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Mortgage Forensic Analysis Report

Prepared for Save Loan and Me Consultant

For

Tom Doe

First Mortgage

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Sample Report

Table of Contents
Executive Summary Forensic Audit Results Observation

Document List For Examination

Forensic Examination Assumption Index Value Transaction Parties Borrowing Parties Transaction Details Subject Property Loan Terms Section A - Settlement Statement (HUD-1 or 1A) Section B - Uniform Residential Loan Application Section C - Good Faith Estimate or Mortgage Loan Disclosure Statement Section D - Final Truth-In-Lending and Itemization of Amount Financed Section E - HOEPA (Section 32), State High Cost Loan, and State Restricted Fees Section F - Promissory Note, Mortgage/Deed of Trust, Riders, and Addendums Section G - Mortgage Insurance Section H - Title Insurance Section I - Notice of Right to Cancel (Refinance Only) Section J - Escrow Account (Monthly Payment with Tax and Insurance) Section K - Purchase Agreement Section L - Appraisal Report Section M - Other Disclosures Section N - Per Diem Interest Disclosure - California Loan Only

Mortgage Compliance Analysis Report Risk Indicator Funding Summary Truth-In-Lending (TIL) Summary Findings Detail Loan Detail Fees

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Sample Report

Table of Contents
Laws and Regulations References Federal Laws and Regulations 12CFR226.4 12CFR226.18 12CFR226.19 12CFR226.22 12CFR226.32

State Laws and Regulations CA AB 489/344 (Division 1.6 of the Financial Code)
California Civil Code Section 2948.5

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Sample Report

Executive Summary
The following are the results of the mortgage forensic analysis audit performed. At various points in your loan application process, you, the borrower(s), should have received various disclosures and documents from the mortgage broker (if applicable) and the lender under many difference Federal, State, and local laws and regulations. In addition, prior to the loan settlement (closing), additional final disclosures and loan documents should had been given to the borrower(s) for approval and signature. We have examined the loan documents and prepared this report.

Forensic Audit Results


Audit Area Federal TIL APR Test Federal TIL Finance Charge Test Federal High Cost (Section 32) APR Test Citation 12 CFR 226.22(a)(2),(4) 12 CFR 226.18(d)(1) 12 CFR 226.32(a)(1)(i) Variance -0.148% -$58,820.33 -4.652% -$12,866.81 -4.652% -$4,915.57 Result Fail Fail Pass Pass Pass Pass

Federal (Section 32) Points and Fees Test 12 CFR 226.32(a)(1)(ii) State High Cost Home Loan APR Test State High Cost Home Loan Points and Fees Test
CA AB 344 [CA FC 4970]

CA AB 344 [CA FC 4970]

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Sample Report

Observation
1/ This is a cash out refinance. 2/ There are limited loan documents provided by the borrower. The audit is based on the limited documents and assumptions made by the auditor. 3/ The underwriting fee and tax related service fee charged to borrower were paid by the lender. The lender did not include the said fees in the TIL calculation. However, federal banking law 12CFR226.4 only exempts the fee from the finance charge that is paid by the seller. 4/ This loan failed the TILA finance charge test because the disclosed finance chargewas understated by $58,820.33. 5/ The loan has a Good Faith Estimate disclosure date that is not within three business days after the application date. 6/ This is a negative amortization loan program. The principal balance of the loan could be increased even though the borrower is making the required monthly payments. If the monthly payment is not sufficient to pay monthly interest, the interest defers would be added to the principal balance. The borrower is required to make a full monthly payment on the fifth anniversary of the due date or the unpaid principal balance not exceed 115% of the original principal amount originally borrowed which ever come first.

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Sample Report

Loan Documents For Examination


This in-depth forensic analysis report is based on an examination of the mortgage loan documents presented by the Borrower(s). In order to determine the validity of a pending case, the following documents were reviewed and audited for their compliance to the applicable federal, state, and local laws and regulations related to consumer real estate lending practice.
Item 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Document Title Final HUD-1 or 1A Estimated Closing Statement Initial Loan Application Final Loan Application Initial Good Faith Estimate (Broker) Mortgage Loan Disclosure Statement (For CA DRE Broker License) Initial Good Faith Estimate (Lender) Initial TIL Disclosure (Lender) Home Equity Line Of Credit Disclosure Itemization of Amount Financed Final Truth-In-Lending Disclosure Lenders Closing Instruction Promissory Note
Mortgage/Deed of Trust and Addendums

Recommended X X X X

Received X

Remarks

X X X

X X

X X

X X X

Prepayment Rider/Addendum Buy Down Agreement (For Buy Down Loan) Estimated Initial Monthly Payments Mortgage Insurance Certificate Section 32 Loan Disclosure Purchase Agreement (For Purchase Transaction) Net Tangible Benefit Escrow Account Disclosure Statement Notice of Right To Cancel (For Primary Residence Refinance) Preliminary Title Report DU / LP Underwriting Findings (if any) First Payment Letter To Borrower Loan Disbursement Summary Rate Lock-In Agreement Appraisal Report Private Mortgage Insurance Disclosure
Variable Rate Mortgage Program Disclosure
Disclosure Concerning The Charging Of Per Diem Interest

X X X X

X X

X X

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Sample Report

Forensic Examination Assumption:


The application has no borrower's signature and no signature date. The application date is one of the ComplianceAnalyzer system required data fields. Therefore, we have made an assumption that the application date is 2/25/2005 (Assuming 30 days before the date of the Note). The loan documents provided were signed by the borrower but the date of signature is unknown. The closing/settlement date in the ComplianceAnalyzer (CA) system web form is the loan document signing date; therefore, we have made an assumption that the document signing date is the same as Escrow Officer's signature date on the Final HUD-1, 5/20/2007.

Index Value
Historical Index Value: The "Twelve-Month Average" of the annual yields on actively traded United States Treasury securities adjusted to a constant maturity of one year, as published by the Federal Reserve Board. The date of the Adjustable Rate Note is 5/20/2007; therefore we selected the April 2007 index value of 5.0217% to perform the audit. The reason for selecting the April 2007 index value is because Clause 2 (C) on the Adjustable Rate Rider defines as ".... The most recent Index figure as the date 15 days before each Change Date is called the Current Index.

MTA Time Period: January, 2007 - May, 2007 Jan 2007 Feb 2007 Mar 2007 Apr 2005 May 2005 5.0217 5.1708 5.3467 5.0217 5.1333

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Sample Report

Closed Loan Audit Review

Form Revised 3/1/2009

Prepared for: 123456789A (California Lending Inc.) Tom Doe 333X Angel Street

Save Loan and Me Consultant Loan Originator (Interviewer's Employer) Co-Borrower Name City Orange County Orange

Date:

3/31/2009 Loan Agencies

Lender Loan Number Borrower Name Property Address: Loan Information Property Type LTV CLTV

Social Security No.

Social Security No. State California

Single Family 100.00% 100.00%

Occupancy Status Loan Amount (1st) Interest Rate

Owner Occupied $416,500.00 1.000%

Lien Type Settlement Date Loan Program

First 5/20/2007 Adjustable

Loan Purpose Disbursement Date Prepayment

Cash out 6/2/2007 36 months

Section A

Settlement Statement (HUD-1 or 1A) Yes No No

Observation

Is Final HUD-1 or 1A in the file? Is Estimated Settlement Statement in the file? Is Estimated Settlement Statement signed by borrower(s)? Do fees on Final HUD-1 or 1A match Estimated Settlement Statement? Is Yield Spread Premium paid to broker (POC) reflected correctly on the HUD? Were fees duplicated on Final HUD-1 or 1A? Section B Uniform Residential Loan Application

Yes N/A Observation No

Is the initial loan application ( FNMA Form 1003) in the file? Is the initial loan application signed and dated by borrower(s) ? Was the initial loan application complete? Was the initial loan application signed and dated by Interviewer? Is the final typed loan application ( FNMA Form 1003) in the file? Is the final typed loan application signed by borrower(s) ? Stated Income only; does the monthly income (item V) on Final Application match Initial Application? If No to the preceding item, Income in Final Application $19,629.00 Income in Initial Application $0.00

Yes
No N/A

Was the Information For Government Monitoring (item X) completed? Does borrower signature in the initial application match the signature in the final application? Section C Good Faith Estimate or Mortgage Loan Disclosure Statement Is Good Faith Estimate (GFE) or Mortgage Loan Disclosure Statement (MLDS)(CA DRE Broker only) prepared by mortgage broker in the file? Is Good Faith Estimate (GFE) or Mortgage Loan Disclosure Statement prepared by mortgage broker within three days of receiving a loan application? Is mortgage broker an exclusive agent of the mortgage lender. Is any additional Good Faith Estimate prepared by mortgage lender in the file? Was any additional Good Faith Estimate mailed to borrower within three business days after the application received from the mortgage broker? HELOC only - Is the Home Equity Line of Credit Disclosure in the file? Section D Final Truth-In-Lending and Itemization of Amount Financed

Yes N/A Observation Yes


No

N/A No

N/A Observation Yes Yes No


Yes unknown

Is the Final Truth-In-Lending in the file? Is the Itemization of Amount Financed in the file? Are all required closing fees disclosed in the Itemization of Amount Financed? Are the closing fees classified correctly (PFC and non PFC) in the Itemization of Amount Financed? Are any service providers owned (wholly or partial) by the lender or mortgage broker? Is the payment schedule in the Final Truth-In-Lending calculated correctly?

Yes

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Sample Report

Closed Loan Audit Review

Form Revised 3/1/2009

Prepared for: 123456789A (California Lending Inc.) Tom Doe 333X Angel Street

Save Loan and Me Consultant Loan Originator (Interviewer's Employer) Co-Borrower Name City Orange County Orange

Date:

3/31/2009 Loan Agencies

Lender Loan Number Borrower Name Property Address: Loan Information Property Type LTV CLTV

Social Security No.

