Alabama Origination Reference Guide
- Kacey Olson
Citation | Topic | Requirement |
Broker Agreement | Prior to the collection of a mortgage broker fee from a borrower, a licensed broker must disclose to the borrower in writing the nature of the mortgage broker's relationship to the borrower and the method by which the mortgage broker will be compensated for services and comply with applicable federal and state laws, rules and regulations. Ala. Code § 5-25-12(a). | |
Collection of Fees Prior to Commitment Letter | A mortgage broker must disburse funds in accordance with the terms of a written commitment to make a mortgage loan. In addition, a mortgage broker may not collect any fees before obtaining a conditional commitment from the lender. | |
Copies of Instruments | At closing, a lender in a consumer credit transaction must furnish the borrower with a copy of each instrument executed by the borrower. This requirement does not apply to credit extended under an open-end credit plan. | |
Late Payment Fees | When a scheduled payment in a consumer credit transaction is in default 10 days or more, the lender may charge and collect a late fee not exceeding the greater of $18 or 5% of the amount of the scheduled payment in default, not to exceed $100. The late charge may be collected only once on any scheduled payment, regardless of how long the payment remains in default. Although the Alabama Consumer Credit Act limits the amount of a late fee that may be charged, Alabama courts have held that a lender and borrower may negotiate the amount of late fees to be charged for loans of $2,000 or more; the amount of the late fee is limited only by principles of unconscionability. | |
Mortgage Loan Origination Agreement | A mortgage broker must, prior to collecting a fee from the borrower, provide the borrower with a written disclosure explaining the nature of the mortgage broker's relationship to the borrower and the method by which the mortgage broker will be compensated for services. | |
Secure and Fair Enforcement for Mortgage Licensing Act / Ala. Code, §5-26-20 | NMLS Unique Identifier | The unique identifier of any person originating a residential mortgage loan must be clearly shown on all residential mortgage loan application forms, solicitations or advertisements, including business cards or websites, and any other documents as established by rule, regulation or order of the Department. |
Note Statement | A consumer credit transaction contract or note, other than for an open-end credit plan, must contain the following statement in 8 point or larger type immediately above the space for the borrower's signature: CAUTION -- IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT BEFORE YOU SIGN IT. | |
Refinancing Restrictions - Terms of the Refinancing | 1) If any scheduled payment is more than 1.5 times as large as the average of earlier scheduled payments, then the borrower has the right to refinance the amount of that payment at the time it is due without penalty. The terms of the refinancing must not be less favorable than the terms of the original transaction. | |
Refinancing Restrictions - Pro Rata Refunds or Credits | 2) When any loan is renewed or refinanced by any lender, or the lender's affiliate, within a period of 120 days from the date the loan is made, the borrower is entitled to a pro rata refund or credit of any unearned portion of the original finance charge computed as of the date of the refinancing or renewal. | |
Refinancing Restrictions - Minimum Finance Charge | 3) When any consumer debt, other than an open-end credit plan, is renewed or refinanced by the lender or its affiliate, any minimum finance charge for a credit sale must be reduced to the finance charge permitted under the Alabama Consumer Credit Act. | |
Right To Select Insurance Provider Notice | If a lender requires a borrower to obtain any insurance on the property that is security for the loan, then the borrower must be given written notice of his or her option to obtain the insurance through the insurer of his or her choice. If the borrower does not provide the insurance through an existing policy or a policy independently obtained and paid for by the borrower, then the creditor may purchase insurance on the property and charge the borrower for the insurance premium. |