Required Forms by Colorado Mortgage Brokers

Mortgage Broker Forms – Part 2

Colorado Lock in Disclosure Form

• Discloses rate and terms
• Is the rate locked?
• Must be completed any time the APR varies by 1/8 of a percent.

The mortgage broker shall disclose the terms of the loan and the lock-in within three business days after receipt of a loan application or moneys from a borrower.  This includes disclosure of the rate, payment type, term, and whether the rate is locked.  This disclosure also includes the length of time and cost of any prepayment penalty.  The Colorado Lock-in Disclosure Form is used to ensure that the lock-in information is clearly and concisely disclosed.  This is the recommended form, but an alternate form can be used as long as it includes all the required information.

a. Once the borrower enters into a lock-in agreement, the mortgage broker must deliver or send the lock-in agreement by first-class mail to the borrower in no less than three (3) business days after the agreement is signed. This includes Saturdays and prior to the borrower closing on the loan.

b. If the annual percentage rate varies from the annual percentage rate disclosed earlier by more than one-eights of one-percent, the broker shall, within three business days, deliver to the borrower a completed lock-in disclosure.

 

Mortgage Broker Forms – Part 3

Colorado Mortgage Broker Compensation Form

• Discloses amount of commission and how that is calculated
• Both “front end” and “back end” compensation shall be disclosed
• Range shall be within one percentage point of the loan transaction

Broker Compensation Form: Mortgage brokers shall disclose the amount of commission or other compensation to be paid to the mortgage broker, including the manner in which such commission or other compensation is calculated and the relationship of such commission or other compensation to the cost of the loan received by the borrower.   The Colorado Compensation Disclosure Form is used to ensure that this information is clearly and concisely disclosed.

a. Mortgage brokers shall disclose to the borrower all of the front end and back end compensation for the transaction.  Annual salaries are not required to be disclosed.

b. Only when the dollar amount of such compensation cannot be determined, may mortgage brokers disclose a range.  Such range shall be disclosed in a dollar amount and range that shall not exceed one (1) percentage point of the loan transaction.

i. “Front end compensation” means the compensation charged to the borrower that inures to the benefit of the mortgage broker and the mortgage company for which the mortgage broker is an officer, partner, member, contractor, independent contractor, exclusive agent, or employee. Front end compensation includes, but is not limited to loan origination fees, administrative fees and processing fees.

ii.  ”Back end compensation” means the compensation paid by the funding lender that inures to the benefit of the mortgage broker and the mortgage company for which the mortgage broker is an officer, partner, member, contractor, independent contractor, exclusive agent, or employee. The back end disclosure will include yield spread premiums, cost to sell the loan, etc.

 

Mortgage Broker Forms – Part 4

Tangible Net Benefit Disclosure Form

• Mortgage Brokers must make a reasonable inquiry concerning income
• Law prohibits mortgage brokers from recommending that borrowers enter transactions that do not have a “tangible net benefit to the borrower”

Reasonable Inquiry and Tangible Net Benefit

Mortgage brokers have a duty of good faith and fair dealing in all communications and transactions with a borrower.  This section requires mortgage brokers to make a reasonable inquiry concerning the borrower’s current and prospective income, existing debts and other obligations, and other information known to the mortgage broker, and after making such inquiry, to make his or her best efforts to recommend, broker, or originate a residential mortgage loan that takes into consideration the information submitted by the borrower. It is both the borrower and mortgage broker’s responsibility to ensure that the loan is beneficial to the borrower.

Mortgage brokers are responsible for having the Tangible Net Benefit Disclosure form completed.

The Tangible Net Benefit Disclosure form shall be completed at application and again if the tangible net benefit changes during the mortgage transaction.

I hope this blog provides insight into the requirements your mortgage lender/broker should be sharing with you.  Please contact me if you have questions.

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