Social Security No. State California

Single Family 100.00% 100.00%

Occupancy Status Loan Amount (1st) Interest Rate

Owner Occupied $416,500.00 1.000%

Lien Type Settlement Date Loan Program

First 5/20/2007 Adjustable

Loan Purpose Disbursement Date Prepayment

Cash out 6/2/2007 36 months

Section E Federal TIL APR Test Disclosed

HOEPA (Section 32), State High Cost Loan, and State Restricted Fees Test
12 CFR 226.22(a)(2),(4)

Observation

Fail
-0.148%

7.890%

Calculated

8.038%

Variance

Federal TIL Finance Charge Test Disclosed


$720,317.20

12 CFR 226.18(d)(1) $779,137.53

Fail
-$58,820.33

Calculated

Variance

Federal High Cost (Section 32) APR Test Calculated


8.038%

12 CFR 226.32(a)(1)(i) 12.690%

Pass
-4.652%

Threshold

Variance

Federal (Section 32) Points and Fees Test Calculated


$18,938.14

12 CFR 226.32(a)(1)(ii) $31,804.95

Pass
-$12,866.81

Threshold

Variance

State High Cost Home Loan APR Test Calculated


8.038%

CA AB 344 [CA FC 4970] 12.690%

Pass
-4.652%

Threshold

Variance

State High Cost Home Loan Points and Fees Test

CA AB 344 [CA FC 4970] $23,853.71

Pass
-$4,915.57

Calculated

$18,938.14

Threshold

Variance

Are all fees to be charged permitted in the applicable state? Section F Promissory Note, Mortgage/Deed of Trust, Riders & Addendums

Yes Observation Yes Yes N/A N/A Yes No

Are each of the Note, Mortgage/Deed of Trust and related Riders or Addendums in the file? Are each of the Note, Mortgage/Deed of Trust and related Riders or Addendums signed by borrower's)? When a spouse is not obligated for the loan and is included in the property title, does the spouse sign on the Mortgage/Deed of Trust & related documents? Is the Quit Claim Deed signed by Spouse? Are the amount of loan, term, interest rate, and property address correctly disclosed in the Note? Adjustable Rate Note: is the Adjustable Rate Disclosure in the file? Is the Adjustable Rate Disclosure signed by borrower (s)? Buy-down Loan Program: is the Buy-down Agreement in the file? Is the Buy-down Agreement signed by borrower(s)? Adjustable Rate Loan: Is the Consumer Handbook on adjustable rate mortgages in the file? Section G Mortgage Insurance (if applicable)

N/A N/A No Observation N/A

Is the Mortgage Insurance Certificate in the file? (if applicable) Does the Certificate include borrower name, insured property address, and renew rate? If Lender Paid Mortgage Insurance (LPMI); Is the LPMI Disclosure signed by borrower? Other Mortgage Insurance; Is the Mortgage Insurance Disclosure signed by borrower?

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Sample Report

Closed Loan Audit Review

Form Revised 3/1/2009

Prepared for: 123456789A (California Lending Inc.) Tom Doe 333X Angel Street

Save Loan and Me Consultant Loan Originator (Interviewer's Employer) Co-Borrower Name City Orange County Orange

Date:

3/31/2009 Loan Agencies

Lender Loan Number Borrower Name Property Address: Loan Information Property Type LTV CLTV

Social Security No.

Social Security No. State California

Single Family 100.00% 100.00%

Occupancy Status Loan Amount (1st) Interest Rate

Owner Occupied $416,500.00 1.000%

Lien Type Settlement Date Loan Program

First 5/20/2007 Adjustable

Loan Purpose Disbursement Date Prepayment

Cash out 6/2/2007 36 months

Section H

Title Insurance No

Observation

Is the Loan Policy of Title Insurance in the file? Are the Name of Insured, Title vested, Legal Description, and Amount of Insurance correctly in Policy? Is the Preliminary Title Report/Title Commitment/Title Search in the file? Is the Plat or Survey in file Preliminary Title Report: Was the report less than 60 days old at funding? Were all liens, judgments, and taxes due paid off or addressed? Did all borrowers have a vested &/or equitable interest in the property prior to closing? Section I Notice of Right to Cancel (Refinance Only)

No

Observation Yes
No Yes Yes

Is the federal Notice of Right to Cancel in the file? Was the Doc Signing Date correct (the same date as shown next to the signatures on the document)? Was the Final Date to Cancel completed and correct? Was the funding date after the Final Date to Cancel? Section J Escrow Account (Monthly Payment with Tax and Insurance)

Observation No

Is the Escrow Waiver in the file? Is the Escrow Waiver signed by borrower(s)? If the borrower(s) requested impounds: Is the correct amount entered on the final HUD? Escrow Account Agreement: Has the borrower(s) initialed preference & signed the form? Section K Purchase Agreement

Observation N/A

Is the Purchase Contract in the file? Did all parties sign the contract and addendum? Does the property address match the HUD-1? Does the sales price match the HUD-1 line 101?

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Sample Report

Closed Loan Audit Review

Form Revised 3/1/2009

Prepared for: 123456789A (California Lending Inc.) Tom Doe 333X Angel Street

Save Loan and Me Consultant Loan Originator (Interviewer's Employer) Co-Borrower Name City Orange County Orange

Date:

3/31/2009 Loan Agencies

Lender Loan Number Borrower Name Property Address: Loan Information Property Type LTV CLTV

Social Security No.

Social Security No. State California

Single Family 100.00% 100.00%

Occupancy Status Loan Amount (1st) Interest Rate

Owner Occupied $416,500.00 1.000%

Lien Type Settlement Date Loan Program

First 5/20/2007 Adjustable

Loan Purpose Disbursement Date Prepayment

Cash out 6/2/2007 36 months

Section L

Appraisal Report No

Observation

Is the appraisal report in the file? Is any explanation provided on property values are declining and the housing demand is over supply? Is any explanation provide on the marketing time over 6 months? If there had been additions, were the building permits in the file? If no building permits on the additions: Did the appraiser include the addition into gross living area? Are the comparables located within one mile circle to subject property? Is the date of sale of each comparables less than 12 months? Is the appraisal made "as is"? Section M Other Disclosures

Observation Yes Yes Yes No

Is the Borrower Signature Authorization signed and dated by borrower in the file? Is the First Payment Letter To Borrower in the file? Do the first payment date, payment amount, and the mailing address of payment mail in the First Payment letter match the information in the Note? Is the first payment due less than 30 days from close escrow? If the first payment is due less than 30 days from close escrow: Is any Hardship Letter in the file? Is the Hardship Letter signed and dated by the borrower(s)? Section N Per Diem Interest Disclosure - California Loan

Observation No 0 Yes No

Is the interest (line 901) paid to lender more than one day prior to disbursement of fund? Number of days of additional interest charged to borrower Is the Disclosure Concerning The Charging Of Per Diem Interest in the file? Has the borrower agreed to pay additional interest?

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Sample Report

MORTGAGE COMPLIANCE ANALYSIS REPORT


CE ID: User Name: Product Name: Report Type: Report Date/Time: Report Version: RiskIndicator 179029U30G Company Administrator ComplianceAnalyzer Post-Close Mortgage Loan 04/02/2009 03:22 AM (PDT) 3 HOEPA TILA RESPA Client Name: Lender Loan Number: Borrower Name: Property Address: Client Support Company 123456789A Tom Doe 333X Angel Street Orange, CA 92867 Exceptions Investor/ Custom

State & Local Predatory

State Regs

FINDINGS SUMMARY
Federal HOEPA (Section 32) HOEPA High Cost Mortgage: HOEPA Rate-based Test: HOEPA Points and Fees Test: HOEPA Timing of Disclosure Test: HOEPA Balloon Payment Test: HOEPA Prepayment Penalties Test: Federal TILA TILA Finance Charge Test: TILA Rescission Finance Charge Test: TILA Foreclosure Rescission Finance Charge Test: TILA APR Test: TILA Right of Rescission Test: TILA Disclosure Date Test: Federal RESPA RESPA GFE Disclosure Date Test: CA AB 489/344 (Division 1.6 of the Financial Code) CA AB 489/344 Consumer Loan: CA AB 489/344 Consumer Loan Single Premium Credit Insurance Test: CA AB 489/344 Covered Loan APR Threshold Test: CA AB 489/344 Covered Loan Points and Fees Threshold Test: CA AB 489/344 Covered Loan: CA AB 489/344 Covered Loan Prepayment Term Test: CA AB 489/344 Covered Loan Balloon Payment Test: CA AB 489/344 Covered Loan Subordinate Lien Negative Amortization Test: CA AB 489/344 Covered Loan DTI Presumption Test: CA AB 489/344 Covered Loan Financing of Points and Fees Test: State Regulations Result YES PASS PASS PASS NO N/A N/A N/A N/A N/A Loan Data Comparison Data Variance Result FAIL Loan Data Comparison Data Variance Result FAIL FAIL NOT TESTED FAIL PASS N/A Loan Data $720,317.20 $720,317.20 7.890% Comparison Data $779,137.53 $779,137.53 8.038% Variance -$58,820.33 -$58,820.33 -0.148% Result NO PASS PASS N/A N/A N/A Loan Data 8.038% $18,938.14 Comparison Data 12.690% $31,804.95 Variance -4.652% -$12,866.81

8.038% $18,938.14

12.690% $23,853.71

-4.652% -$4,915.57

Sample Report

Interest Rate Test: Grace Period Test: Late Fees Test: Prepayment Term Test: State Regulations Restricted Fees Broker Fees Test: Reconveyance Fee Alert: Index Name Treasury Security

Result PASS PASS PASS PASS

Loan Data 1.000% 15 Days 5.000% 36 Months

Comparison Data

Variance

6.000% 60 Months

-1.000% -24 Months

Result NOT TESTED ALERT

Loan Data

Comparison Data

Variance

Term 30 Year

Yield 4.690%

Date 03/15/2007

TIL SUMMARY
Annual Percentage Rate 8.038% Interest Rate 1.000% Payment Schedule Number of Payments 1 11 12 12 11 301 11 1 Finance Charge $779,137.53 Amount Financed $397,561.86 Total of Payments $1,176,699.39

