                        $_______________
Title Insurance --- Lender
        $_______________
Title Insurance --- Owner's Title Policy Recording Fees
        $_______________
City/County Tax Stamps                                                                                                               $_______________
State Tax Stamps (Transfer)                                                                                                          $_______________
State Tax Stamps (Intangible)                                                                                                        $_______________
Transfer & Assignment Fee
        $_______________
Survey                                                                                                                               $_______________
Pest Inspection                                                                                                                      $_______________
Other Costs_________                                                                                                                 $_______________

TOTAL ESTIMATED CLOSING COSTS                                                                                                        $_______________

LESS: COSTS TO BE PAID BY SELLER                                                                                                     $_______________

BUYER'S ESTIMATED CLOSING COSTS                                                                                                      $_______________

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This list represents part of the Good Faith Estimate. A sample of the complete form is
furnished in your training Manual. The items listed are presented as estimates, even
though many of the items are known values. Some of the costs will vary, such as
appraisals, surveys, and other fees related to services from third parties. The actual
closing costs will generally be less than the estimates, since some latitude is built into
the accruals of interest and other items. The lender is required to recalculate the Good
Faith Estimate items for the closing and provide an accurate and complete listing of the
costs on the Settlement Sheet or HUD-1 in the closing documents. Any differences are
noted at that time in the closing and the borrower pays the actual expenses rather than
the estimates.


EXPLANATION OF THE GOOD FAITH ESTIMATE (GFE) AND HUD-1
The three most difficult documents to explain to a borrower are the Good Faith
Estimate, the HUD-1, and the Truth In Lending. This narrative should be of some help
with the GFE.

The Good Faith Estimate and HUD-1 are basically the same document; the items on
both are numbered identically. Although the GFE may not contain every cost shown on
the HUD-1, the numbers and headings correspond. The big difference and it is
significant, is that the HUD-1, being the settlement document, states the actual charges
calculated as of the closing date. The GFE is an estimate only!

The lender calculates the GFE with an unknown closing date and an unknown payoff
amount on the existing loan. Lenders usually estimate most closing costs high based on
their knowledge of the transaction at the time of loan application. The major reason that
the lender will not know the exact closing costs is because the borrower is applying for
a loan amount based on either the purchase price or the borrower's best estimate of
value in a refinance transaction. The loan amount at settlement can, and often does
differ. Also, not knowing the exact closing date changes interest calculations and pro-
ration of taxes.

The per diem interest shown on the GFE will be estimated higher than the interest at
actual settlement. Interest is paid in arrears. That means when a borrower pays the July
1st payment, they are paying the June interest. At settlement interest will be charged on
the old loan from the first of the month through the date of settlement. There is also a 3
to 5-day overlap due to rescission and transit time until the payoff funds are received by
the existing lender. Interest will be charged on the new loan from the date of settlement
to the first of the following month. The first payment on the new loan includes the prior
months interest and is normally not due until the first of the month following the month
after closing.

For example, a loan closes on August 15, the first payment is due October 1, collecting
September's interest. The borrower will be required to pay interest at closing for that
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part of August beginning on the date of settlement to the first of September. The
borrower will not have to make their first monthly payment for 46-days. Generally
speaking, the later in the month the loan closes the less cash will be needed for closing
but the sooner the first payment will be due.

The same rule applies to the payment of property taxes. However, property taxes are
pro-rated, based on the settlement date, between the seller and the borrower. What
time of year the loan closes (near tax assessment or disbursement to the taxing
authority) can also affect the amount due at closing and to be escrowed.

The final amount of hazard insurance and sometimes even the property taxes are also
not exact at loan application and can affect the amount of escrows collected for
reserves at settlement.


Commonly Asked Questions About the Good Faith Estimate
Q:         Why do you include an extra payment on my existing loan?
A:         This is interest on your existing loan for the month the loan is paid off. You will
           be charged interest on your old loan up to the day your current lender receives
           and posts the money to pay off the loan. This will occur a few days after closing
           your new loan.

