LAW OFFICES OF
LEONARD KOMEN, P.C.
Area coverage: Missouri Counties of:
St. Louis County, St. Louis, Jefferson, St. Charles
Attorneys at Law
14385 Stablestone Ct.
Chesterfield, MO 63017
Telephone: (314) 651-1601
e-mail: [email protected]
webpage: komenlaw.com
LENDING DOCUMENTATION
Applicable laws:
FEDERAL
12 U.S.C. 1464 Home Owners Loan Act (HOLA)
12 CFR Section 560 (State laws pre-empted and not pre-empted by federal law.)
12 CFR Section 591 (Federal permanent preemption of state prohibitions on due-on-sale clauses)
MISSOURI REVISED STATUTES
Chapter 407 Merchandising Practices Act
Chapter 427 Creditor Protection (Lender’s non-liability for environmental violations)
Chapter 443 Deeds of Trust, Mortgages, ..
Miscellaneous Sections:
408.230 et seq: Second Mortgage loans
408.030 Interest, maximum rate allowed
408.035 Unlimited interest, when allowed
408.036 Prepayment penalty by lender prohibited, exception
408.052 Points prohibited, exception
408.100 Interest on small loans (section cited in Bankers System form of
Second Deed of Trust Note and Disclosure
408.551 Legal tender and interest; defaults – applicability of Section 504.554 to second mortgage loans
408.551 Notice of Default on second mortgage loans
429.050 Priority of mechanics liens (for construction funded by deed of trust)
442.210 Certificate of acknowledgment – contents
443.055 Future Advances deeds of trust
SIGNIFICANT PROVISIONS OF STATUTES
FEDERAL
Loan Application should include “Government Monitoring” section (see format below)
MISSOURI
Points – Points and Origination fees – Missouri has no restrictions on points or origination fees on federal government backed mortgages or intended to be federally insured. Section 408.052
Otherwise:
-lender can charge a maximum of one percent origination fee
-if loan is for construction, repair or improvement of residential real estate, lender can charge up to 1% of loan amount for inspection and disbursement of the proceeds of the loan to a third party.
Charges/fees allowed: (Missouri says no charges can be assessed other than):
- recording costs
- taxes
- closing costs to third parties: – title exam; title insurance, survey; preparation deed, settlement statement, notary, appraisal fees, credit reports, insurance, origination fee up to 5%, amounts paid by lender to other to reduce the rate on a second mortgage, and an annual fee up to $50 on revolving loans.
- insurance protecting the lender against borrower’s default or other credit loss, and casualty insurance if not already covered, and life, accident health or involuntary unemployment coverage.
- Late charge for payment over 15 days, (the lesser of 5% of amount due or $25.00.
- On refused instruments, the actual charge of handling plus $15.00
- Attorneys fees if the contract calls for it, and (only) if suit is brought
Trustee for Missouri deed of trust –can not be a foreign corporation or person in any security agreement executed after 8/28/94. Sec. 443.350
Foreclosure sales: Missouri: requires not less than 20 days’ notice of sale, whether so provided in deed of trust or not. Section 443.310
Form of Notice of sale per Section 443.320
Time of sale: Unless the deed of trust specifies an hour, the time is commercially reasonable if between 9:00 a.m. and 5:00 p.m.; If not time specified, then shall be held at the time customary for such sales in the county. Section 443.327.
Form of Acknowledgment on Deeds– Must be in the following form:
For an individual:
STATE OF MISSOURI )
) SS.
COUNTY OF__________ )
Appeared before me, a notary public, this ___ day of ___________, 200_, __________________, being known to be and being first duly sworn, on oath, executed the foregoing instrument and acknowledged that he/she executed the same as his/her free act and deed”
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the County and State aforesaid, the day and year first above written.
_____________________________________
Notary Public
For a corporation:
STATE OF MISSOURI )
) SS.
COUNTY OF__________ )
ON THIS ____ day of ____________, 200___, before me personally appeared ______________________ to me known, who, being by me duly sworn, did say that he is the President of ___________________ , a corporation of the State of Missouri, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporate seal of said corporation, by authority of its Board of Directors; and he acknowledged said instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the County and State aforesaid, the day and year first above written.
_____________________________________
Notary Public
Or if no seal:
STATE OF MISSOURI )
) SS.
COUNTY OF__________ )
On __________________, 200___, before me appeared ___________________, to me personally known, who, being by me duly sworn, did say that he is the President of __________________ a Missouri Corporation, and that said instrument was signed and sealed in behalf of said corporation, by authority of its Board of Directors; and said_________________ acknowledged said instrument to be the free act and deed of said corporation, and that said corporation has no corporate seal.
___________________________
Notary Public
For a limited liability company
STATE OF MISSOURI )
) SS.
