Banking Department
State of New York
General General Regulations
of the Banking Board
Part 38
Sections 38.4 to 38.13
Sections 38.1-38.3
DEFINITION OF TERMS; ADVERTISING; APPLICATION AND COMMITMENT; DISCLOSURES AND PROCEDURES; IMPROPER CONDUCT UNDER ARTICLE 12-D
(Statutory Authority: Banking Law Sections 6-I, 9-0, 14, 590-a, 590(3) and 595-a)
Section
38.1 Definitions
38.2 Soliciting and Advertising
38.3 Application disclosures and procedures
38.4 Commitment disclosures and procedures
38.5 Prevailing rate
38.6 Lock-in agreements (ranteed rate)
38.7 Prohibited conduct
38.8 Administrative actions and penalties
38.9 Limitation on excess insurance and required disclosures
38.10 Notification requirement
38.11 Branch requirements
38.12 Dual agency disclosures
38.13 FHA mortgage loan correspondents
§ 38.1 Definitions.
For purposes of this Part:
(a) The term advertisement shall mean material used or intended to be used to induce the public to apply for a mortgage loan. Such term shall include any printed or published material, electronic media, audio or visual material, or descriptive literature concerning a mortgage loan to be solicited, processed, negotiated or funded by a mortgage broker, mortgage banker or exempt organization whether disseminated by direct mail, newspaper, magazine, radio or television broadcast, billboard, electronic media or similar display. The term advertisement shall not include promotional material containing 15 words or fewer relating to the mortgage business of the entity which material does not contain references to a specific rate or product, such as balloons, hats, pencils or pens, calendars or rulers displaying the name of the registrant, licensee or exempt organization. The term advertisement also shall not include any disclosures, program descriptions or other published materials prepared or authorized by any State or Federal government agency, nor shall such term include any material or communication which has been excluded from any definition of advertisement for purposes of any regulation of the Board of Governors of the Federal Reserve System regulating consumer credit disclosures.
(b) The term application fee shall mean any fee taken by a mortgage broker, mortgage banker or exempt organization in connection with an application for a mortgage loan including any charge for soliciting, processing, placing or negotiating a mortgage loan. The term application fee does not include a commitment fee taken pursuant to section 38.4 or a lock-in fee taken pursuant to section 38.6 of this Part, nor does such term include payments to be remitted to third-party service providers, such as appraisal fees or fees for credit reports, nor payments or remittances to the mortgage broker, mortgage banker or exempt organization by the lender. In addition, the term application fee does not include a processing fee so long as the application fee does not include the cost of processing the application.
(c) The term commitment shall mean a written or electronically transmitted offer to make a mortgage loan signed by a licensee or exempt organization.
(d) The term commitment agreement shall mean a commitment accepted by an applicant for a mortgage loan. Such acceptance shall be evidenced by either a hand-written or digital signature to the extent that such signatures are recognized as binding under New York State law.
(e) The term commitment fee shall mean a fee, exclusive of third-party charges, imposed by the licensee or exempt organization as consideration for binding the licensee or exempt organization to make a mortgage loan or as a lender's requirement for acceptance by the consumer of a commitment.
(f) The term employee shall mean:
(1) any individual performing a service for any one of either a mortgage broker, mortgage banker or exempt organization for whom such entity would be liable for withholding taxes pursuant to title 26 of the United States Code; or
(2) any individual engaged in regulated activities as an independent contractor pursuant to Title 26 of the United States Code of any one of either a mortgage broker, mortgage banker or exempt organization.
(g) The term exempt organization shall mean any person or entity engaged in the business of making mortgage loans which entity is exempt from licensing under article 12-D of the Banking Law and Part 39 of this Title.
(h) The term lock-in agreement shall mean a written or electronically transmitted agreement between a mortgage banker or exempt organization and an applicant for a mortgage loan which, subject to the terms set forth therein, obligates the mortgage banker or exempt organization to make a mortgage loan at a specified rate and a specific number of points, if any.
(i) The term lock-in fee shall mean points or other fees, or discounts taken by a mortgage broker for transmittal to a mortgage banker or exempt organization or taken directly by a mortgage banker or exempt organization as consideration for the making of a lock-in agreement.