Amount of Payments $1,339.63 $1,339.63 $1,440.10 $1,548.11 $1,664.22 $3,535.01 $3,535.07 $3,535.11

FINDINGS DETAIL
Federal HOEPA (Section 32) Section 32 (High Cost) Mortgage (12 CFR 226.32(a)(1)(i) and (ii)) [Amd. 2001] / [Original] The loan is not a Section 32 (High Cost) mortgage because it has terms that do not exceed either the HOEPA ratebased threshold or the HOEPA points and fees based threshold. This loan has terms that do not exceed the rate-based threshold. (12 CFR 226.32(a)(1)(i)) [Amd. 2001] / [Original] The annual percentage rate (APR) at consummation is 8.038%, which does not exceed the yield of 4.690%, as of March 15, 2007 on 30 year Treasury securities (the Treasury securities having comparable periods of maturity), plus 8.000 percentage points. The yield is as of the fifteenth day of the month immediately preceding the month of the application for extension of credit, which was received by the creditor on April 1, 2007. This loan has terms that do not exceed the points and fees based threshold. (12 CFR 226.32(a)(1)(ii)) [Amd. 2001] / [Original] The total points and fees payable by the consumer at or before loan closing is $18,938.14, which does not exceed the greater of 8 percent of the "total loan amount" (as defined in the official commentary to paragraph 32(a)(1)(ii)), or $547.00. The timing of disclosure test is not applicable to this loan due to one or more of the following findings: (12 CFR 226.31(c)) Pre-close audits do not pertain to the consummation of a loan. The loan is not a high cost loan. The balloon payment test is not applicable to this loan. (12 CFR 226.32(a)) The loan is not a high cost loan. The prepayment penalties test is not applicable to this loan due to one or more of the following findings: (12 CFR 226.32(a)) The loan is not a high cost loan. There is no prepayment term specified in the terms of the loan.

NO

PASS

PASS

N/A

N/A N/A

Sample Report

Federal TILA This loan failed the TILA finance charge test. (12 CFR 226.18(d)(1)) The finance charge is $779,137.53. The disclosed finance charge of $720,317.20 is not considered accurate because it is understated by more than $100. This loan failed the TILA rescission finance charge test. (12 CFR 226.23(g)(1)) The finance charge is $779,137.53. The disclosed finance charge of $720,317.20 is not considered accurate for purposes of rescission because it is understated by more than 1/2 of 1 percent of the face amount of the note or $100, whichever is greater. This loan was not tested against the TILA foreclosure rescission finance charge test due to one or more of the following findings: (12 CFR 226.23(h)) A disclosed finance charge was not provided; or Your company settings are not configured to run the TILA foreclosure rescission finance charge test as part of an audit report. This loan failed the TILA APR test. (12 CFR 226.22(a)(2),(4)) The annual percentage rate (APR) is 8.038%. The disclosed APR of 7.890% is not considered accurate because it is more than 1/8 of 1 percentage point above or below the APR as determined in accordance with the actuarial method. This loan passed the TILA right of rescission test. Closed-end (12 CFR 226.23(a)(3)) , Open-end (12 CFR 226.15(a)(3)) The funding date is not before the third business day following consummation. The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by 12 CFR 226.23 or 226.15, or delivery of all material disclosures, whichever occurs last. The TILA Disclosure Date Test does not apply to this loan due to the following finding. Closed-end (12 CFR 226.17(b)) , Open-end (12 CFR 226.5b(1)) The loan is not a "residential mortgage transaction," meaning it is not a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained in the consumer's principal dwelling to finance the acquisition or initial construction of that dwelling. Federal RESPA This loan failed the Good Faith Estimate disclosure date test. (12 CFR 226.19(a)) The loan has a Good Faith Estimate disclosure date that is not within three business days after the application date, or is after the closing date. In a residential mortgage transaction subject to the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) the creditor shall make good faith estimates of required disclosures before consummation, or shall deliver or place them in the mail not later than three business days after the creditor receives the consumer's written application, whichever is earlier. Calculations take into account a submitted preference that this test treat the creditor's office as being open to the public on Saturdays for carrying on substantially all of its business functions, as described in 226.2(a)(6). CA AB 489/344 (Division 1.6 of the Financial Code) Consumer Loan (CA AB 344 1 [CA FC 4970(d)]) The loan is a consumer loan, as defined in the legislation, due to all of the following findings: The loan is secured by a property intended to be used as the principal dwelling of the consumer. The loan is secured by property improved by a one-to-four residential unit. The loan is not a bridge loan, as defined in the legislation. This loan passed the single premium credit insurance test. (CA AB 344 9 [CA FC 4979.7]) The consumer loan does not finance credit life, credit disability, credit property, or credit unemployment insurance premiums, or debt cancellation or suspension agreement fees. This loan passed the APR threshold test. (CA AB 344 1 [CA FC 4970(b)(1)(A)]) The annual percentage rate at consummation does not exceed by more than 8% points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month of the application date. This loan passed the points and fees threshold test. (CA AB 344 1 [CA FC 4970(b)(1)(B)]) The total points and fees, as defined in the legislation, do not exceed 6% of the total loan amount, as defined in HOEPA (Section 32). Covered Loan (CA AB 344 1 [CA FC 4970(b)]) The loan is not a covered loan, as defined in the legislation, due to one or more of the following findings: The loan is not a consumer loan, as defined in the legislation. The loan does not exceed either the APR threshold or the points and fees threshold. If the latest available closing date is before January 1, 2006, the original principal balance of the loan does exceed $250,000.

FAIL

FAIL

NOT TESTED

FAIL

PASS

N/A

FAIL

YES

PASS

PASS

PASS

NO

Sample Report

If the latest available closing date is on or after January 1, 2006, the original principal balance of the loan does exceed the most current conforming loan limit for a single-family first mortgage loan established by the Federal National Mortgage Association ($417,000.00). The prepayment term test is not applicable to this loan. (CA AB 344 2 [CA FC 4973(a)(1)]) The loan is not a covered loan, as defined in the legislation. The balloon payment test is not applicable to this loan. (CA AB 344 2 [CA FC 4973(b)(1)]) The loan is not a covered loan, as defined in the legislation. The subordinate lien negative amortization test is not applicable to this loan. (CA AB 344 2 [CA FC 4973(c)]) The loan is not a covered loan, as defined in the legislation. The DTI presumption test is not applicable to this loan. (CA AB 344 2 [CA FC 4973(f)(1)]) The loan is not a covered loan, as defined in the legislation. The financing of points and fees test is not applicable to this loan. (CA AB 489 [CA FC 4979.6]) The loan is not a covered loan, as defined in the legislation. State Regulations This loan passed the interest rate test. The loan has an interest rate that conforms to the requirements for the lender's license type in the state where the property is located. This loan passed the grace period test. The loan has a grace period that conforms to the requirements for the lender's license type in the state where the property is located. This loan passed the late fees test. The loan has late fees that conform to the requirements for the lender's license type in the state where the property is located. This loan passed the prepayment term test. The loan has a prepayment term that conforms to the requirements for the lender's license type in the state where the property is located. State Regulations Restricted Fees This loan is not tested by the broker fees test. The broker fees limitations depend on the license of the broker, which is not captured on the loan form. A licensed Real Estate Broker, when acting as the broker, may receive commissions not exceeding the totals outlined in CA Bus. Prof. Code 10242(b). A licensed Residential Mortgage Lender, when acting as the broker, may receive commissions not exceeding the totals outlined in CA Bus. Prof. Code 10242(b). (CA Bus. Prof. Code 50703) A licensed Finance Lender, when acting as the broker, may only broker loans to other licensed Finance Lenders (CA. Fin. Code 22059) and charge for services actually rendered (10 CCR 1451). Reasonable Reconveyance Fee A borrower may be charged a "reasonable" reconveyance fee. A reconveyance fee that does not exceed $45 is presumed to be reasonable. (CA Civil Code 2941(e))

N/A N/A N/A

N/A N/A

PASS

PASS

PASS

PASS

NOT TESTED

ALERT

LOAN DETAIL
Client CE ID: Report Type:

179029U30G User Name: Post-Close Mortgage Loan

Company Administrator

Client Name:

Client Support Company

Lender Lender Name: Lender Loan Number: Originator: MIN: License Type: DIDMCA Exempt: HUD Approved Lender: Investor Default: Borrower First Name: Total Income:

California Lending Inc. 123456789A

: : Custom Label 3: Custom Label 4: California Residential Mortgage Lender License No No

Loan Modification Sample Inc.

