Your MN Mortgage Mom's Blog

When most industries are boasting the paperless era, the mortgage industry continues to inundate our consumers with more paper!  Every year it seems that we are presented with new state and federal disclosures.  What do all these forms mean?

Well, here it is...Everything you wanted to know about mortgage documents, but were too afraid to ask!

The following descriptions are meant to be abbreviated explanations of lending disclosures.  Of course, I recommend that you read them in their entirety, ask your loan officer questions where they arise and seek professional counsel should you feel it necessary.

 Uniform Residential Loan Application (1003)

 The lender uses this form to record relevant financial information about an applicant who applies for a residential mortgage.  This form will represent the information shared in the interview concerning residence history, income, assets, liabilities, details of the proposed transaction and declarations about the applicant, his/her intentions and his/her past. 

Good Faith Estimate (GFE)

 This document is a written estimate of expected closing costs that a lender must provide a prospective home loan borrower.  Brokers and lenders are required by law to make as accurate an estimate as they can.

Truth In Lending (TIL)

 The purpose of the Truth In Lending Act (TILA) is to promote the informed use of consumer credit by requiring disclosures about its terms and costs in a standardized manner.  This document will show you your Annual Percentage Rate (APR) which is the cost of credit on a yearly basis, expressed as a percentage. This is required to be disclosed by the lender and it includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. APR Does not include title insurance, appraisal and credit report.

Borrower's Certification and Authorization

 This document affirms your application intentions, its accuracy, consequences of lying, and authorizes your lender or its assignee to verify your application information and modify the method by which your income may be documented for the purposes of loan processing and approval.

Credit Authorization

 This document allows your broker/lender to obtain and share your credit report with lenders, investors or other relevant 3^rd parties for the purpose of fulfilling your request for an extension of credit.

RESPA Servicing Disclosure

 The Real Estate Settlement Procedures Act (RESPA) requires the lender or mortgage broker to tell you in writing whether it expects that someone else will be servicing your loan (collecting your payments).  In this document, you'll find the lender's history of servicing and transferring servicing rights.

4506-T Request for Transcript of Tax Return

 This document authorizes your lender to obtain transcripts (i.e. Form 1040 series, Form 1065, Form 1120, Form 1120A, Form 1120H, Form 1120L, and Form 1120S) as well as supplemental filed materials (i.e. Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript) for verification and quality control purposes. 

Credit Score Information Disclosure

 In connection with your application for a home loan, the lender must disclose to you the score that a credit bureau distributed to the lender used in connection with your home loan, and the key factors affecting your credit scores.

Equal Credit Opportunity Act Notice

 The Equal Credit Opportunity Act (ECOA) ensures that all consumers are given an equal chance to obtain credit.  This notice informs you of that right and what to do if you feel you've been discriminated against.

Disclosure Notices

There are several elements to this disclosure.  It is an affidavit of your intention of occupying the property or not, a description of your rights under the Fair Credit Reporting Act, a reiteration of your rights and redress under the ECOA, a description of your right to privacy, an authorization to your current affiliates to release information to your lender for the purpose of compiling a mortgage loan credit package, an affirmation that your lender has not coerced you to use a specific insurance company and an affirmation that you received a copy of the Consumer Handbook on Adjustable Rate Mortgages, if applicable.

Fair Lending Notice

 The Fair Lending Notice outlines what constitutes different forms of illegal bias, prejudice and discrimination and provides contact information to federal agencies for further questions about your rights or whom to contact if you wish to file a complaint.

Patriot Act Disclosure

 Federal law requires all financial institutions to obtain, verify, and record information that identifies every customer.  This document simply informs you that we'll be collecting the required information to be in compliance with this act.

 Patriot Act Information Form

 This form gives you the option of which form of identification you'd like to use to satisfy the Patriot Act requirements.  Please choose the identification form that is most convenient for you and fill out the requested information.

Net Tangible Benefit...IMPORTANT!

 Loan officers in Minnesota are prohibited from brokering or making a loan that does not provide a borrower with a "net tangible benefit."  This disclosure outlines that this requirement exists and how the benefit is identified.

Ability to Repay the Loan

 Minnesota requires that consideration be given to a borrower's capacity to repay the loan that they are applying for.  This disclosure verifies this fact, affirms your income as represented by you or on your behalf to your lender and outlines the method by which they evaluate your capacity to repay the loan.  It also serves as a warning that, if you think you might not be able to afford this loan, that you should not proceed with the loan process.

Escrow Accounts

 Of late, many less scrupulous companies have disclosed terms of loan offers without representing the complete monthly payment that includes taxes and insurance.  This disclosure outlines how an escrow account works and shows our estimate, at this time, of what will be included on a monthly basis in your escrow account.

Whew!  Now that's a lot of language!  Always work closely with your loan officer, ask questions, read your mortgage documents and make sure you know what you are signing.