(j) The term mortgage banker or licensee shall mean any person or entity which is licensed pursuant to article 12-D of the Banking Law and Superintendent's Regulation Part 410 of this Title to make mortgage loans.
(k) The term mortgage broker or registrant shall mean any person or entity registered pursuant to article 12-D of the Banking Law and Superintendent's Regulation Part 410 of this Title.
(l) The term to make a loan or making a loan, shall mean for compensation or gain, either directly or indirectly, advancing funds, offering to advance funds, or making a commitment to advance funds to a mortgagor as a mortgage loan. As used in this Part, the term mortgagor shall refer only to a retail consumer/borrower.
(m) The term mortgage loan shall mean a loan made to one or more individuals primarily for personal, family or household use primarily secured by a first or junior mortgage on residential real property located in this State or by certificates of stock or other evidence of ownership interests in, and proprietary leases from, corporations or partnerships formed for the purpose of cooperative ownership of real estate in this State. Such term shall not include residential loan products exempt pursuant to section 39.5 of this Title.
(n) The term point shall mean any fee or discount calculated as one percent of the principal amount of the loan or one percent of the amount financed, irrespective of how such point may be denominated by the mortgage broker, mortgage banker or exempt organization. The term point shall include, but not be limited to, percentage-based fees denominated as brokerage fees (excluding fees taken for real estate brokerage services), origination fees, or warehousing fees.
(o) The term prevailing rate shall mean a mortgage loan rate that is set by the mortgage banker or exempt organization after the time a commitment is issued but prior to or on the closing date. Such rate may be fixed or variable.
(p) The term residential real property shall mean real property located in this State improved by a one- to four-family owner-occupied dwelling used or occupied, or intended to be used or occupied, wholly or partly, as the home or residence of one or more owners, but shall not refer to unimproved real property upon which such dwelling is to be constructed.
(q) The term settlement cost shall mean the total cost to the consumer for each service required to be listed as a settlement service in the "Good Faith Estimate of Settlement Services" required in certain mortgage loan transactions by regulation X of the Department of Housing and Urban Development (24 CFR part 3500). The term settlement cost shall have the meaning described herein irrespective of whether the mortgage loan is subject to regulation X.
(r) The terms soliciting, processing, placing and negotiating a mortgage loan shall mean performing or offering to perform such activities for compensation or gain, either directly or indirectly, with a lender on behalf of a third party.
(s) The term bonus and premium shall mean money or an equivalent given in addition to usual compensation.
(t) The term premium pricing shall mean any pricing arrangement under which a loan application is submitted to a lender at an interest rate (including points) that will:
(1) meet the lender's minimum yield requirements; and
(2) enable the mortgage broker, mortgage banker or exempt organization when acting in a mortgage brokerage capacity to receive as all or part of its fee all or part of the difference between the interest rate (including points) received by the lender and the minimum interest rate (including points) at which the lender would have been willing to make the loan to the consumer/borrower.
(u) The term full service branch shall mean any location at which loan processing takes place, whether or not loan solicitation also occurs thereat, and the licensee or registrant owns or pays rent or any other form of consideration for the use thereof. This term shall not include processing locations that are never available to the public and which do not conduct any written, electronic or telephonic (including facsimile transmissions) communications with any applicant.
(v) The term loan solicitation branch shall mean any location at which only loan solicitation takes place and the licensee or registrant owns or pays rent or any other form of consideration for the use thereof.
(w) The term electronically transmitted or electronic media shall mean any transmission via diskette, wire or tape including but not limited to the Intranet (interactive or otherwise), the Internet, any other computer network, electronic mail, or any other similar method of transmission.
(x) The term lender shall mean a mortgage banker or an exempt organization pursuant to article 12-D of the New York Banking Law.
(y) A digital signature shall mean any electronic authentication method that provides the same assurance as a signature in a paper-based system.
§ 38.2 Solicitation and advertising.
(a) No mortgage broker shall advertise its business in New York in print or electronic media without including the legend "Registered Mortgage Broker-NYS Banking Department" or words to like effect therein. No mortgage banker shall advertise its business in New York without including the legend "Licensed Mortgage Banker-NYS Banking Department" or words to like effect therein. Business cards, letterhead and general electronic media communications, to the extent that they are not used for general advertising purposes, need not include the legend.