Tom $12,500.00 / month

Last Name: DTI Ratio:

Doe 0.000%

Sample Report

Property Address:
Number Street Name Type (St, Ave, etc.) State Direction Zip Unit #

333X
City

Angel Street
County

Orange Type: Occupancy: Loan Information Loan Amount:

Orange Detached SFD Primary Residence

CA

92867 Number of Units:

$416,500.00 ARM Refinance Cash-Out/Other No 100.000% 100.000% Conventional First Mortgage

Loan Amount:
(with Finance Charge)

$416,500.00 1.000% 7.890% $720,317.20 No 360 months 360 months 5.000% 15 days

(exclude PMI, MIP, Funding Fee financed)

Program Type: Loan Purpose: Purpose of Refinance: Refinancing Portfolio Loan: LTV Ratio: CLTV Ratio: Loan Type: Lien Type: Document Type: Prepayment Penalty Program Name: Prepayment Penalty Program: Prepayment Term:

Interest Rate: Undiscounted Rate: Disclosed APR: Disclosed Finance Charge: Irregular Payment Transaction: Maturity Term: Amortization Term: Late Charges: Grace Period:

Not Provided Not Provided 36 months

Max. Prepayment Penalty Amount:


(for high-cost points & fees)

$8,745.80

Construction / Construction to Permanent Rate: Estimate Interest on: Amount Advanced Adjustable Rate Mortgage ARM Margin: ARM Index: Ceiling: Floor: Graduated Payment Mortgage Rate: Potential Negative Amortization (Option ARM) Negative Amortization Standard Type: Payment Adjustment: Cap: 7.500%

Construction Term: Interest Reserve:

2.650% 5.021% 9.950% 2.625%

First Adjustment: Subsequent Adjustment: Adjustment Rounding:

Cap 0.000% Cap No rounding

Period 1 months Period

Term:

Recast:

Maximum Balance:

Buydown 1. 2. or 1.075 3. Multiplier: 4. Frequency: 12 months 5. Beginning 60 Stop 348 Month: Month: Frequency: 60 months 115.000% Recast at Maximum Balance Maximum Balance Can Be Exceeded by One Payment

Rate: Rate: Rate: Rate: Rate:

Term: Term: Term: Term: Term:

Interest Only Term: Interest Only (excl. Negative Amortization and Option ARM) Term: Dual Amortization Initial Amortization Term: Subsequent Amortization Term:

Period: Period:

Mortgage Insurance (PMI) Upfront Premium:

Monthly Premium (Initial):

Sample Report

or Cash/Credit Financed $0.00 Adjust Payments Due to Upfront Premium

Prepaid Finance Charge

or Monthly Premium (Renew): or

Period

Period Cancel at Calculate Premiums Using Loan Amount Cancel At Midpoint

Dates Application Date: Initial GFE Disclosure Date: Initial TIL Disclosure Date: Sec. 32 (HOEPA) Disclosure Date:

04/01/2007 04/05/2007

Closing / Settlement Date: Funding / Disbursement Date: Rate Lock Date:

05/20/2007 06/02/2007 05/01/2007

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800: Items payable in connection with loan Prepaid Finance Charges 801 802 803 804 805 Loan Origination Fee Loan Discount Fee Appraisal Fee Credit Report Fee Lender Inspection Fee (performed prior to closing) Lender Inspection Fee (performed post closing) Mortgage Insurance Application Fee Assumption Fee Modification Fee Tie-in Fee Mortgage Broker Fee (Direct) Mortgage Broker Fee (Indirect / POC) Yield Spread Premium (Indirect / POC) CLO Access Fee Application Fee Rate Lock Fee Commitment Fee Processing Fee Underwriting Fee Administration Fee Appraisal Review Fee Appraisal Re-Inspection Fee Flood Determination - Initial Fee Flood Determination - Life of Loan Fee Document Preparation Fee Document Signing Fee Courier / Messenger Fee Tax Related Service Fee Wire Transfer Fee Warehousing Fee Advance Mortgage Payments Credit Life Insurance Premium Accident Insurance Premium Health Insurance Premium Loss of Income Insurance Premium Debt Cancellation Fee Prepayment Penalty Compliance Audit / Quality Control Fee Seller-Paid Points and Fees $ $ 2,082.50 bona fide $ 350.00 $ 15.00 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Financed By Lender Compensation To Lender Lender Affiliate of Lender Other Lender Lender Lender Lender Lender Other 12,495.00 13,200.00 Lender Lender Lender Lender Broker Lender Broker Lender Other Other Other Lender Lender Lender Lender Lender Lender Lender Lender Lender Lender Lender Lender Other Lender

806 807

995.00 350.00 250.00

12.00 350.00

75.00

900: Items required by lender to be paid in advance Prepaid Finance Charges Financed By Lender Compensation To

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901 902 903

Interest Mortgage Insurance Premium Hazard Insurance Premium County Property Taxes Flood Insurance Premium

$ for day(s) $ $ 850.00 $ $ $ $ $ $

Lender Other Other Other Other

1000: Reserves deposited with lender Prepaid Finance Charges 1001 1002 1003 1004 1005 Hazard Insurance Reserve Mortgage Insurance Reserve City Property Taxes Reserve County Property Taxes Reserve Annual Assessments $ 135.00 $ $ $ 1,171.40 $ $ $ $ $ $ Financed By Lender Compensation To Other Other Other Other Other

1100: Title Charges Prepaid Finance Charges 1101 1102 1103 1104 1105 1106 1107 Settlement / Closing / Escrow Fee Abstract / Title Search Fee Title Examination Fee Title Insurance Binder Fee Title Document Preparation Fee Notary Fee Attorney's Fee Attorney's Fee (Other) 1108 1109 1110 Title Insurance Lender's Coverage Owner's Coverage Assignment Endorsement Fee Sub-Escrow Fee Reconveyance Fee Title Courier Fee Funding, Wire, or Disbursement Fee Tie-in Fee E-doc Fee $ 1,078.64 $ $ $ $ $ 120.00 $ Excludable due to borrower choice $ Excludable due to borrower choice $ 3,456.00 $ $ $ 75.00 $ 150.00 $ $ 150.00 $ 100.00 $ 350.00 $ 150.00 $ $ $ Financed By Lender Compensation To Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other

1200: Government Recording and Transfer Charges Prepaid Finance Charges Financed By Lender Compensation To

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1201 1202 1203

Recording Fee City / County / Tax / Stamps State Tax / Stamps Subordination Recording Fee Assignment Recording Fee Recording Service Fee Intangible Tax

$ 150.00 $ $ $ $ $ $ $ $ $ $

Other Other Other Other Other Other Other

1300: Additional Settlement Charges Prepaid Finance Charges 1301 1302 Survey Fee Pest Inspection Fee Architectural / Engineering Fee Building Permit $ $ $ $ $ $ $ $ $ Financed By Lender Compensation To Other Other Other Other

If you have any questions or comments regarding this report, please contact ComplianceEase client support at 650.347.HELP (4357) or at clientsupport@complianceease.com.

DISCLAIMER: Provision of this report and the content contained herein is made subject to the terms of the services agreement between LogicEase Solutions Inc. and the client for whom this report was prepared. LogicEase Solutions' services, particularly including its ComplianceAnalyzer service, are protected by the following U.S. patent and other patents pending: 7,386,505.

COPYRIGHT 2001-2009 LOGICEASE SOLUTIONS INC. ALL RIGHTS RESERVED. END OF REPORT

Sample Report

Code of Federal Regulations


[CITE: 12CFR226.18] [Title 12, Volume 3] [Revised as of January 1, 2008] From the U.S. Government Printing Office via GPO Access TITLE 12--BANKS AND BANKING CHAPTER II--FEDERAL RESERVE SYSTEM (C0NTINUED) PART 226_TRUTH IN LENDING (REGULATION Z)--Table of Contents Subpart C_Closed-End Credit Sec. 226.18 Content of disclosures.

For each transaction, the creditor shall disclose the following information as applicable: (a) Creditor. The identity of the creditor making the disclosures. (b) Amount financed. The amount financed, using that term, and a brief description such as the amount of credit provided to you or on your behalf. The amount financed is calculated by: (1) Determining the principal loan amount or the cash price (subtracting any downpayment); (2) Adding any other amounts that are financed by the creditor and are not part of the finance charge; and (3) Subtracting any prepaid finance charge. (c) Itemization of amount financed. (1) A separate written itemization of the amount financed, including:\40\ ----------------------------------------------------------------------\40\ Good faith estimates of settlement costs provided for transactions subject to the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) may be substituted for the disclosures required by paragraph (c) of this section. ----------------------------------------------------------------------(i) The amount of any proceeds distributed directly to the consumer. (ii) The amount credited to the consumer's account with the creditor. (iii) Any amounts paid to other persons by the creditor on the consumer's behalf. The creditor shall identify those persons.\41\ ----------------------------------------------------------------------\41\ The following payees may be described using generic or other general terms and need not be further identified: public officials or government agencies, credit reporting agencies, appraisers, and insurance companies. ----------------------------------------------------------------------(iv) The prepaid finance charge. (2) The creditor need not comply with paragraph (c)(1) of this

Federal Regulation 12CFR226.

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section if the creditor provides a statement that the consumer has the right to receive a written itemization of the amount financed, together with a space for the consumer to indicate whether it is desired, and the consumer does not request it. (d) Finance charge. The finance charge, using that term, and a brief description such as ``the dollar amount the credit will cost you.'' (1) Mortgage loans. In a transaction secured by real property or a dwelling, the disclosed finance charge and other disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge: (i) Is understated by no more than $100; or (ii) Is greater than the amount required to be disclosed. (2) Other credit. In any other transaction, the amount disclosed as the finance charge shall be treated as accurate if, in a transaction involving an amount financed of $1,000 or less, it is not more than $5 above or below the amount required to be disclosed; or, in a transaction involving an amount financed of more than $1,000, it is not more than $10 above or below the amount required to be disclosed. (e) Annual percentage rate. The annual percentage rate, using that term, and a brief description such as ``the cost of your credit as a yearly rate.'' \42\ ----------------------------------------------------------------------\42\ For any transaction involving a finance charge of $5 or less on an amount financed of $75 or less, or a finance charge of $7.50 or less on an amount financed of more than $75, the creditor need not disclose the annual percentage rate. ----------------------------------------------------------------------(f) Variable rate. (1) If the annual percentage rate may increase after consummation in a transaction not secured by the consumer's principal dwelling or in a transaction secured by the consumer's principal dwelling with a term of one year or less, the following disclosures:\43\ ----------------------------------------------------------------------\43\ Information provided in accordance with Sec. Sec. 226.18(f)(2) and 226.19(b) may be substituted for the disclosures required by paragraph (f)(1) of this section. ----------------------------------------------------------------------(i) The circumstances under which the rate may increase. (ii) Any limitations on the increase. (iii) The effect of an increase. (iv) An example of the payment terms that would result from an increase. (2) If the annual percentage rate may increase after consummation in a transaction secured by the consumer's principal dwelling with a term greater than one year, the following disclosures: (i) The fact that the transaction contains a variable-rate feature. (ii) A statement that variable-rate disclosures have been provided earlier. (g) Payment schedule. The number, amounts, and timing of payments scheduled to repay the obligation. (1) In a demand obligation with no alternate maturity date, the

Federal Regulation 12CFR226.