           By using an entire month's payment for this charge we have shown you the
           maximum this charge can be. We have also assured that your application will be
           underwritten for an amount sufficient to cover any charges included in the payoff
           of your old loan.

           You may either bring a personal check to closing to pay for this interest, or
           include it in the new loan amount.

Q:         What is the interest shown on line 901?
A:         This is interest on the new loan from the closing date to the first of the next
           month. Mortgage loan payments are paid in arrears (at the end of the month).
           We have shown 16-days interest as the estimate, because we do not yet know
           when your closing will be scheduled.

Q:         Why are the escrow reserves so high? I have an escrow account with my
           current lender.
A:         We will collect escrow reserves in an amount sufficient to pay bills for taxes and
           insurance when they are due. In some states taxes are paid only once each
           year.

           If you have an escrow account with your current lender, those funds will be
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           refunded to you after the loan is paid off. Those funds are required by law to be
           refunded within 30-days.

           If your present escrow account is current, the net difference between your
           current escrow balance, and the escrows needed for the new loan should be
           equal to one month's payment of tax and hazard insurance reserve.

Q:         My hazard insurance premium was just recently paid. Why do you show 12
           months reserve?
A:         We have estimated 12 months reserve because we often don't know when your
           hazard insurance premium is due. The actual amount collected at closing will be
           based on the policy due date. You will be informed of the amount prior to
           closing.


HUD 1 Closing Statement
Real Estate closings, where a new loan is used a HUD 1 closing statement form will be
used. This is a government required form that outline both buyer and seller closing
costs on one form.

HUD-1 (Page 2)

700 Sales/Broker's Commission:
Total dollar amount of sales commission, usually paid by the seller. Sales commissions
are usually a percentage of the selling price of the home and are intended to
compensate real estate brokers or sales agents for their services.

701-702 Division of Commission:
When several brokers or sales agents work together to sell the home, the commission
may be split among them. If they are paid from funds collected at settlement this is
shown on lines 701-702.

703 Commission paid at Settlement:
Sometimes the broker will retain the deposit against the sales price (earnest money) to
apply towards the commission. In this case, line 703 will show only the remainder of
the commission, which will be paid at settlement.

801 Loan Origination Fee:
This fee covers the lenders administrative costs in processing the loan. Often
expressed as a percentage of the loan, the fee will vary among lenders and from
locality to locality. Generally the buyer pays the fee unless another agreement has
been made with the seller and written into the sales contract.

802 Loan Discount:
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Often called "points" a one-time charge used to adjust the yield (interest rate) on the
loan to what market conditions demand. Each point = 1% of the mortgage amount.
More points paid = lower interest rate.
803 Appraisal Fee:
Pays for a statement of property value for the lender. The lender needs to know if the
value of the property is sufficient to secure the loan if the borrower fails to repay the
loan. Value is based on sales prices of comparable homes in the area. A copy of the
Appraisal may be given to the borrower if the borrower requests a copy in writing.
Know the lenders policy on this as borrowers often ask this question.

804 Credit Report Fee:
This fee pays for the credit report. The credit report shows how the borrower has
handled other credit transactions and determines whether a borrower is an acceptable
credit risk. Problems with a credit report often require an explanation of all derogatory
accounts and liens or judgments. If the reason for these derogatories is acceptable the
borrower may be granted credit despite the problems.

805 Lender's Inspection Fee:
This charge covers inspections, often of newly constructed housing, made by personnel
of the lending institution or an outside inspector. Example: appraiser states the roof
needs repair - the lender may send someone out after the repairs to be sure they are
complete.

806 Mortgage Insurance Application Fee:
Fee covers processing the application for private mortgage insurance, which may be
required on certain loans. It may cover both the appraisal and application fee.

807 (Courier or Delivery Fee) or:
Lenders may charge for any overnight expenses they incur.

807 Assumption Fee:
Charge for processing paperwork for cases in which the buyer assumes the loan and
payments of the prior loan of the seller.