(b) Any advertisement by a mortgage broker, mortgage banker or exempt organization in print or electronic media must indicate the name of the entity and a street address of any one of its offices in New York State or, if the entity is not located in New York State, the street address of any one office outside New York. This requirement will not apply to advertisements made by a mortgage broker, mortgage banker or exempt organization having more than 10 offices in New York State.
(c) No mortgage loan products may be advertised by a mortgage broker, mortgage banker or exempt organization unless the entity has the advertised product available to a reasonable number of qualified applicants responding to the advertisement on the date the advertisement appears, or the entity's next business day. Nothing in this section shall require a lender to make a loan to an unqualified applicant. This requirement shall not be deemed to be violated if the aggregate principal amount of the advertised product available to all applicants is limited to the amount specified in an agreement between the entity and a third person (e.g., State mortgage agency) to sell such product to the third person, and the entity discloses in the advertisement for such product that the availability of such product is limited.
(d) No advertisement by a mortgage broker shall contain language which indicates or suggests that the mortgage broker will fund a mortgage loan. Any advertisement by a mortgage broker must contain a statement to the effect that the mortgage broker arranges mortgage loans with third-party providers.
(e) No mortgage broker, mortgage banker or exempt organization shall fraudulently or deceitfully advertise a mortgage loan, or misrepresent the terms, conditions or charges incident to a mortgage loan in any advertisement therefor. Without limiting the foregoing, the following conduct shall be deemed fraudulent, deceitful or misleading:
(1) the advertisement of "immediate approval" of a loan application or "immediate closing" of a loan;
(2) the advertisement of a "no-point" mortgage loan when points, as defined herein, are accepted as a condition for commitment or closing, or the advertisement of an intentionally incorrect specific number of points;
(3) the advertisement that an applicant will have unqualified access to credit without disclosing what material limitations on the availability of credit may exist, such as the percentage down payment required, that a higher rate or points may be required, or that restrictions as to the maximum principal amount of the loan offered may apply;
(4) the advertisement of a specific time period within which a commitment will be issued unless a commitment will be issued to a qualified applicant within the time period specified, if at all; and
(5) the advertisement of a mortgage loan where a prevailing rate is indicated in the advertisement, unless the advertisement specifically states that the expressed rate may change or not be available at commitment or closing.
(f) Every mortgage broker, mortgage banker and exempt organization shall maintain a record of samples of its advertisements (including commercial scripts of all radio broadcasts, television broadcasts and electronic media) for examination by the superintendent for a period of two years from the date of publication.
(g) Any advertisement by a mortgage broker, mortgage banker or exempt organization for a mortgage loan product containing a prepayment penalty which advertisement sets forth the interest rate and/or points of such product shall include a statement indicating that the product has a pre-payment penalty.
Historical Note
Sec. filed March 13, 1987; amds. filed: April 21, 1997; May 11, 1998 eff. May 27, 1998. Amended (a)-(b), (d)-(f), added (g).
§ 38.3 Application disclosures and procedures.
Article 12-D requires and authorizes the Banking Board to promulgate regulations governing the disclosures which must be given and the procedures which must be followed at the time an application is taken. No mortgage broker, mortgage banker or exempt organization may take an application, application fee, credit report fee or property appraisal fee prior to making the disclosures set forth in this section. Each entity shall also comply with the procedures set forth in this section regarding the processing of applications. An application may be taken in writing, over the telephone or electronically transmitted.
(a) Mortgage broker application disclosures and procedures.
