Important Info on the New CA MLDS

For those of you who are originators in California but not active members of CAMB, I'm posting the contents of an e-mail I received this morning regarding the new required MLDS. You can read the details below, but the gist is that the new forms are required for all loans originated after August 15th, 2008. In other words, now. Most loan origination systems, including Calyx Point, do not yet have the new forms (there are different versions required based on loan type), but you can access them for free at the DRE website. Use this link: http://www.dre.ca.gov/frm_mlb.html.

Here is the complete e-mail from CAMB:

Important Notice:

Effectively IMMEDIATELY and MANDATORY!!

Revised MLDS Disclosures

MLDS 883, MLDS 885 and MLDS 882

Finally, all the comments have been reviewed and the final versions of the new MLDS forms were approved late Thursday, August 14, 2008 by the Office of Administrative Law (OAL). Approval from OAL was the last step necessary for formal approval and release of the new forms. That’s the good news, the “not so good news”, is that use of the new MLDS Disclosures are required effective Friday, August 15, 2008.. Each of the Disclosures has been revised to reflect expanded language about the proposed loan, loan documentation, prepayment and tax/insurance impounds. Shown below is a summary of the Disclosures.

Please check your Loan Processing System to determine whether or not you have the most recent version of the Disclosure (more than likely you do not). The MLDS versions you should be using will show (Rev. 8/08). The good news is that if you go to the DRE website, the disclosures in the Forms Section will allow you to enter the appropriate data and print out the disclosure. Even better news, the RE 885 Disclosure is in a format that will allow you to enter the data and print the disclosure. The more difficult data that is required for the RE 885 MLDS Disclosure (disclosure for Non-Traditional loans) can be obtained from the existing loan processing system; no manual calculations will be necessary. Run the disclosure in your loan processing system, and manually input the necessary the data into the disclosure on DRE’s website. The forms can be found at: http://www.dre.ca.gov/frm_mlb.html.

Just keep in mind that DRE has provided you with the disclosures, use of the Rev. 8/08 MLDS Disclosures are mandatory effective with any loans taken on or after Friday, 8/15/08. Just because you do not have the up to date disclosure in your loan processing system, does not relieve you of the responsibility of using the correct disclosure. For those of you who process your loans in different languages, DRE has informed me that the translated versions of the Disclosures will not be available until funds are released with the new Budget. Until that time, you are responsible for translating the disclosures into the appropriate language.

Copies of the revised MLDS Disclosures have been attached for your reference.

Summary of Disclosures

RE 883 Traditional Loans
1. This disclosure is to be used when the loan product DOES NOTallow the Borrower to defer repayment of principal or interest; and
2. Each payment is to include the full amount of principal and interest due for that installment.
3. The disclosure can be used when the loan is secured by real property (1-4 unit residential, raw or unimproved land or parcels, commercial, multi-family, or any other interest in real property.
4. Other than the non-applicable boxes in Section II, you are not to leave any spaces or lines blank.
5. The Broker or Broker’s Representative must sign and provide a completed MLDS Disclosure to the Borrower within three (3) business days of receiving the Borrower’s completed written loan application.
6. A copy of the Disclosure signed by all parties must be retained by the Broker for three (3) years.
7. If any other form other than the required RE 883 is used by a Real Estate Broker, prior written approval from DRE is required.
8. Completion of Disclosure Tips:
A. Page 1 – Compensation to Broker (not paid out of loan proceeds) – This is where any compensation received by the Broker for YSP, SRP or any other rebate or compensation is noted.
B. Page 2 – Section II – General Information About Loan – One of the four (4) boxes indicating the loan program and terms must be chosen. Real Estate Law requires that all material terms of the loan be disclosed. When the proposed loan terms cannot be accommodated in one of the four (4) boxes, an addendum that is signed and dated by the Borrower(s) and the Broker (or Broker’s Representative) should be attached to the disclosure.
C. Page 2 Section IV - Complete all applicable information. (Note: when there is no impound account being established, it is still necessary to provide an approximate amount for both Taxes and Insurance.)


