| A
real estate broker who solicits or negotiates loans
on behalf of borrowers or lenders to be secured directly
or collaterally by liens on real property in non-federally
related loan transactions must deliver a written disclosure
statement to the borrower within three business days
of receipt of the borrower’s written loan application,
or before the borrower becomes obligated to complete
the loan, whichever is earlier.
The required statement, known as the Mortgage Loan
Disclosure Statement (MLDS), must be in a form approved
by the Real Estate Commissioner and shall contain:
1. Expected maximum costs and expenses of making the
loan which are to be paid by the borrower, including,
but not limited to, fees for appraisal, settlement/escrow,
credit report, title insurance, recording, and notary
services.
2. Total amount of real estate commissions/fees to be
received by the broker from anyone, regardless of the
form, time, and source of payment, for services performed
in arranging the loan including, but not limited to:
points, loan origination fees, bonuses, rebates, premiums,
discounts as well as other charges received by the real
estate broker in lieu of interest in transactions where
the broker acts as the lender. The disclosure must distinguish
between commissions/fees, bonuses, rebates and premiums
paid to the broker and loan origination fees, bonuses,
and discounts paid to the lender.
3. Liens against the real property disclosed by the
borrower and whether each lien will remain senior or
will be subordinate to the lien that will secure the
subject loan.
4. Liens, including the lien securing the subject loan,
which are anticipated to be secured by the real property
and the order of priority of such liens.
5. Estimated amounts to be paid by the borrower for:
• fire insurance;
• balances due on prior liens, including interest,
prepayment penalties, fees for reconveyance, or other
removal from record of prior liens;
• amounts due other creditors; and
• assumption, transfer, forwarding and beneficiary
statement fees.
6. Estimated balance of the loan to be paid to the borrower
after deducting all loan fees, penalties, and costs
to secure the loan.
7. Principal amount of the loan.
8. Rate of interest (whether fixed or variable).
9. Term of the loan; number and amount of each installment;
the approximate loan balance at maturity; and the following
notice in 10-point bold typeface:
NOTICE TO BORROWER: IF YOU DO NOT HAVE THE FUNDS TO
PAY THE BALLOON PAYMENT WHEN IT COMES DUE, YOU MAY HAVE
TO OBTAIN A NEW LOAN AGAINST YOUR PROPERTY TO MAKE THE
BALLOON PAYMENT. IN THAT CASE, YOU MAY AGAIN HAVE TO
PAY COMMISSIONS, FEES, AND EXPENSES FOR THE ARRANGING
OF THE NEW LOAN. IN ADDITION, IF YOU ARE UNABLE TO MAKE
THE MONTHLY PAYMENTS OR THE BALLOON PAYMENT, YOU MAY
LOSE THE PROPERTY AND ALL OF YOUR EQUITY THROUGH FORECLOSURE.
KEEP THIS IN MIND IN DECIDING UPON THE AMOUNT AND TERMS
OF THIS LOAN.
10. A statement containing the name, real estate license
number and business address of the real estate broker
negotiating the loan.
11. If the broker anticipates the loan will be made
from funds owned or controlled by the broker, the broker’s
relative, or an entity in which the broker alone or
together with a relative(s) has a 10% or greater interest,
the broker’s statement to that effect.
12. Terms of prepayment, including the amount of penalty,
if any.
13. A statement that the purchase of credit life or
disability insurance is not required as a condition
of the loan.
14. If the loan is secured by a first trust deed of
less than $30,000 or a junior lien of less than $20,000,
a statement that the loan is being made in compliance
with Article 7 of Chapter 3 of the Real Estate Law.
The Real Estate Commissioner’s Regulations contain
an approved form for the Mortgage Loan Disclosure Statement
that includes a notice to the borrower of the importance
of stating accurately the amount, type, and priority
of existing and anticipated liens. The Regulations also
include an approved form that combines the Mortgage
Loan Disclosure Statement with a Good Faith Estimate
disclosure.
The MLDS must be signed by the borrower and the agent
negotiating the loan. The broker negotiating the loan
must keep a signed copy of the statement on file for
three years. A broker who initially holds himself out
as an agent arranging a loan will be subject to this
requirement even though he/she ultimately makes the
loan with his/her own money. In that case, the amount
of compensation disclosed will include any loan origination
fee, discount, bonuses, or other compensation which
the broker collects as the lender.
In federally related loan transactions which are controlled
by RESPA, real estate brokers who act as mortgage brokers
no longer have to deliver to the borrower the above
separate California-mandated mortgage loan disclosure
statement, so long as the borrower receives a good faith
estimate of settlement costs as required under RESPA
and all disclosures required by the Truth-in-Lending
Act (Regulation Z), and provided that other disclosures
are given as discussed in the section above on RESPA.
Business and Professions Code Sections 10240, 10241
and 10245
Commissioner’s Regulation 2840
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