(1) Disclosures. Prior to taking an application or collecting an application fee, credit report fee or property appraisal fee, every mortgage broker shall disclose to the applicant in writing or via electronic media:
(i) that such mortgage broker may not make mortgage loans or commitments;
(ii) that such mortgage broker cannot guarantee acceptance into any particular loan program, nor can that mortgage broker promise any specific loan terms or conditions;
(iii) whether the mortgage broker places loans primarily with any three or fewer lenders, and if so, the name(s) of such lender(s);
(iv) a statement to the effect that the rate, points, fees, and other terms quoted at commitment by or on behalf of the lender encompass the consideration to be received by the mortgage broker from a lender for its services. In addition, the statement shall disclose the specific maximum amount of such consideration to be received;
(v) the amount of the application fee, and the registrant's good faith estimate of the credit report fee, property appraisal fee, processing fee, if any, and the terms and conditions for obtaining a refund of such fees if any;
(vi) the specific services which will be provided or performed for the application fee and/or the processing fee;
(vii) the maximum points, including premium pricing, payable by the lender to the mortgage broker and any fees or points to be paid by the applicant directly to the mortgage broker;
(viii) if applicable, any premiums or bonuses to be paid to the mortgage broker by the lender and/or the basis of its eligibility to receive premiums or bonuses;
(ix) if applicable, a description of the consumer protections and lender disclosures which are lost when the loan is placed with a private investor that is neither an exempt organization nor licensed pursuant to article 12-D of the Banking Law. This disclosure shall include a notice that the requirement that the term of a balloon mortgage be at least three years does not necessarily apply to a loan placed with a private investor. This disclosure shall be no less conspicuous than any other disclosures made pursuant to this section;
(x) if applicable, the fact that fees are being divided between more than one mortgage broker and/or mortgage banker and/or exempt organization acting as a mortgage broker and the dollar amount or the percentage, of if not known, a good faith estimate thereof, of the fee to be received by each mortgage broker, mortgage banker or exempt organization;
(xi) the fact that certain mortgage loan products impose a pre-payment penalty on the borrower and the amount of, or the formula for calculating, the pre-payment penalty, if any, and the terms of the pre-payment penalty, if any, will be disclosed to the borrower as soon as they are known, but no later than the issuance of the commitment (if any), for the loan product chosen by the borrower;
(xii) with regard to written applications, a toll free telephone number of a person in a management position with the mortgage broker who may be contacted about problems with the application or if there is no toll free telephone number, then the circumstances under which a collect call will be accepted. With respect to electronic applications, the disclosure shall include the electronic mail address of the mortgage broker.
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Commitment Disclosures, Procedures
(2) Required procedures for mortgage brokers.
(i) The application fee and/or processing fee, if any, shall be denominated as such and shall be reasonably related to the services to be performed on behalf of the applicant. Neither fee may be based upon a percentage of the principal amount of the loan or the amount financed. The separation of application and processing fees is intended to benefit consumers by allowing them to obtain a more complete and accurate itemization of fees charged in the transaction and to thereby more effectively comparison shop when seeking to obtain a residential mortgage.
(ii) Every written application taken by a mortgage broker shall be signed by the employee taking such application, and shall include the name and/or title of such employee.
(iii) Every electronic application form used by a mortgage broker shall include the e- mail address of the mortgage broker.
(iv) No mortgage broker shall take any fee in connection with a mortgage loan other than an application fee, credit report fee and property appraisal fee prior to the acceptance by an applicant of a commitment from a qualified lender nor shall any mortgage broker take any fee, prior to closing, other than an application fee, credit report fee and property appraisal fee when the commitment from the lender is subject to any of the following:
(a) adequate appraisal value;
(b) satisfactory credit history and obligations; and
(c) pre-sale requirement clause in a condominium or co-op mortgage commitment.
Nothing in this section shall prohibit a mortgage broker from taking a lock-in fee for transmittal to a mortgage banker or exempt organization subject to the restrictions imposed by section 38.6(c) of this Part.
(v) Any amount collected in excess of the actual cost of the credit report fee and property appraisal fee must be returned at or prior to closing.
(vi) Some or all of the disclosures required by this section may appear on forms used to comply with otherwise applicable State or Federal laws or, at the option of the entity making the disclosure, as separate disclosures.
(vii) All disclosures concerning refundability must be no less conspicuous than any other disclosure made pursuant to this section.
(viii) It shall be the duty of every registrant to familiarize itself and its employees with the qualifications necessary to fulfill lenders' requirements for the loan products and programs available through that mortgage broker.