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RE 885 Non-Traditional Loans*
1. This disclosure is to be used when the loan product allows the Borrower to defer repayment of principal OR interest; and
2. Loan is secured by a 1-4 unit residential property (it can be Owner Occupied or Non-Owner Occupied).
3. If property is NOT a 1-4 unit residential property, the RE 883 or RE 882 may be used.
4. Blank spaces or lines are not allowed.
5. The Broker or Broker’s representative must sign and provide to the Borrower within three (3) business days of receiving the Borrower’s completed written loan application.
6. A copy of the Disclosure signed by all parties must be retained by the Broker for three (3) years.
7. Completion of Disclosure Tips:
A. Page 1 – Compensation to Broker (not paid out of loan proceeds) – This is where any compensation received by the Broker for YSP, SRP or any other rebate or compensation is noted.
B. Page 2 – Section III – If the “Initial Adjustable Rate” box is selected, complete section IV – XI.
C. Page 2 – Section III – If “Fixed Rate” box is selected and loan is an Interest Only or has a Negative Amortization feature, skip section IV – IX and complete section X and XI.
D. Page 2 Section XIV - Complete all applicable information. (Note: when there is no impound account being established, it is still necessary to provide an approximate amount for both Taxes and Insurance.)
E. Page 3 – Certification – THIS ONE IS IMPORTANT – SO PLEASE READ!!…. If any or all of the columns on page 4, section XIX is incomplete (except last column “proposed loan”, in the Typical Mortgage Transactions portion), the Broker MUST read and complete the Certification on Page 3. This certification can only be signed by the BROKER OF RECORD; and should only be signed after proper due diligence has taken place. By signing the Certification, the Broker of Record is certifying UNDER PENALTY OF PERJURY that:
1. Only after a diligent search, the product specified in the column not completed is NOT available.
2. The Borrower to whom the disclosure applies does not qualify for that particular product.
F. Page 4 - Comparison of Sample Mortgage Features - If a Broker does not offer one or more comparison loan products, the box "not offered" should be selected for that particular product. The Broker must provide the required information in all columns except those for which the Broker has executed the Certification on Page 3.

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RE 882 Traditional
1. This disclosure is to be used when the loan product DOES NOTallow the Borrower to defer repayment of principal or interest; and
2. Each payment is to include the full amount of principal and interest due for that installment.
3. Disclosure has typically been used for Private Money loans not coming under RESPA.
4. The disclosure can be used when the loan is secured by real property (1-4 unit residential, raw or unimproved land or parcels, commercial, multi-family, or any other interest in real property.)
5. Other than the non-applicable boxes in Section II, you are not to leave any spaces or lines blank.
6. The Broker or Broker’s representative must sign and provide to the Borrower within three (3) business days of receiving the Borrower’s completed written loan application.
7. A copy of the Disclosure signed by all parties must be retained by the Broker for three (3) years.
8. If any other form other than the required RE 882 is used by a Real Estate Broker, prior written approval from DRE is required.
9. Completion of Disclosure Tips:
A. Page 1 Section I (B) (4) – Compensation to Broker (not paid out of loan proceeds) – This is where any compensation received by the Broker for YSP, SRP or any other rebate or compensation is noted.
B. Page 1 Section II (A) – General Information about Loan – One of the four (4) boxes indicating the loan program and terms must be chosen. Real Estate Law requires that all material terms of the loan be disclosed.
C. When the proposed loan terms cannot be accommodated in one of the four (4) boxes, an addendum that is signed and dated by the Borrower(s) and the Broker (or Broker’s Representative) should be attached to the disclosure.
D. Page 2 Section II (E) - Complete all applicable information. (Note: when there is no impound account being established, it is still necessary to provide an approximate amount for both Taxes and Insurance.)