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creditor may comply with this paragraph by disclosing the due dates or payment periods of any scheduled interest payments for the first year. (2) In a transaction in which a series of payments varies because a finance charge is applied to the unpaid principal balance, the creditor may comply with this paragraph by disclosing the following information: (i) The dollar amounts of the largest and smallest payments in the series. (ii) A reference to the variations in the other payments in the series. (h) Total of payments. The total of payments, using that term, and a descriptive explanation such as ``the amount you will have paid when you have made all scheduled payments.'' \44\ ----------------------------------------------------------------------\44\ In any transaction involving a single payment, the creditor need not disclose the total of payments. ----------------------------------------------------------------------(i) Demand feature. If the obligation has a demand feature, that fact shall be disclosed. When the disclosures are based on an assumed maturity of 1 year as provided in Sec. 226.17(c)(5), that fact shall also be disclosed. (j) Total sale price. In a credit sale, the total sale price, using that term, and a descriptive explanation (including the amount of any downpayment) such as ``the total price of your purchase on credit, including your downpayment of $----.'' The total sale price is the sum of the cash price, the items described in paragraph (b)(2), and the finance charge disclosed under paragraph (d) of this section. (k) Prepayment. (1) When an obligation includes a finance charge computed from time to time by application of a rate to the unpaid principal balance, a statement indicating whether or not a penalty may be imposed if the obligation is prepaid in full. (2) When an obligation includes a finance charge other than the finance charge described in paragraph (k)(1) of this section, a statement indicating whether or not the consumer is entitled to a rebate of any finance charge if the obligation is prepaid in full. (l) Late payment. Any dollar or percentage charge that may be imposed before maturity due to a late payment, other than a deferral or extension charge. (m) Security interest. The fact that the creditor has or will acquire a security interest in the property purchased as part of the transaction, or in other property identified by item or type. (n) Insurance and debt cancellation. The items required by Sec. 226.4(d) in order to exclude certain insurance premiums and debt cancellation fees from the finance charge. (o) Certain security interest charges. The disclosures required by Sec. 226.4(e) in order to exclude from the finance charge certain fees prescribed by law or certain premiums for insurance in lieu of perfecting a security interest. (p) Contract reference. A statement that the consumer should refer to the appropriate contract document for information about nonpayment, default, the right to accelerate the maturity of the obligation, and prepayment rebates and penalties. At the creditor's option, the statement may also include a reference to the contract for further information about security interests and, in a residential mortgage transaction, about the creditor's policy regarding assumption of the

Federal Regulation 12CFR226.

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obligation. (q) Assumption policy. In a residential mortgage transaction, a statement whether or not a subsequent purchaser of the dwelling from the consumer may be permitted to assume the remaining obligation on its original terms. (r) Required deposit. If the creditor requires the consumer to maintain a deposit as a condition of the specific transaction, a statement that the annual percentage rate does not reflect the effect of the required deposit.\45\ ----------------------------------------------------------------------\45\ A required deposit need not include, for example: (1) An escrow account for items such as taxes, insurance or repairs; (2) a deposit that earns not less than 5 percent per year; or (3) payments under a Morris Plan. [46 FR 20892, Apr. 7, 1981; 46 FR 29246, June 1, 1981, as amended at 52 FR 48670, Dec. 24, 1987; 61 FR 49246, Sept. 19, 1996]

Federal Regulation 12CFR226.

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Code of Federal Regulations [CITE: 12CFR226.19]


[Title 12, Volume 3] [Revised as of January 1, 2008] From the U.S. Government Printing Office via GPO Access

TITLE 12--BANKS AND BANKING CHAPTER II--FEDERAL RESERVE SYSTEM (C0NTINUED) PART 226_TRUTH IN LENDING (REGULATION Z)--Table of Contents Subpart C_Closed-End Credit Sec. 226.19 Certain residential mortgage and variable-rate transactions. (a) Residential mortgage transactions subject to RESPA--(1) Time of disclosures. In a residential mortgage transaction subject to the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) the creditor shall make good faith estimates of the disclosures required by Sec. 226.18 before consummation, or shall deliver or place them in the mail not later than three business days after the creditor receives the consumer's written application, whichever is earlier. (2) Redisclosure required. If the annual percentage rate at the time of consummation varies from the annual percentage rate disclosed earlier by more than \1/8\ of 1 percentage point in a regular transaction or more than \1/4\ of 1 percentage point in an irregular transaction, as defined in Sec. 226.22, the creditor shall disclose all the changed terms no later than consummation or settlement. (b) Certain variable-rate transactions.\45a\ If the annual percentage rate may increase after consummation in a transaction secured by the consumer's principal dwelling with a term greater than one year, the following disclosures must be provided at the time an application form is provided or before the consumer pays a nonrefundable fee, whichever is earlier:\45b\ ----------------------------------------------------------------------\45a\ Information provided in accordance with variable-rate regulations of other federal agencies may be substituted for the disclosures required by paragraph (b) of this section. \45b\ Disclosures may be delivered or placed in the mail not later than three business days following receipt of a consumer's application when the application reaches the creditor by telephone, or through an intermediary agent or broker. ----------------------------------------------------------------------(1) The booklet titled Consumer Handbook on Adjustable Rate Mortgages published by the Board and the Federal Home Loan Bank Board, or a suitable substitute.

Federal Regulation 12CFR226.

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(2) A loan program disclosure for each variable-rate program in which the consumer expresses an interest. The following disclosures, as applicable, shall be provided: (i) The fact that the interest rate, payment, or term of the loan can change. (ii) The index or formula used in making adjustments, and a source of information about the index or formula. (iii) An explanation of how the interest rate and payment will be determined, including an explanation of how the index is adjusted, such as by the addition of a margin. (iv) A statement that the consumer should ask about the current margin value and current interest rate. (v) The fact that the interest rate will be discounted, and a statement that the consumer should ask about the amount of the interest rate discount. (vi) The frequency of interest rate and payment changes. (vii) Any rules relating to changes in the index, interest rate, payment amount, and outstanding loan balance including, for example, an explanation of interest rate or payment limitations, negative amortization, and interest rate carryover. (viii) At the option of the creditor, either of the following: (A) A historical example, based on a $10,000 loan amount, illustrating how payments and the loan balance would have been affected by interest rate changes implemented according to the terms of the loan program disclosure. The example shall reflect the most recent 15 years of index values. The example shall reflect all significant loan program terms, such as negative amortization, interest rate carryover, interest rate discounts, and interest rate and payment limitations, that would have been affected by the index movement during the period. (B) The maximum interest rate and payment for a $10,000 loan originated at the initial interest rate (index value plus margin, adjusted by the amount of any discount or premium) in effect as of an identified month and year for the loan program disclosure assuming the maximum periodic increases in rates and payments under the program; and the initial interest rate and payment for that loan and a statement that the periodic payment may increase or decrease substantially depending on changes in the rate. (ix) An explanation of how the consumer may calculate the payments for the loan amount to be borrowed based on either: (A) The most recent payment shown in the historical example in paragraph (b)(2)(viii)(A) of this section; or (B) The initial interest rate used to calculate the maximum interest rate and payment in paragraph (b)(2)(viii)(B) of this section. (x) The fact that the loan program contains a demand feature. (xi) The type of information that will be provided in notices of adjustments and the timing of such notices. (xii) A statement that disclosure forms are available for the creditor's other variable-rate loan programs. (c) Electronic disclosures. For an application that is accessed by the consumer in electronic form, the disclosures required by paragraph (b) of this section may be provided to the consumer in electronic form on or with the application. [Reg. Z, 52 FR 48670, Dec. 24, 1987; 53 FR 467, Jan. 7, 1988, as amended at 61 FR 49246, Sept. 19, 1996; 62 FR 63443, Dec. 1, 1997; 72 FR 63474, Nov. 9, 2007

Federal Regulation 12CFR226.

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Code of Federal Regulations [CITE: 12CFR226.22]


[Title 12, Volume 3] [Revised as of January 1, 2008] From the U.S. Government Printing Office via GPO Access

TITLE 12--BANKS AND BANKING CHAPTER II--FEDERAL RESERVE SYSTEM (C0NTINUED) PART 226_TRUTH IN LENDING (REGULATION Z)--Table of Contents Subpart C_Closed-End Credit Sec. 226.22 Determination of annual percentage rate.

(a) Accuracy of annual percentage rate. (1) The annual percentage rate is a measure of the cost of credit, expressed as a yearly rate, that relates the amount and timing of value received by the consumer to the amount and timing of payments made. The annual percentage rate shall be determined in accordance with either the actuarial method or the United States Rule method. Explanations, equations and instructions for determining the annual percentage rate in accordance with the actuarial method are set forth in appendix J to this regulation.\45d\ ----------------------------------------------------------------------\45d\ An error in disclosure of the annual percentage rate or finance charge shall not, in itself, be considered a violation of this regulation if: (1) The error resulted from a corresponding error in a calculation tool used in good faith by the creditor; and (2) upon discovery of the error, the creditor promptly discontinues use of that calculation tool for disclosure purposes and notifies the Board in writing of the error in the calculation tool. ----------------------------------------------------------------------(2) As a general rule, the annual percentage rate shall be considered accurate if it is not more than \1/8\ of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section. (3) In an irregular transaction, the annual percentage rate shall be considered accurate if it is not more than \1/4\ of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.\46\ ----------------------------------------------------------------------\46\ For purposes of paragraph (a)(3) of this section, an irregular transaction is one that includes one or more of the following features: multiple advances, irregular payment periods, or irregular payment amounts (other than an irregular first period or an irregular first or final payment). -----------------------------------------------------------------------

Federal Regulation 12CFR226.