(ix) For written application, each mortgage broker shall provide each applicant with a duplicate of the signed application within seven business days from the time of receipt of such application by the mortgage broker. Both the applicant's signature and the signature of the employee may be hand-written or digital to the extent such signatures are recognized as binding under New York State law. For electronic applications, each mortgage broker shall provide each applicant with a duplicate copy of the application within seven business days from the time of receipt of such application by the mortgage broker unless the applicant indicates that he or she has the computer capacity to down-load and print such application. The applicant's signature may be hand-written or digital to the extent such signatures are recognized as binding under New York State law.
(x) Each mortgage broker shall submit a copy to the lender of any separate written or electronic fee agreement made with the applicant or a written or electronic statement that there is no separate fee agreement. If applicable, the disclosures in subparagraph (1)(x) of this subdivision shall be included in the fee agreement.
(xi) With regard to written pre-application disclosures, each mortgage broker shall maintain a duplicate copy of the pre-application disclosures signed by the applicant.
(xii) With regard to electronic pre-application disclosures, no mortgage broker shall take an application unless the applicant either digitally signs, to the extent such signatures are recognized as binding under New York State law, the pre-application disclosures he or she has received electronically or acknowledges electronic receipt of the pre-application disclosures through the use of a "required confirm button" without which the transaction may not proceed further. In addition, within three business days of the electronic transmission of the pre-application disclosures, a hard-copy of such pre-application disclosures shall be mailed to each applicant who indicates that he or she does not have the computer capacity to down-load and print such disclosures. The mortgage brokers shall either keep a copy of the pre-application disclosures digitally signed by the applicant or be able to demonstrate that the transaction could not proceed further than the display of the pre-application disclosures without the applicant's use of the "required confirm button". Furthermore, in those instances in which a hard copy of the pre-application disclosures is not mailed to the applicant, the mortgage broker must be able to demonstrate that information was obtained as to the applicant's computer capacity to down-load and print such disclosures.
(xiii) All mail application packages must include the pre-application disclosures and a stamped self-addressed envelope with a request that a signed copy of these disclosures be returned to the mortgage broker. The mortgage broker shall keep a copy of this request.
(xiv) If a mortgage loan involves more than one mortgage broker, mortgage banker or exempt organization, or any combination thereof, the persons or entities involved shall agree among themselves as to who must comply with the disclosure and other requirements imposed under this section. In the absence of a written or electronic co-broker agreement, all such persons or entities shall be liable therefor.
(xv) If there is no toll-free telephone number, then collect calls must be accepted from those applicants who live more than fifty miles from a processing center.
(b) Mortgage banker and exempt organization application disclosures and procedures.
(1) Disclosures. In those instances in which the proceeds of the mortgage loan will be used to finance the acquisition of the dwelling and in all other residential mortgage loan transactions in which a commitment fee or points are paid or will be paid to the lender prior to closing, then prior to the taking of an application, application fee, credit report fee or property appraisal fee, every mortgage banker or exempt organization shall disclose in writing or via electronic media to each applicant for a mortgage loan:
(i) the amount of the application fee, and the mortgage banker or exempt organization's good faith estimate of the credit report fee, property appraisal fee, the processing fee, if any, and the terms and conditions, if any, under which such fees may be refundable. In addition, no fee other than an application fee, credit report fee, property appraisal fee and lock-in fee shall be taken prior to the acceptance by an applicant of a commitment;
(ii) in those instances in which the lender routinely assigns the commitments it has issued in its own name to a third party or parties, the amount of any fee the lender will pay to and/or receive from, the name and address of and the service(s) to be performed by such third party or parties;
(iii) the fact that certain mortgage loan products impose a pre-payment penalty on the borrower and the amount of, or formula for calculating, the pre-payment penalty, if any, and the terms of the pre-payment penalty, if any, will be disclosed to the borrower as soon as they are known, but no later than the issuance of the commitment (if any), for the loan product chosen by the borrower;
(iv) with regard to written applications, a toll free telephone number of a person in a management position with the mortgage banker or exempt organization who may be contacted about problems with the application or if there is no toll free telephone number, then the circumstances under which a collect call will be accepted. With respect to electronic applications, the disclosure shall include the electronic mail address of the mortgage banker or exempt organization.
(2) Required procedures for mortgage bankers and exempt organizations.