808- 811 Other Fees:
Depending on the lender other fee can be charged to pay for underwriting or processing
(putting the loan file together). May also include any buy down fees.

808-811 Document Preparation Fee:
Fees to pay for preparation of documents, typically closing documents.

808-811 Subordination Fee:
Fees to pay a lender, usually in a 2nd lien position, for permission to subordinate their
lien to a new first mortgage loan.

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901 Interest:
Interest accrued on the new loan from settlement date to the beginning of the period
covered by the 1st payment, usually the first of the month following closing.


902 Mortgage Insurance Premium:
Protects lender in the event of default by the borrower. Usually required when the down
payment is less than 20%; usually a one-year premium.

903 Hazard Insurance Premium:
Protects the homeowner and the lender against physical damage to a property from
fire, wind, vandalism, or other hazards; usually a one-year premium.

904 Flood Insurance:
Protects borrower for loss due to flood. Required if property is within a flood plain.

1001 Hazard Insurance Reserve:
Lender determines the amount of money that must be placed in a reserve that when
added to the monthly collection of insurance (1/12 the annual premium) will provide
ample funds to pay the next insurance premium.

1002 Mortgage Insurance:
Lender determines the amount of money that must be placed in a reserve that when
added to the monthly collection of insurance (1/12 the annual premium) will provide
ample funds to pay the next insurance premium.

1003-1004 City/ County Property Taxes:
Lender determines the amount of money that must be placed in a reserve that when
added to the monthly collection of taxes (1/12 the annual assessment) will provide
ample funds to pay the next tax assessment.

1101 Settlement or Closing Fee:
Fee paid to the settlement agent. Responsibility for payment of this fee is usually
negotiated between the seller and buyer at the time the sales contract is signed.

1102-1104 Abstract or Title Search, Title Examination, Title Insurance Binder:
Covers the costs of the search and examination of public records of previous
ownership, transfers, liens, etc. Title insurance determines whether the seller can
convey clear title to the property and to disclose any matters on record that could
adversely affect the buyer or the lender. Examples of title problems are unpaid
mortgages, judgments or tax liens, conveyances of mineral rights, leases, and power
line easements or road right-of-ways that could limit use and enjoyment of the real
estate. In some areas a title insurance binder is called a commitment to insure.

1105 Document Preparation:
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There may be a separate document fee that covers Preparation of final legal papers,
such as mortgage, deed of trust, note, or conveyance deed.

1106 Notary Fee:
Cost of having a licensed person affix his or her name and seal to various documents,
authenticating the execution of these documents by the parties.

1107 Attorney's Fees:
Borrower may be required to pay for legal services provided to the lender in connection
with the settlement.

1108 Title Insurance:
The total cost of owner's or lender's title insurance may be shown here. The borrower
may pay all, a part or none of this cost depending on the terms of the sales contract or
local custom.

1109 Lender's Title Insurance:
One time premium may be charged at settlement for a lender's title policy, which
protects the lender against loss due to problems or defects in connection with the title.
The insurance is usually written for the amount of the mortgage loan and covers losses
due to defects or problems not identified by the title search and examination. The
borrower may pay all, a part or none of this cost depending on the terms of the sales
contract or legal custom.

1110 Owner's Title Insurance:
Protects the borrower against losses due to title defects. May be paid by the seller if
customary. In some areas if the buyer desires an owner's policy he or she must pay for
it.

1111-1113 Tax Certificate:
A fee charged by a local taxing authority (state, county, city) to obtain the current status
of taxes paid. The lender requires that all taxes be current before closing a new loan.

1111-1113 Title Policy Endorsements:
A fee charged by a title insurer to provide additional coverage(s) required by the lender
or investor.

1111-1113 Document Preparation Fee: Settlement Agent:
Fees charged by the settlement company to prepare closing documents such as the
HUD-1.