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(4) Mortgage loans. If the annual percentage rate disclosed in a transaction secured by real property or a dwelling varies from the actual rate determined in accordance with paragraph (a)(1) of this section, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, the disclosed annual percentage rate shall also be considered accurate if: (i) The rate results from the disclosed finance charge; and (ii)(A) The disclosed finance charge would be considered accurate under Sec. 226.18(d)(1); or (B) For purposes of rescission, if the disclosed finance charge would be considered accurate under Sec. 226.23(g) or (h), whichever applies. (5) Additional tolerance for mortgage loans. In a transaction secured by real property or a dwelling, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, if the disclosed finance charge is calculated incorrectly but is considered accurate under Sec. 226.18(d)(1) or Sec. 226.23(g) or (h), the disclosed annual percentage rate shall be considered accurate: (i) If the disclosed finance charge is understated, and the disclosed annual percentage rate is also understated but it is closer to the actual annual percentage rate than the rate that would be considered accurate under paragraph (a)(4) of this section; (ii) If the disclosed finance charge is overstated, and the disclosed annual percentage rate is also overstated but it is closer to the actual annual percentage rate than the rate that would be considered accurate under paragraph (a)(4) of this section. (b) Computation tools. (1) The Regulation Z Annual Percentage Rate Tables produced by the Board may be used to determine the annual percentage rate, and any rate determined from those tables in accordance with the accompanying instructions complies with the requirements of this section. Volume I of the tables applies to single advance transactions involving up to 480 monthly payments or 104 weekly payments. It may be used for regular transactions and for transactions with any of the following irregularities: an irregular first period, an irregular first payment, and an irregular final payment. Volume II of the tables applies to transactions involving multiple advances and any type of payment or period irregularity. (2) Creditors may use any other computation tool in determining the annual percentage rate if the rate so determined equals the rate determined in accordance with appendix J, within the degree of accuracy set forth in paragraph (a) of this section. (c) Single add-on rate transactions. If a single add-on rate is applied to all transactions with maturities up to 60 months and if all payments are equal in amount and period, a single annual percentage rate may be disclosed for all those transactions, so long as it is the highest annual percentage rate for any such transaction. (d) Certain transactions involving ranges of balances. For purposes of disclosing the annual percentage rate referred to in Sec. 226.17(g)(4) (Mail or telephone orders--delay in disclosures) and (h) (Series of sales--delay in disclosures), if the same finance charge is imposed on all balances within a specified range of balances, the annual

Federal Regulation 12CFR226.

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percentage rate computed for the median balance may be disclosed for all the balances. However, if the annual percentage rate computed for the median balance understates the annual percentage rate computed for the lowest balance by more than 8 percent of the latter rate, the annual percentage rate shall be computed on whatever lower balance will produce an annual percentage rate that does not result in an understatement of more than 8 percent of the rate determined on the lowest balance. [46 FR 20892, Apr. 7, 1981, as amended at 47 FR 756, Jan. 7, 1982; 48 FR 14886, Apr. 6, 1983; 61 FR 49246, Sept. 19, 1996]

Federal Regulation 12CFR226.

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Code of Federal Regulations [CITE: 12CFR226.32]


[Title 12, Volume 3] [Revised as of January 1, 2008] From the U.S. Government Printing Office via GPO Access

TITLE 12--BANKS AND BANKING CHAPTER II--FEDERAL RESERVE SYSTEM (C0NTINUED) PART 226_TRUTH IN LENDING (REGULATION Z)--Table of Contents Subpart E_Special Rules for Certain Home Mortgage Transactions Sec. 226.32 Requirements for certain closed-end home mortgages.

(a) Coverage. (1) Except as provided in paragraph (a)(2) of this section, the requirements of this section apply to a consumer credit transaction that is secured by the consumer's principal dwelling, and in which either: (i) The annual percentage rate at consummation will exceed by more than 8 percentage points for first-lien loans, or by more than 10 percentage points for subordinate-lien loans, the yield on Treasury securities having comparable periods of maturity to the loan maturity as of the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or (ii) The total points and fees payable by the consumer at or before loan closing will exceed the greater of 8 percent of the total loan amount, or $400; the $400 figure shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index that was reported on the preceding June 1. (2) This section does not apply to the following: (i) A residential mortgage transaction. (ii) A reverse mortgage transaction subject to Sec. 226.33. (iii) An open-end credit plan subject to subpart B of this part. (b) Definitions. For purposes of this subpart, the following definitions apply: (1) For purposes of paragraph (a)(1)(ii) of this section, points and fees means: (i) All items required to be disclosed under Sec. 226.4(a) and 226.4(b), except interest or the time-price differential; (ii) All compensation paid to mortgage brokers; (iii) All items listed in Sec. 226.4(c)(7) (other than amounts held for future payment of taxes) unless the charge is reasonable, the creditor receives no direct or indirect compensation in connection with the charge, and the charge is not paid to an affiliate of the creditor; and (iv) Premiums or other charges for credit life, accident, health, or loss-of-income insurance, or debt-cancellation coverage (whether or not the debt-cancellation coverage is insurance under applicable law) that provides for cancellation of all or part of the consumer's liability in

Federal Regulation 12CFR226.

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the event of the loss of life, health, or income or in the case of accident, written in connection with the credit transaction. (2) Affiliate means any company that controls, is controlled by, or is under common control with another company, as set forth in the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.). (c) Disclosures. In addition to other disclosures required by this part, in a mortgage subject to this section, the creditor shall disclose the following in conspicuous type size: (1) Notices. The following statement: ``You are not required to complete this agreement merely because you have received these disclosures or have signed a loan application. If you obtain this loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan.'' (2) Annual percentage rate. The annual percentage rate. (3) Regular payment; balloon payment. The amount of the regular monthly (or other periodic) payment and the amount of any balloon payment. The regular payment disclosed under this paragraph shall be treated as accurate if it is based on an amount borrowed that is deemed accurate and is disclosed under paragraph (c)(5) of this section. (4) Variable-rate. For variable-rate transactions, a statement that the interest rate and monthly payment may increase, and the amount of the single maximum monthly payment, based on the maximum interest rate required to be disclosed under Sec. 226.30. (5) Amount borrowed. For a mortgage refinancing, the total amount the consumer will borrow, as reflected by the face amount of the note; and where the amount borrowed includes premiums or other charges for optional credit insurance or debt-cancellation coverage, that fact shall be stated, grouped together with the disclosure of the amount borrowed. The disclosure of the amount borrowed shall be treated as accurate if it is not more than $100 above or below the amount required to be disclosed. (d) Limitations. A mortgage transaction subject to this section shall not include the following terms: (1)(i) Balloon payment. For a loan with a term of less than five years, a payment schedule with regular periodic payments that when aggregated do not fully amortize the outstanding principal balance. (ii) Exception. The limitations in paragraph (d)(1)(i) of this section do not apply to loans with maturities of less than one year, if the purpose of the loan is a ``bridge'' loan connected with the acquisition or construction of a dwelling intended to become the consumer's principal dwelling. (2) Negative amortization. A payment schedule with regular periodic payments that cause the principal balance to increase. (3) Advance payments. A payment schedule that consolidates more than two periodic payments and pays them in advance from the proceeds. (4) Increased interest rate. An increase in the interest rate after default. (5) Rebates. A refund calculated by a method less favorable than the actuarial method (as defined by section 933(d) of the Housing and Community Development Act of 1992, 15 U.S.C. 1615(d)), for rebates of interest arising from a loan acceleration due to default. (6) Prepayment penalties. Except as allowed under paragraph (d)(7) of this section, a penalty for paying all or part of the principal

Federal Regulation 12CFR226.

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before the date on which the principal is due. A prepayment penalty includes computing a refund of unearned interest by a method that is less favorable to the consumer than the actuarial method, as defined by section 933(d) of the Housing and Community Development Act of 1992. (7) Prepayment penalty exception. A mortgage transaction subject to this section may provide for a prepayment penalty otherwise permitted by law (including a refund calculated according to the rule of 78s) if: (i) The penalty can be exercised only for the first five years following consummation; (ii) The source of the prepayment funds is not a refinancing by the creditor or an affiliate of the creditor; and (iii) At consummation, the consumer's total monthly debts (including amounts owed under the mortgage) do not exceed 50 percent of the consumer's monthly gross income, as verified by the consumer's signed financial statement, a credit report, and payment records for employment income. (8) Due-on-demand clause. A demand feature that permits the creditor to terminate the loan in advance of the original maturity date and to demand repayment of the entire outstanding balance, except in the following circumstances: (i) There is fraud or material misrepresentation by the consumer in connection with the loan; (ii) The consumer fails to meet the repayment terms of the agreement for any outstanding balance; or (iii) There is any action or inaction by the consumer that adversely affects the creditor's security for the loan, or any right of the creditor in such security. [Reg. Z, 60 FR 15472, Mar. 24, 1995, as amended at 60 FR 29969, June 7, 1995; 66 FR 65617, Dec. 20, 2001]

Federal Regulation 12CFR226.