(i) The application fee and/or processing fee, if any, shall be denominated as such and shall be reasonably related to the services to be performed on behalf of the applicant. Neither fee may be based upon a percentage of the principal amount of the loan or the amount financed. The separation of application and processing fees is intended to benefit consumers by allowing them to obtain a more complete and accurate itemization of fees charged in the transaction and to thereby more effectively comparison shop when seeking to obtain a residential mortgage.
(ii) Any amount collected in excess of the actual cost of the credit report fee and the property appraisal fee must be returned at or prior to closing.
(iii) A mortgage banker or exempt organization may satisfy the disclosure requirements of this section by making such disclosures in one or more documents, including but not limited to any form or document used to comply with otherwise applicable State or Federal laws or regulations.
(iv) Every written application taken by a mortgage banker or exempt organization shall be signed by the employee taking such application, and shall include the name and/or title of such employee.
(v) Every electronic application form used by a mortgage banker or exempt organization shall include the e-mail address of the mortgage banker or exempt organization.
(vi) For written applications, each mortgage banker or exempt organization shall provide each applicant with a duplicate of the signed application within seven business days from the time of receipt of such application by the mortgage banker or exempt organization. Both the applicant's signature and the signature of the employee may be hand-written or digital to the extent such signatures are recognized as binding under New York State law. For electronic applications, each mortgage banker or exempt organization shall provide each applicant with a duplicate copy of the application within seven business days from the time of receipt of such application by the mortgage banker or exempt organization unless the applicant indicates that he or she has the computer capacity to down-load and print such application. The applicant's signature may be hand-written or digital to the extent such signatures are recognized as binding under New York State law.
(vii) All disclosures concerning refundability must be no less conspicuous than any other disclosure made pursuant to this section.
(viii) With regard to written pre-application disclosures, every applicant shall sign a duplicate copy of the pre-application disclosures he or she has received which shall be kept by the mortgage banker or exempt organization.
(ix) With regard to electronic pre-application disclosures, no mortgage banker or exempt organization shall take an application unless the applicant either digitally signs, to the extent such signatures are recognized as binding under New York State law, the pre- application disclosures he or she has received electronically or acknowledges electronic receipt of the pre-application disclosures through the use of a "required confirm button" without which the transaction may not proceed further. In addition, within three business days, a hard-copy of such pre-application disclosures shall be mailed to each applicant who indicates that he or she does not have the computer capacity to down-load and print such disclosures. The mortgage banker or exempt organization shall either keep a copy of the pre- application disclosures digitally signed by the applicant or be able to demonstrate that the transaction could not proceed further than the display of the pre-application disclosures without the applicant's use of the "required confirm button". Furthermore, in those instances in which a hard copy of the pre-application disclosures is not mailed to the applicant, then the mortgage banker or exempt organization must be able to demonstrate that information was obtained as to the applicant's computer capacity to down-load and print such disclosures.
(x) All mail application packages must include the pre-application disclosures and a stamped self-addressed envelope with a request that a signed copy of these disclosures be returned to the mortgage banker or exempt organization. The mortgage banker or exempt organization shall keep a copy of this request.
(xi) If a mortgage loan involves more than one mortgage broker, mortgage banker or exempt organization, or any combination thereof, the persons or entities involved shall agree among themselves as to who must comply with the disclosure and other requirements imposed under this section. In the absence of a written or electronic co-broker agreement, all such persons or entities shall be liable therefor.
(xii) If there is no toll-free telephone number, then collect calls must be accepted from those applicants who live more than fifty miles from a processing center.
(c) Mortgage banker or exempt organization acting in a mortgage brokerage capacity. (1) Disclosures. Prior to taking an application or collecting an application fee, credit report fee or appraisal fee, every mortgage banker or exempt organization acting as a mortgage broker shall disclose to the applicant in writing or via electronic media:
(i) that such mortgage banker or exempt organization will not be making the mortgage loan;
(ii) that such mortgage banker or exempt organization can neither guarantee acceptance into any particular loan program nor promise any specific loan terms or conditions;
(iii) whether the mortgage banker or exempt organization places loans primarily with any three or fewer lenders, and if so, the name(s) of such lender(s);
(iv) a statement to the effect that the rate, points, fees, and other terms quoted at commitment by or on behalf of the lender encompass the consideration to be received by the mortgage banker or exempt organization from a lender for its services. In addition, this statement shall disclose the specific maximum amount of such consideration to be received;
(v) the amount of the application fee, and the good faith estimate of the credit report, property appraisal fee, processing fee, if any, and the terms and conditions, if any, under which such fees may be refundable. In addition, no fee other than an application fee, credit report fee and property appraisal fee shall be taken prior to the acceptance by an applicant of a commitment.