COUNTY OF__________ )
ON THIS ____ day of ____________, 200____, before me personally appeared ______________, who, being known to me and being first duly sworn, did say that he is the Member-Manager of ___________________________, L.L.C., a Missouri limited liability company, and that said instrument was signed by him on behalf of said limited liability company, by authority of its Members; and he acknowledged said instrument to be the free act and deed of said limited liability company.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the County and State aforesaid, the day and year first above written.
_____________________________________
Notary Public
Future Advances Deeds of Trust
The fact that it secures future advances must be clearly stated in the body of the deed of trust ( not in the title alone)
Total debt may increase or decrease from time to time but can never exceed the maximum amount stated in the deed of trust.
Exception to above two items: future advances made by lender for reasonable protection of lender’s security interest
Notice of Default on second mortgage loans – contents are strictly prescribed (408.554)
- After borrower has been in default over 10 days, lender “may” give notice
- Notice shall conspicuously state: name and phone number of lender, brief identification of credit transaction, borrower’s right to cure the default’ amount of payment and date by which payment must be made to cure the default.
- Notice “shall” state:
- “If you voluntarily surrender possession of the following specified collateral, you could still owe additional money after the money received from the sale of the collateral is deducted from the total amount you owe.”
- In the case of a third default on the same second mortgage loan, the notice shall indicate that in the case of further default, the borrower will have no right to cure.
A CHECKLIST FOR PROVISIONS IN LOAN DOCUMENTS
NOT FNMA/FHLMC/VA LOANS
Deed of Trust With Future Advances clause – Missouri, Not for FNMA, FHLMC, FHA)
__ Date, identity of parties,
__ Conveyance – language of grant: grants, bargains, sells and conveys
__ address and legal description
__ principal amount of loan, note dated, general terms
__ Identify debt secured – “including renewals, extensions and modifications,”
__ borrower to pay debt etc. as evidenced by Note
__ warranty of title
__ prior security interests to be paid, with copies of notices to lender; no modification
__ charges, liens against property to be paid by borrower
__ due on sale clause; unless prohibited by federal law; 30 days notice of acceleration
__ occupancy, preservation, maintenance of property,
Inspection by lender at reasonable times, on notice, specifying cause
__ protection of lender’s rights in property if borrower fails to perform covenants; any amounts paid by lender for those purposes to become additional debt.
__ assignment of leases
__ default: failure to pay on time; general insecurity clause
__ remedies on default: Acceleration; foreclosure sale;
Expenses on default
__ hazardous substances prohibited; borrower to give lender notice of investigations
__ condemnation proceeds assigned to lender
__ hazard insurance by borrower, else lender can provide at borrower’s cost; lender has right to hold policies; insurance proceeds applied to restoration or repair of property; if not economically feasible, then applied to sums due under Note.
__ escrow for taxes and insurance; no escrow charges
__ financial reports and additional documents as requested
__ successors and assigns bound; joint and several liability
__ governing law, severability
__ successor trustee authorized
__ trustee leases property to grantor
__ notices, method
__ payments applied first to prepayment charges due under the Note, then to taxes and insurance, then interest, then principal, and then late charges.
__ mortgage insurance – if required by lender, borrower to pay premiums
__ lender’s extension or modification of borrower’s obligations not a waiver
__ loan charges in excess of legal limits to be reduced as necessary and refunded
__ release upon payment of all sums secured, without charge to borrower except recording fees.
__ riders to security instrument, identified, incorporated.
__ adjustable rate rider __ condominium rider
__ second home rider __ 1-4 family rider
__ balloon rider __ planned unit development
__ other
__ Acknowledgment:
Second Mortgage – Home Equity Loans/Line of Credit documents
Application
Line of credit Agreement, Note, and Truth in Lending disclosures
Note
__ promise to pay
__ lender can transfer the note
__ Interest rate both before and after any default
__ payments due when; applied to interest first; payable at ..
__ payment amount
__ prepayment privilege without penalty
Missouri says prepayment penalty fee only within the first 5 years; maximum 2% of balance
__ loan charges in excess of legal limits to be reduced as necessary and refunded
__ late charges for failure to pay on time – 15 days – 5% – only once on each payment
__ default in event of ..
__ notice of default of overdue amount to be paid by a certain date or entire balance accelerated at least 30 days from notice
__ waiver of one default does not waive later defaults
__ costs and expenses can be added if note accelerated, including e.g. attorneys fees
__ methods of giving notice; mail etc
__ obligations joint and several; obligations of guarantors, assignees
__ borrower waiver of right of presentment and notice of dishonor, defined.
__ note is connected with a deed of trust or security instrument that has additional terms, such as due on sale clause and acceleration
__(30 days notice of invoking due on sale clause)
Notice of right to cancel
Disclosure/Information Sheet (home equity line of credit)
Use of this Web Site and review of this Article does not create an attorney-client relationship. The law and its application by the courts is constantly evolving and changing. As with all memoranda in these archives, the discussion of the law is for general informational purposes, is in general summary form, is not to be taken as a definitive guide, and should not be relied upon to determine all fact situations. Each set of facts must be examined separately with the current case and statutory law analyzed and applied accordingly.