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Banking Interpretations

General Regulations of the Banking Board Part 38.4

January 11, 2006

[ ]

Re: Section 38.4 of the General Regulations of Banking Board (“Part 38.4”)

Dear [ ]:

Your letter to Sara Kelsey, Esq., New York State Banking Department (the “Department”), has been referred to me for response. In your letter you asked the following questions: (i) Will the disclosure requirements of Part 38.4 necessitate disclosure by a lender in a refinancing transaction that in the event the borrower chooses to rescind the transaction, he/she will be entitled to all fees paid in connection with the commitment? (ii) Will a fee collected by a lender at the time a commitment is accepted, or after acceptance of the commitment, for the purpose of filing a UCC in a coop loan transaction be considered a fee paid in connection with a commitment, for purposes of Part 38.4?

Part 38.4 requires:

At the time of commitment, and in any case prior to the acceptance of a commitment fee or points, each mortgage banker and exempt organization making a mortgage loan shall disclose in writing or by electronic transmission to each applicant for a mortgage loan the fees to be paid in connection with the commitment and the terms and conditions under which such fees may be refundable.

It is clear from a reading of the statute, that if under some “term or condition” fees paid in connection with a commitment are refundable, then such “terms or conditions” shall be disclosed to the consumer. And when, as in refinancing transactions, one such term or condition could be a rescission of the transaction, then such disclosure should be made in accordance with Part 38.4.

With regard to your second question, for purposes of Part 38.4, fees paid in connection with the filing of a UCC in a coop loan transaction is not “a fee paid in connection with a commitment” if the commitment is not contingent on the payment of such fee. Note that this opinion does not address the question of whether such fee is a refundable fee under 12 CFR 226.23.

I trust the foregoing is responsive to your inquiry.

Very truly yours,

Harry C. Goberdhan
Assistant Counsel

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