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CA AB 489/344 (Division 1.6 of the Financial Code)

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Assembly Bill No. 344 CHAPTER 733 An act to amend Sections 4970, 4973, 4974, 4975, 4977, 4978, 4978.6, 4979, and 4979.7 of the Financial Code, as added by Assembly Bill 489 of the 2001-02 Regular Session, relating to lending.
[Approved by Governor October 10, 2001. Filed with Secretary of State October 11, 2001.]
LEGISLATIVE COUNSELS DIGEST

AB 344, Migden. Loans secured by real property. Existing law provides for regulation of banks and savings associations by the Department of Financial Institutions. Existing law provides for regulation of real estate brokers by the Department of Real Estate. Existing law provides for regulation of finance lenders and residential mortgage lenders by the Department of Corporations. Existing law provides that willful violations of provisions governing savings associations, real estate brokers, and residential mortgage lenders are crimes. AB 489 of the 200102 Regular Session would impose various requirements on consumer loans secured by specified real property, defined as covered loans. This bill would make various changes to the provisions of AB 489 that apply to a covered loan for which an application is made on or after July 1, 2002. The people of the State of California do enact as follows: SECTION 1. Section 4970 of the Financial Code, as added by Assembly Bill 489 of the 200102 Regular Session, is amended to read: 4970. For purposes of this division: (a) Annual percentage rate means the annual percentage rate for the loan calculated according to the provisions of the federal Truth in Lending Act and the regulations adopted thereunder by the Federal Reserve Board. (b) (1) Covered loan means a consumer loan in which the original principal balance of the loan does not exceed two hundred fifty thousand dollars ($250,000) in the case of a mortgage or deed of trust, and where one of the following conditions are met: (A) For a mortgage or deed of trust, the annual percentage rate at consummation of the transaction will exceed by more than eight percentage points the yield on Treasury securities having comparable

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periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor. (B) The total points and fees payable by the consumer at or before closing for a mortgage or deed of trust will exceed 6 percent of the total loan amount. (2) The dollar amount specified in paragraph (1) shall be adjusted every five years in accordance with the California Consumer Price Index. (c) Points and fees shall include the following: (1) All items required to be disclosed as finance charges under Sections 226.4(a) and 226.4(b) of Title 12 of the Code of Federal Regulations, including the Official Staff Commentary, as amended from time to time, except interest. (2) All compensation and fees paid to mortgage brokers in connection with the loan transaction. (3) All items listed in Section 226.4(c)(7) of Title 12 of the Code of Federal Regulations, only if the person originating the covered loan receives direct compensation in connection with the charge. (d) Consumer loan means a consumer credit transaction that is secured by real property located in this state used, or intended to be used or occupied, as the principal dwelling of the consumer that is improved by a one-to-four residential unit. Consumer loan does not include a reverse mortgage, an open line of credit as defined in Part 226 of Title 12 of the Code of Federal Regulations (Regulation Z), or a consumer credit transaction that is secured by rental property or second homes. Consumer loan does not include a bridge loan. For purposes of this division, a bridge loan is any temporary loan, having a maturity of one year or less, for the purpose of acquisition or construction of a dwelling intended to become the consumers principal dwelling. (e) Original principal balance means the total initial amount the consumer is obligated to repay on the loan. (f) Licensing agency shall mean the Department of Real Estate for licensed real estate brokers, the Department of Corporations for licensed residential mortgage lenders and licensed finance lenders and brokers, and the Department of Financial Institutions for commercial and industrial banks and savings associations and credit unions organized in this state. (g) Licensed person means a real estate broker licensed under the Real Estate Law (Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code), a finance lender or broker licensed under the California Finance Lenders Law (Division 9 (commencing with Section 22000)), a residential mortgage lender
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licensed under the California Residential Mortgage Lending Act (Division 20 (commencing with Section 50000)), a commercial or industrial bank organized under the Banking Law (Division 1 (commencing with Section 99)), a savings association organized under the Savings Association Law (Division 2 (commencing with Section 5000)), and a credit union organized under the California Credit Union Law (Division 5 (commencing with Section 14000)). Nothing in this division shall be construed to prevent any enforcement by a governmental entity against any person who originates a loan and who is exempt or excluded from licensure by all of the licensing agencies, based on a violation of any provision of this division. Nothing in this division shall be construed to prevent the Department of Real Estate from enforcing this division against a licensed salesperson employed by a licensed real estate broker as if that salesperson were a licensed person under this division. A licensed person includes any person engaged in the practice of consumer lending, as defined in this division, for which a license is required under any other provision of law, but whose license is invalid, suspended or revoked, or where no license has been obtained. (h) Originate means to arrange, negotiate, or make a consumer loan. (i) Servicer has the same meaning provided in Section 6 (i)(2) of the Real Estate Settlement Procedures Act of 1974. SEC. 2. Section 4973 of the Financial Code, as added by Assembly Bill 489 of the 200102 Regular Session, is amended to read: 4973. The following are prohibited acts and limitations for covered loans: (a) (1) A covered loan shall not include a prepayment fee or penalty after the first 36 months after the date of consummation of the loan. (2) A covered loan may include a prepayment fee or penalty up to the first 36 months after the date of consummation of the loan if: (A) The person who originates the covered loan has also offered the consumer a choice of another product without a prepayment fee or penalty. (B) The person who originates the covered loan has disclosed in writing to the consumer at least three business days prior to loan consummation the terms of the prepayment fee or penalty to the consumer for accepting a covered loan with the prepayment penalty and the rates, points, and fees that would be available to the consumer for accepting a covered loan without a prepayment penalty. (C) The person who originates the covered loan has limited the amount of the prepayment fee or penalty to an amount not to exceed the payment of six months advance interest, at the contract rate of interest

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then in effect, on the amount prepaid in any 12-month period in excess of 20 percent of the original principal amount. (D) A covered loan will not impose the prepayment fee or penalty if the covered loan is accelerated as a result of default. (E) The person who originates the covered loan will not finance a prepayment penalty through a new loan that is originated by the same person. (b) (1) A covered loan with a term of 5 years or less may not provide at origination for a payment schedule with regular periodic payments that when aggregated do not fully amortize the principal balance as of the maturity date of the loan. (2) For a payment schedule that is adjusted to account for the seasonal or irregular income of the consumer, the total installments in any year shall not exceed the amount of one years worth of payments on the loan. This prohibition does not apply to a bridge loan. For purposes of this paragraph, bridge loan means a loan with a maturity of less than 18 months that only requires payments of interest until the time when the entire unpaid balance is due and payable. (c) A covered loan shall not contain a provision for negative amortization such that the payment schedule for regular monthly payments causes the principal balance to increase, unless the covered loan is a first mortgage and the person who originates the loan discloses to the consumer that the loan contains a negative amortization provision that may add principal to the balance of the loan. (d) A covered loan shall not include terms under which periodic payments required under the loan are consolidated and paid in advance from the loan proceeds. (e) A covered loan shall not contain a provision that increases the interest rate as a result of a default. This provision does not apply to interest rate changes in a variable rate loan otherwise consistent with the provisions of the loan documents, provided the change in the interest rate is not triggered by the event of default or the acceleration for the indebtedness. (f) (1) A person who originates covered loans shall not make or arrange a covered loan unless at the time the loan is consummated, the person reasonably believes the consumer, or consumers, when considered collectively in the case of multiple consumers, will be able to make the scheduled payments to repay the obligation based upon a consideration of their current and expected income, current obligations, employment status, and other financial resources, other than the consumers equity in the dwelling that secures repayment of the loan. In the case of a covered loan that is structured to increase to a specific designated rate, stated as a number or formula, at a specific
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predetermined date not exceeding 37 months from the date of application, this evaluation shall be based upon the fully indexed rate of the loan calculated at the time of application. The consumer shall be presumed to be able to make the scheduled payments to repay the obligation if, at the time the loan is consummated, the consumers total monthly debts, including amounts owed under the loan, do not exceed 55 percent of the consumers monthly gross income, as verified by the credit application, the consumers financial statement, a credit report, financial information provided to the person originating the loan by or on behalf of the consumer, or any other reasonable means. (2) No presumption of inability to make the scheduled payments to repay the obligation shall arise solely from the fact that at the time the loan is consummated, the consumers total monthly debts, including amounts owed under the loan, exceed 55 percent of the consumers monthly gross income. (3) In the case of a stated income loan, the reasonable belief requirement in paragraph (1) shall apply, however, for stated income loans that belief may be based on the income stated by the consumer, and other information in the possession of the person originating the loan after the solicitation of all information that the person customarily solicits in connection with loans of this type. A person shall not knowingly or willfully originate a covered loan as a stated income loan with the intent, or effect, of evading the provisions of this subdivision. (g) A person who originates a covered loan shall not pay a contractor under a home-improvement contract from the proceeds of a covered loan other than by an instrument payable to the consumer or jointly to the consumer and the contractor or, at the election of the consumer, to a third-party escrow agent for the benefit of the contractor in accordance with terms and conditions established in a written escrow agreement signed by the consumer, the person who originates a covered loan, and the contractor prior to the disbursement of funds. No payments, other than progress payments for home-improvement work that the consumer certifies is completed, shall be made to an escrow account or jointly to the consumer and the contractor unless the person who originates the loan is presented with a signed and dated completion certificate by the consumer showing that the home-improvement contract was completed to the satisfaction of the consumer. (h) It is unlawful for a person who originates a covered loan to recommend or encourage a consumer to default on an existing consumer loan or other debt in connection with the solicitation or making of a covered loan that refinances all or any portion of the existing consumer loan or debt.

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(i) A covered loan shall not contain a call provision that permits the lender, in its sole discretion, to accelerate the indebtedness. This prohibition does not apply if repayment of the loan has been accelerated in accordance with the terms of the loan documents (1) as a result of the consumers default, (2) pursuant to a due-on-sale provision, or (3) due to fraud or material misrepresentation by a consumer in connection with the loan or the value of the security for the loan. (j) A person who originates a covered loan shall not refinance or arrange for the refinancing of a consumer loan such that the new loan is a covered loan that is made for the purpose of refinancing, debt consolidation or cash out, that does not result in an identifiable benefit to the consumer, considering the consumers stated purpose for seeking the loan, fees, interest rates, finance charges, and points. (k) (1) A covered loan shall not be made unless the following disclosure, written in 12-point font or larger, has been provided to the consumer no later than three business days prior to signing of the loan documents of the transaction: CONSUMER CAUTION AND HOME OWNERSHIP COUNSELING NOTICE If you obtain this loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan. Mortgage loan rates and closing costs and fees vary based on many other factors, including your particular credit and financial circumstances, your earnings history, the loan-to-value requested, and the type of property that will secure your loan. Higher rates and fees may be justified depending on the individual circumstances of a particular consumers application. You should shop around and compare loan rates and fees. This particular loan may have a higher rate and total points and fees than other mortgage loans and is, or may be, subject to the additional disclosure and substantive protections under Division 1.6 (commencing with Section 4970 of the Financial Code. You should consider consulting a qualified independent credit counselor or other experienced financial adviser regarding the rate, fees, and provisions of this mortgage loan before you proceed. For information on contacting a qualified credit counselor, ask your lender or call the United States Department of Housing and Urban Developments counseling hotline at 1-888-466-3487 or go to www.hud.gov/fha/sfh/hcc for a list of counselors.

