From: Leon < This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Subject: Lon's Contract in MS-Word To: Roger Tanner < This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , Dottie < This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Date: Thursday, October 1, 2009, 12:13 AM






 

florida-mortgage fanniemae form 3010.doc
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Ladies and Gentlemen: Roger Tanner just sent me a copy of a client's mortgage agreement, identified as Florida Form 3010.  I googled it and came up with the attached document, which I encourage all of you to take the time to read in full because Fannie Mae has prescribed a version of this form for all states    - *http://www.mortgage-investments.com/mortgage-documents/    <goog_1254841120200 florida <goog_1254841120200 -mortgage.doc    <http://www.mortgage-investments.com/mortgage-documents/ florida-mortgage.doc<http://www.mortgage-investments.com/mortgage-documents/%E2%80%8Bflori...    *    Home buyers sign this one-sided mortgage agreement (an adhesion contract    that has limited enforcability) and an associated promissory note as a    condition to receiving the loan with which to pay for the house.    Pay attention to section 10 of the document.  Do you notice that it    discuses mortgage insurance?                *10.  Mortgage Insurance.*  If Lender required Mortgage    Insurance as a condition of making the Loan, Borrower shall pay the premiums    required to maintain the Mortgage Insurance in effect. If, for any reason,    the Mortgage Insurance coverage required by Lender ceases to be available    from the mortgage insurer that previously provided such insurance and    Borrower was required to make separately designated payments toward the    premiums for Mortgage Insurance, Borrower shall pay the premiums required to    obtain coverage substantially equivalent to the Mortgage Insurance    previously in effect, at a cost substantially equivalent to the cost to    Borrower of the Mortgage Insurance previously in effect, from an alternate    mortgage insurer selected by Lender.  If substantially equivalent Mortgage    Insurance coverage is not available, Borrower shall continue to pay to    Lender the amount of the separately designated payments that were due when    the insurance coverage ceased to be in effect.  Lender will accept, use and    retain these payments as a non-refundable loss reserve in lieu of Mortgage    Insurance.  Such loss reserve shall be non-refundable, notwithstanding the    fact that the Loan is ultimately paid in full, and Lender shall not be    required to pay Borrower any interest or earnings on such loss reserve.    Lender can no longer require loss reserve payments if Mortgage Insurance    coverage (in the amount and for the period that Lender requires) provided by    an insurer selected by Lender again becomes available, is obtained, and    Lender requires separately designated payments toward the premiums for    Mortgage Insurance.  If Lender required Mortgage Insurance as a condition of    making the Loan and Borrower was required to make separately designated    payments toward the premiums for Mortgage Insurance, Borrower shall pay the    premiums required to maintain Mortgage Insurance in effect, or to provide a    non-refundable loss reserve, until Lender’s requirement for Mortgage    Insurance ends in accordance with any written agreement between Borrower and    Lender providing for such termination or until termination is required by    Applicable Law.  Nothing in this Section 10 affects Borrower’s obligation to    pay interest at the rate provided in the Note.    Mortgage Insurance reimburses Lender (or any entity that purchases the    Note) for certain losses it may incur if Borrower does not repay the Loan as    agreed.  Borrower is not a party to the Mortgage Insurance.    Mortgage insurers evaluate their total risk on all such insurance in    force from time to time, and may enter into agreements with other parties    that share or modify their risk, or reduce losses. These agreements are on    terms and conditions that are satisfactory to the mortgage insurer and the    other party (or parties) to these agreements.  These agreements may require    the mortgage insurer to make payments using any source of funds that the    mortgage insurer may have available (which may include funds obtained from    Mortgage Insurance premiums).    As a result of these agreements, Lender, any purchaser of the Note,    another insurer, any reinsurer, any other entity, or any affiliate of any of    the foregoing, may receive (directly or indirectly) amounts that derive from    (or might be characterized as) a portion of Borrower’s payments for Mortgage    Insurance, in exchange for sharing or modifying the mortgage insurer’s risk,    or reducing losses.  