California real estate disclosure laws California Real Estate Disclosures | Page 56
At least three business days before a high-rate OR high-cost loan is funded,
the following disclosures must be made:
•
The creditor/lender must provide a written notice stating that the loan
need not be completed, even if the borrower has signed the loan
application and received the required disclosures. The borrower has
three business days to decide whether to sign the loan agreement after
the borrower receives the special Section 32 disclosures;
•
The notice must include a warning to the borrower that, he/she could
lose his/her residence (the security property) and any money put into it,
if payments are not made; and
•
The lender must disclose the APR, the regular payment amount, any
authorized balloon payment, and the loan amount (plus where the
amount borrowed includes credit insurance premiums that fact must be
stated). For variable rate loans, the lender must disclose that the rate and
monthly payment may increase and state the amount of the maximum
monthly payment and interest rate, as applicable.
These disclosures are in addition to the other TILA disclosures that must be
provided no later than the closing of the loan or prior thereto as required by
law.
(15 U.S.C. § 1601 et. seq.)
I.
California High Cost Mortgage/Loan Disclosures
The California Financial Code defines certain high cost loans as “covered
loans,” which loans are subject to various requirements, restrictions,
standards and penalties. A “covered loan” is one that does not exceed the
most current conforming loan limit for a single-family first mortgage loan
established by the Federal National Mortgage Association (FNMA) and
which exceeds specified points, fees, and/or includes APRs that exceed a
defined limit in comparison to Treasury Securities of a similar term as the
contemplated loan.
For 2006, the conforming FNMA loan limit is set at $359,650 for
loans/mortgages secured by single-family properties. This law adjusts the
covered loan limits automatically to track with FNMA conforming loan
limits.
The following are disclosures required in covered loan transactions:
•
At least three business days prior to loan consummation, the loan
originator (defined as either the lender or broker for this purpose) must
disclose in writing to the borrower the terms of any lawfully allowed
prepayment penalty and the rates, points, and fees for the “covered loan”
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