1201 Recording Fees:
Fees charged by recorders in local county to record loan instruments.

1202 City/County tax/stamps:
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Additional fees charged by local municipalities to for recording of loan instruments.

1203 State tax/Stamps:
See 1201 and 1202 above.

1204 Documentary Fee:
See 1201 and 1202 above.

1205 Other Recording Fees:
Borrower pays the fees for legally recording the new deed and mortgage. These fees,
collected when property changes hands or when a mortgage loan is made may be quite
large and are set by state or local governments.

1301 Survey:
The lender or the title insurance company may require that a surveyor conduct a
property survey (normally a improvement location certificate) to determine the exact
location of the home and the property boundaries, as well as, easements and rights of
way. This is a protection to the buyer, as well as, the lender.

1302 Pest and Other Inspections:
Inspection for termite of other infestations of the home. Not required in all states and
may be paid by the buyer or seller.

1303 Tax Service Fee:
The fee charged for a tax service contract. The Tax Service Provider will search tax
records for the lender each year for current assessments due and owing.

1306 Final Inspection Fee:
Charged when an inspection is required on the property for reasons such as repairs or
improvements that must be completed before the loan is closed.

California Mortgage Loan Disclosure Statement
The Mortgage Loan Disclosure Statement has some additions to it as required by the
California Department of Real Estate, which oversees most mortgage activity in the
state. This is a two-page form, where page one contains the same HUD section
numbers we described above. Page two is titled Additional Required California
Disclosures, and details the following information:

           Proposed loan amount and cash to/from at closing – this section includes the
           total of fees listed on page one, and summarizes payment of other obligations,
           such as consumer debt, mortgage payoffs, and third party payments for services
           not related to the transaction.

           Proposed interest rate and term – this part identifies if the loan is a fixed rate or
           has an initial variable rate. The best course of action is to mark the Initial
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           Variable Rate box if at any time during the term of the loan it could become an
           adjustable.

           Proposed payments – where the GFE only mentions the initial P&I payment on
           the loan, the MLDS breaks down the payment more specifically. It notes the P&I
           payment, how frequently it will be made, and for how long that particular P&I
           payment will be made. This section also identifies the balloon features that may
           be associated with the loan program, and makes special note to the borrower
           about what may happen to them when the balloon payment comes due.

           Prepayments – you will state here whether or not there is a prepayment penalty
           on the loan, along with the terms of the penalty calculation.

           Other liens – all liens against the subject property that the borrower is obligated
           for, prior to the proposed loan transaction, must be stated here along with
           approximate balance and lien position. Then, any and all liens that will remain
           on the subject property at the conclusion of the transaction must be listed, along
           with approximate balance and lien position.

           If the borrower fails to identify and correctly state the amount of all liens against
           the property the state of California allows brokers to hold a borrower responsible
           for payment of fees and commissions, should a loan not be obtainable due to
           this inaccuracy.

           Broker compliance – the broker must identify whether the loan will be funded in
           whole or in part with any of its own funds, and that the loan will be made in
           compliance with the Real Estate Law in California. The broker must also provide
           the phone number of the Department of Real Estate office. The MLDS requires
           the name and license number of the loan broker be provided on this form, along
           with the name, signature and license number of the broker’s representative
           completing the form.

The State of California does not allow any modification whatsoever to this form.


Truth-In-Lending (Regulation Z)
In 1968, The Consumer Protection Act was put into effect to require all lenders,
including mortgage lenders, to disclose to borrowers exactly how much obtaining credit
was going to cost them. The law is designed to protect consumers by requiring clear
disclosure of key terms of the lending arrangement and costs.

The Federal Truth-in-Lending Disclosure Statement (TIL) must be given to the borrower
within three business days of the application, as with the GFE/MLDS. The information
contained in the TIL is not always certain at the time of application, and the loan officer
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should indicate the items listed are estimates. A final TIL will be provided to the borrower
at the time of settlement if the actual APR differs from the originally disclosed APR by more
than 1/8%.