If such agreement provides that an affiliate of Lender    takes a share of the insurer’s risk in exchange for a share of the premiums    paid to the insurer, the arrangement is often termed “captive reinsurance.”    Further:    *(a) Any such agreements will not affect the amounts that Borrower has    agreed to pay for Mortgage Insurance, or any other terms of the Loan.  Such    agreements will not increase the amount Borrower will owe for Mortgage    Insurance, and they will not en_title_ Borrower to any refund.    (b) Any such agreements will not affect the rights Borrower has – if any    – with respect to the Mortgage Insurance under the Homeowners Protection Act    of 1998 or any other law. These rights may include the right to receive    certain disclosures, to request and obtain cancellation of the Mortgage    Insurance, to have the Mortgage Insurance terminated automatically, and/or    to receive a refund of any Mortgage Insurance premiums that were unearned at    the time of such cancellation or termination.    *    Did you also notice that the borrower pays non-refundable premiums, and    that the lender may disburse those premiums to others virtually at its whim,    but that the borrower might have rights to terminate the insurance?    What ever can this mean?    Let us suppose the lender requires the borrower to pay for mortgage    insurance.  In such an event, what happens if the borrower fails to make    mortgage payments?  Depending on the terms of the mortgage insurance policy,    the insurance company will to the lender the the remaining balance on the    promissory note.    Let us suppose that happens.  Has the insurer just discharged all or part    of the debt?  If so, does the borrower still owe the debt?  How long after    the borrower defaulted (fail to pay) may the insurer wait before paying such    a discharge?    I suppose we would have to see the insurance policy to know that.  Does    an industry standard exist for that?    It seems to me that if the insurer discharges the debt, then the lender    or the ultimate assignee of the note has lost the right to sue for    foreclosure, except for the amount not discharged by insurance.    In other words, it should operate pretty much as automobile insurance    operates.  You get into a wreck, the cop issues an accident report citing    who had fault, the injured party contacts the insured's insurer, the insurer    sends the victim to a repair shop, the repairer fixes and returns the car,    and neither party to the accident pays anything.    In other words, the premiums the borrowers pay covers the discharge of    the debt, and nobody owe anything to anybody as a consequence.    I only guess that virtually all lenders require borrowers to pay
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Bob Duke responded with his views about mortgage insurance below. To supplement his comments, I have appended immediately below, the Florida Statutes, Chapter 635<http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statut..., relating to mortgage insurance. You will notice that we cannot consider the mortgage insurance premium part of the cost of the loan, by statute, even though it clearly arises in connection with the loan, and the lender might not provide the loan without it. Also notice the Contingency (Loss) Reserve mentioned in both the statutes and in the Fannie Mae for 3010 mortgage agreement.  There, the borrower must, if required by the lender, pay a mortgage insurance premium, and that premium might go into the Reserve, which form 3010 claims the lender shall not refund to the mortgagor. even if the insurer or lender cancel the insurance.  Imagine paying that premium for the life of the loan, 30 years, even after cancellation of the insurance. Seems crooked, doesn't it? Note that mortgage guaranty insurance also falls subject to chapters 624, 625,626, 627, 628, and 631.  You have some more reading to do to understand this matter fully.  But you should consider that the insurer must abide by capitalization requirements, and can suffer punishment for not doing so.  It might therefore benefit victims of mortgage fraud or mortgage insurance fraud to verify insurer compliance with the laws, and file a complaint for substantive violations. *CHAPTER 635* ** *MORTGAGE GUARANTY INSURANCE* 635.011  Definitions. 635.021  Authority to transact mortgage guaranty insurance. 635.031  Additional limitations. 635.041  Contingency reserve. 635.042  Minimum surplus requirement. 635.051  Licensing and appointment of mortgage guaranty insurance agents. 635.061  Premium cost. 635.071  Filings, approval of forms; rate filings. 635.075  Restoration of property. 635.081  Administration and enforcement. 635.091  Provisions of Florida Insurance Code applicable to mortgage guaranty insurance. *635.011  Definitions.*