California Financial Code 50203 – (a) A licensee may not require a borrower to pay fees or charges …
(a) A licensee may not require a borrower to pay fees or charges prior to the residential mortgage loan closing, except for:
(1) Actual charges to be incurred by the licensee on behalf of the borrower for services from third parties necessary to process the application, such as credit reports, appraisals, flood certification, and tax service, and in transactions where these services are provided by the licensee, a charge not to exceed the prevailing market rate for the service.
Terms Used In California Financial Code 50203
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
- Precedent: A court decision in an earlier case with facts and law similar to a dispute currently before a court. Precedent will ordinarily govern the decision of a later similar case, unless a party can show that it was wrongly decided or that it differed in some significant way.
- Writing: includes any form of recorded message capable of comprehension by ordinary visual means. See California Financial Code 8
(2) An application fee.
(3) A rate-lock fee, provided:
(A) There is a written agreement signed by the borrower and licensee.
(B) The terms of the agreement include, but are not limited to:
(i) The expiration date of the rate-lock fee agreement.
(ii) The principal amount of the mortgage loan, the term of the mortgage loan, and identification of the property.
(iii) The initial interest rate and the discount (points) to be paid.
(iv) The amount and payment term of the rate-lock fee along with a statement disclosing whether the fee is refundable and the terms and conditions necessary to obtain a refund.
(C) The licensee demonstrates to the commissioner that it is able to perform under the terms of the agreement.
(4) A commitment fee, upon approval of the residential mortgage loan application, provided:
(A) The commitment is in writing and signed by the licensee and the borrower.
(B) The commitment contains all of the following information:
(i) The terms and conditions of the residential mortgage loan.
(ii) The terms and conditions of the commitment, including, but not limited to, all of the following:
(I) The time period during which the commitment is irrevocable and may be accepted by the borrower, which may not be less than three calendar days from the date of commitment or the date of mailing, whichever is later.
(II) The amount and payment terms of the commitment fee, along with a statement disclosing whether the fee is refundable and the terms and conditions necessary to obtain a refund.
(III) The expiration date of the commitment.
(IV) Conditions precedent to closing.
(b) If the licensee has performed its obligations under the law related to the transaction, fees or charges collected pursuant to this section, other than those collected pursuant to paragraphs (1) and (2) of subdivision (a), shall be refunded if a valid commitment or closing, respectively, does not occur, except that the licensee may retain appropriate fees upon the licensee’s demonstration to the commissioner that any of the following occurred:
(1) The borrower withdrew the loan application.
(2) The borrower made a material misrepresentation or omission on the loan application.
(3) The borrower failed, after written request, to provide documentation necessary to the processing or closing of the loan application.
(4) The closing failed to occur due solely to the fault of the borrower.
(Amended by Stats. 1995, Ch. 564, Sec. 14. Effective January 1, 1996.)