Under Regulation Z, disclosure must be made of the following important credit terms:

Annual
Percentage Rate                       This is the measure of the cost of the credit that must be disclosed on
                                      a yearly basis. This is not the interest rate the borrower pays as
                                      reflected on the promissory note! This figure includes: interest for the
                                      life of the loan, mortgage insurance premiums for the life of the loan
                                      and prepaid finance charges (see below).

Prepaid Finance
Charges                               This is the amount charged to the consumer for the credit. This
                                      represents the dollar amount charged to the borrower for:
                                      origination fees to brokers, bankers, wholesale lenders; discount
                                      points to buy a rate, interest adjustment on the new loan, prepaid
                                      mortgage insurance, escrow service and settlement fees.

Amount Financed                       This represents the amount being borrowed by the consumer
                                      credited to the actual sale. In dollar figures, it is the loan amount
                                      minus the prepaid finance charges.

Total of Payments When you see someone swooning at closing, they have probably
                  just noticed this figure! This represents the total of the Prepaid
                  Finance Charges and Amount Financed; or, all the amounts due at
                  and after closing on the loan! It is usually many times the actual
                  loan amount.

Payment Schedule A schedule of when payments are due and how much they are, to
                 include principal, interest and MI if applicable, is required. The final
                 TIL will define exactly how payments will be made, even if it differs
                 from the promissory note!
Demand/Variable
Feature          The TIL must identify if the loan has a ‘demand’ feature (principal
                 balance may called due and payable in full at a certain date in the
                 future), or a variable rate feature (loan may at any point in its term
                 become an adjustable).

Insurance
Required                              The type of insurance required for the protection of the creditor
                                      must be identified, and for what property.

Security Interest                     The address of the property that will serve, as security for the loan
                                      must be given.
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Late Charges                          Any fees charged for late payments, and when they can be
                                      charged must be clearly specified.

Prepayment
Penalty                               If there are fees charged for prepaying some or all of the principal
                                      balance, it must be clearly identified on the TIL. Failure to do so on
                                      the final TIL will render any prepayment penalty specified in the note
                                      as unenforceable.

Assumption Policy The lender must indicate if the loan is assumable or not, and if
                  there might be conditions associated with its assumption.

To summarize the TIL and Reg Z, the loan officer should provide an estimated TIL to
the borrower within three business days of the application (although at application is
preferable). If the estimated APR differs from the final APR by more than 1/8%, or if
any of the above terms differ, a new TIL must be given to the borrower no later than at
settlement. The disclosures made on the TIL provided at settlement will rule over the
terms of the note should the two give different information.

Calculation of APR on your financial calculator
To calculate APR using a financial calculator use the following: (remember calculators
operate differently so you may need to refer to your manual to solve for APR)


                         Information to be Entered                                                        Calculator Key
                         into calculator                                                                  to use

                         “Number of Payments”                                                                          N
                         “Amount Financed”                                                                             PV or L/A
                         “PI and MI payment”                                                                                         PMT
                         Solve for “Interest or Rate”                                                                  %i or Int




Mortgage Loan Origination Agreement
The Mortgage Loan Origination Agreement (MLOA) acts as a contract between the
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borrower and the mortgage broker. It should identify the responsibilities of each party
to the other; identify the broker’s compensation structure, and any remediation
procedures. Many wholesale lenders require that an MLOA be executed by the
borrower for the specific purpose of showing that the lender has disclosed that they
may be compensated for their services in a number of ways. The attached MLOA
meets this guideline.




  WARNING! Protected by International Copyright Laws  1998, 1999, 2000, 2001, 2002, 2003 The Mortgage Training Institute a division of MTI Services Corporation
 This Material and the service marked, copyrighted training and sales processes are licensed to The Mortgage Institute graduates only. Reproduction is strictly prohibited.
                                          The Mortgage Training Institute 4155 E. Jewell AVE #908, Denver Colorado 80222.
                                                                     303-758-9037/ Fax 303-759-3925

								
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