(vi) the specific services which will be provided or performed for the application fee and/or the processing fee;
(vii) if applicable, a description of the consumer protections and lender disclosures which are lost when the loan is placed with a private investor that is neither an exempt organization nor licensed pursuant to article 12-D of the Banking Law. A statement must be included to the effect that if a loan is placed with a private lender, certain consumer protections and lender disclosures required by New York law and regulations do not apply to the loan. The statement shall include a notice the requirement that the term of a balloon mortgage be at least three years does not necessarily apply to a loan placed with a private investor. This statement shall be no less conspicuous than any other disclosures made pursuant to this section;
(viii) if applicable, the fact that fees are being divided between more than one mortgage broker and/or mortgage banker and/or exempt organization and the dollar amount or the percentage, or if not known, a good faith estimate thereof, of the fee to be received by each mortgage broker, mortgage banker and/or exempt organization;
(ix) no mortgage banker or exempt organization shall take any fee in connection with a mortgage loan other than an application fee, credit report fee and property appraisal fee prior to the acceptance by an applicant of a commitment from a qualified lender nor shall any mortgage banker or exempt organization take any fee, prior to closing, other than an application fee, credit report fee and property appraisal fee when the commitment from the lender is subject to any of the following:
(a) adequate appraisal value;
(b) satisfactory credit history and obligations;
(c) pre-sale requirement clause in a condominium or co-op mortgage commitment;
(x) the fact that certain mortgage loan products impose a pre-payment penalty on the borrower in the amount of, or formula for calculating, the pre-payment penalty, if any, and the terms of the pre-payment penalty, if any, will be disclosed to the borrower as soon as they are known, but no later than the issuance of the commitment (if any), for the loan product chosen by the borrower;
(xi) with regard to written application, a toll free telephone number of a person in a management position with the mortgage banker or exempt organization who may be contacted about problems with the application. If there is no toll free telephone number, then collect calls must be accepted from those applicants who live more than fifty miles from a processing center. The circumstances under which a collect call will be accepted must be disclosed to the applicant. With respect to electronic applications, the disclosure shall include the electronic mail address of the mortgage banker or exempt organization.
(2) Required procedures for mortgage bankers and exempt organizations acting in a mortgage brokerage capacity. Mortgage bankers or exempt organizations which act in a mortgage brokerage capacity shall comply with the procedures set forth in paragraph (a)(2) of this section. Nothing in this section shall prohibit a mortgage banker or exempt organization from taking a lock-in fee for transmittal to a mortgage banker or exempt organization subject to the restrictions imposed by section 38.6(c) of this Part.
(d) Separate application disclosure and procedures. In addition to the disclosures required by this section, each mortgage banker and exempt organization shall disclose in writing or via electronic media to each applicant for a mortgage loan when the interest rate for the loan will be set. If it is the policy of the mortgage banker or exempt organization to allow the applicant to choose when the rate will be set, then the disclosure shall contain a statement to this effect. The disclosure required by this subdivision must be no less conspicuous than the other disclosures made pursuant to this section.
(e) Telephone applications. Nothing in this section shall be construed to prohibit the taking of telephone applications. However, within 10 days of the taking of such application or filling out a borrower's worksheet, and in any event prior to the taking of any fee, the applicant must be given two copies of the application or the worksheet and of the appropriate disclosures for review by the applicant. The applicant must also be provided with a stamped self-addressed return envelope and a written request that the applicant sign and return one copy of the application and the disclosures to the mortgage broker, mortgage banker or exempt organization. In those instances in which a worksheet and pre-application disclosures are provided to the applicant, the applicant need only sign and return the disclosures.
§ 38.4 Commitment disclosures and procedures.