Authorized Advance Fees and Escrow Requirements

PURPOSE: This rule establishes general practices and guidelines for residential mortgage loan brokers with regard to what advance fees may be collected and placement of said fees. This rule also sets forth guidelines for the collection and disbursement of rate-lock fees. (1) A broker shall not require a borrower to pay any fees or charges prior to the loan closing, except for: (A) The actual and necessary charges of third parties needed to process the application, which shall be administered pursuant to this rule; and (B) A rate-lock fee, provided that the written rate-lock fee agreement signed by both the borrower and the proposed lender includes the following terms: 1. The expiration date of the fee agreement; 2. The amount of the loan; 3. The maximum interest rate and maximum discount (points); 4. The term of the loan; 5. The lender is able to perform under the terms of the fee agreement; and 6. Subject to verification, the information submitted by the borrower indicates that the loan will be approved in accordance with the fee agreement. (2) Refunds on Failure to Close. The ratelock fee must be refunded if the loan does not close in accordance with the fee agreement, except that the fee may be retained upon the lender’s ability to demonstrate to the director any of the following reasons: the borrower withdrew the loan application; made a material misrepresentation on the loan application; or failed to provide documentation necessary to the processing or closing of the loan, such documents having been timely requested. When the fee is to be retained, the lender shall send a written notice to the borrower stating the reason for retaining the fee. (3) Brokers Failure to Close. If a residential mortgage loan is not closed through no fault of the applicant, all the charges shall be refunded to the borrower, except to the extent such charges were incurred in good faith by the lender on behalf of the borrower for thirdparty services. (4) Nothing in these rules shall be construed as to allow a broker, that is not a lender, to charge a fee for a rate-lock agreement or otherwise enter into a rate-lock agreement. (5) Escrow. Brokers, not subject to the Department of Housing and Urban Development escrow regulations, who receive funds that are to be used for actual and necessary third-party expenses needed to process the application shall place said funds with one (1) of the following no later than five (5) days after receipt: (A) A title insurer, title agency, or title agent not affiliated with a title agency that is authorized to act as an escrow, security, settlement, or closing agent pursuant to Chapter 381, RSMo; (B) An unaffiliated depository institution as defined in section 443.703.1(5), RSMo, or first-tier subsidiary or service corporation thereof that is acting as an escrow agent as defined by section 443.703.1(9), RSMo; or (C) A licensed attorney. AUTHORITY: sections 443.865, 443.869, and 443.887, RSMo Supp. 2009.* Emergency rule filed April 5, 2010, effective April 18, 2010, expired Jan. 26, 2011. Original rule filed April 15, 2010, effective Nov. 30, 2010. *Original authority: 443.865, RSMo 1994, amended 1995, 2009; 443.869, RSMo 1994, amended 1995, 2001, 2009; and 443.887, RSMo 1994, amended 1995, 2001, 2009.