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You are not required to complete any loan agreement merely because you have received these disclosures or have signed a loan application. If you proceed with this mortgage loan, you should also remember that you may face serious financial risks if you use this loan to pay off credit card debts and other debts in connection with this transaction and then subsequently incur significant new credit card charges or other debts. If you continue to accumulate debt after this loan is closed and then experience financial difficulties, you could lose your home and any equity you have in it if you do not meet your mortgage loan obligations. Property taxes and homeowners insurance are your responsibility. Not all lenders provide escrow services for these payments. You should ask your lender about these services. Your payments on existing debts contribute to your credit ratings. You should not accept any advice to ignore your regular payments to your existing creditors. (2) It shall be a rebuttable presumption that a licensed person has met its obligation to provide this disclosure if the consumer provides the licensed person with a signed acknowledgment of receipt of a copy of the notice set forth in paragraph (1). (l) (1) A person who originates a covered loan shall not steer, counsel, or direct any prospective consumer to accept a loan product with a risk grade less favorable than the risk grade that the consumer would qualify for based on that persons then current underwriting guidelines, prudently applied, considering the information available to that person, including the information provided by the consumer. A person shall not be deemed to have violated this section if the risk grade determination applied to a consumer is reasonably based on the persons underwriting guidelines if it is an appropriate risk grade category for which the consumer qualifies with the person. (2) If a broker originates a covered loan, the broker shall not steer, counsel, or direct any prospective consumer to accept a loan product at a higher cost than that for which the consumer could qualify based on the loan products offered by the persons with whom the broker regularly does business. (m) A person who originates a covered loan shall not avoid, or attempt to avoid, the application of this division by doing the following: (1) Structuring a loan transaction as an open-end credit plan for the purpose of evading the provisions of this division when the loan would have been a covered loan if the loan had been structured as a closed end loan. (2) Dividing any loan transaction into separate parts for the purpose of evading the provisions of this division.

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(n) A person who originates a covered loan shall not act in any manner, whether specifically prohibited by this section or of a different character, that constitutes fraud. SEC. 3. Section 4974 of the Financial Code, as added by Assembly Bill 489 of the 200102 Regular Session, is amended to read: 4974. (a) Any compliance failure that was not willful or intentional and resulted from a bona fide error, that occurred notwithstanding the maintenance of procedures reasonably adopted to avoid those errors, including, but not limited to, those involving clerical, calculation, computer malfunction and programming, and printing errors shall be corrected no later than 45 days after receipt of the complaint or discovery of the error. A person who originates a covered loan shall not be administratively, civilly, or criminally liable for a bona fide error corrected pursuant to this section. (b) If a person who originates covered loans makes a loan where the person knew of and showed reckless disregard for a violation of this division by a broker, the person and broker shall be jointly and severally liable for all damages awarded under this division with respect to the brokers unlawful conduct. This section does not impose or transfer liability for a breach of the brokers fiduciary duty. SEC. 4. Section 4975 of the Financial Code, as added by Assembly Bill 489 of the 200102 Regular Session, is amended to read: 4975. (a) (1) Any licensed person who violates any provision of Section 4973, 4979.6, or 4979.7 shall be deemed to have violated that persons licensing law. (2) After a knowing and willful violation, the licensing agency may bring a proceeding to suspend the license of the licensed person for not less than six months and not more than three years. (b) After a knowing and willful violation resulting in a second or subsequent administrative or civil action, the licensing agency may bring a proceeding to permanently revoke the license of the licensed person or impose any lesser licensed sanction for at least three years. (c) A licensing agency may exercise any and all authority and powers available to it under any other provisions of law, to administer and enforce this division including, but not limited to, investigating and examining the licensed persons books and records, and charging and collecting the reasonable costs for these activities. The licensing agency shall not charge a licensed person twice for the same service. Any civil, criminal, and administrative authority and remedies available to the licensing agency pursuant to its licensing law may be sought and employed in any combination deemed advisable by the licensing agency to enforce the provisions of this division.
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(d) Nothing in this section shall be construed to impair or impede a licensing agencys authority under any other provision of law. SEC. 5. Section 4977 of the Financial Code, as added by Assembly Bill 489 of the 200102 Regular Session, is amended to read: 4977. (a) A licensing agency may, after appropriate notice and opportunity for hearing, by order levy administrative penalties against a person who violates any provision of this division, and the person shall be liable for administrative penalties of not more than two thousand five hundred dollars ($2,500) for each violation. Except for licensing agencies exempt from the provisions of the Administrative Procedure Act, any hearing shall be held in accordance with the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), and the licensing agency shall have all the powers granted under that act. (b) Any person who willfully and knowingly violates any provision of this division shall be liable for a civil penalty of not more than twenty-five thousand dollars ($25,000) for each violation which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the licensing agency in any court of competent jurisdiction. (c) Nothing in this section requires exhaustion of administrative remedies prior to an injured party bringing a civil action. (d) If the licensing agency determines that it is in the public interest, the licensing agency may include, in any action for penalties authorized by subdivision (b), a claim for relief in addition to the penalties, including a claim for restitution or disgorgement, and the court shall have jurisdiction to award the additional relief. (e) Nothing in this section shall be construed to impair or impede the Attorney General from representing a licensing agency in bringing an action to enforce this division at the request and on behalf of the licensing agency. (f) In any action brought by the licensing agency, or the Attorney General acting at the request and on behalf of the licensing agency, under this division in which a judgment against a person is rendered, the licensing agency or the Attorney General shall be entitled to recover costs which, in the discretion of the court, may include an amount representing reasonable attorneys fees and investigative expenses for services rendered for deposit in the appropriate fund of that licensing agency. (g) The amounts collected under subdivisions (a) and (b) shall be deposited in the appropriate fund of the licensing agency to be used by that licensing agency, subject to appropriation by the Legislature, for the

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purposes of education and enforcement in connection with abusive lending practices. SEC. 6. Section 4978 of the Financial Code, as added by Assembly Bill 489 of the 200102 Regular Session, is amended to read: 4978. (a) A person who fails to comply with the provisions of this division is civilly liable to the consumer in an amount equal to any actual damages suffered by the consumer, plus attorneys fees and costs. For a willful and knowing violation of this division, the person shall be liable to the consumer in the amount of fifteen thousand dollars ($15,000) or the consumers actual damages, whichever is greater, plus attorneys fees and costs. (b) (1) If a provision in a contract in a covered loan violates subdivision (a), (b), (c), (d), (e), or (i) of Section 4973, Section 4979.6, or Section 4979.7, that provision is unenforceable. A court in which any action is brought by, or on behalf of, an aggrieved consumer for relief may issue an order or injunction to reform the terms of the covered loan to conform to the provisions of this division. (2) A court may, in addition to any other remedy, award punitive damages to the consumer upon a finding that such damages are warranted pursuant to Section 3294 of the Civil Code. (c) Nothing in this section is intended, nor shall be construed, to abrogate existing common law provisions prohibiting double recovery of damages. SEC. 7. Section 4978.6 of the Financial Code, as added by Assembly Bill 489 of the 200102 Regular Session, is amended to read: 4978.6. A person who originates covered loans shall inform any employee, who originates covered loans on behalf of the person, of the administrative or civil penalties for a violation of this division. SEC. 8. Section 4979 of the Financial Code, as added by Assembly Bill 489 of the 200102 Regular Session, is amended to read: 4979. Upon request, a person who originates a covered loan shall provide the licensing agency or the consumer, at no cost, documentation regarding his or her loan that clearly demonstrates whether any loan is a covered loan. This documentation shall include, but not be limited to, full disclosure of the original principal balance, the annual percentage rate, and the total points and fees, as defined in Section 4970. SEC. 9. Section 4979.7 of the Financial Code, as added by Assembly Bill 489 of the 200102 Regular Session, is amended to read: 4979.7. On or after July 1, 2002, a person who originates a consumer loan shall not finance, directly or indirectly, into a consumer loan or finance to the same borrower within 30 days of a consumer loan any credit life, credit disability, credit property, or credit unemployment insurance premiums, or any debt cancellation or suspension agreement
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fees, provided that credit insurance premiums, debt cancellation, or suspension fees calculated and paid on a monthly basis shall not be considered financed by the person originating the loan. For purposes of this section, credit insurance does not include a contract issued by a government agency or private mortgage insurance company to insure the lender against loss caused by a mortgagors default. SEC. 10. All of the sections amended by this act shall apply only to a covered loan for which an application is made on or after July 1, 2002.

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California Civil Code Section 2948.5


(a) A borrower shall not be required to pay interest on a principal obligation under a promissory note secured by a mortgage or deed of trust on real property improved with between one to four residential dwelling units for any period that meets any of the following requirements: (1) Is more than one day prior to the date that the loan proceeds are disbursed from escrow. (2) In the event of no escrow, if a request for recording is made in connection with the disbursement, is more than one day prior to the date the loan proceeds are disbursed to the borrower, to a third party on behalf of the borrower, or to the lender to satisfy an existing obligation of the borrower. (3) In all other circumstances where there is no escrow and no request for recording, is prior to the date funds are disbursed to the borrower, to a third party on behalf of the borrower, or to the lender to satisfy an existing obligation of the borrower. (b) Interest may commence to accrue on the business day immediately preceding the day of disbursement, for obligations described in paragraphs (1) and (2) of subdivision (a) if both of the following occur: (1) The borrower affirmatively requests, and the lender agrees, that the disbursement will occur on Monday, or a day immediately following a bank holiday. (2) The following information is disclosed to the borrower in writing: (A) the amount of additional per diem interest charged to facilitate disbursement on Monday or the day following a holiday, as the case may be, and (B) that it may be possible to avoid the additional per diem interest charge by disbursing the loan proceeds on a day immediately following a business day. This disclosure shall be provided to the borrower and acknowledged by the borrower by signing a copy of the disclosure document prior to placing funds in escrow. (c) This section does not apply to a loan that is subject to subdivision (c) of Section 10242 of the Business and Professions Code.

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