Memo MRM 2000-3
To: Mortgage Companies
From: Kevin C. Glendening, Deputy Commissioner
Date: August 2, 2000; amended October 19, 2001
RE: Minimum documentation to be retained for examination purposes.
Pursuant to the Kansas Mortgage Business Act, K.S.A. 9-2201 et seq., this agency may conduct examinations of the operations, books, and records of licensed mortgage companies. This memorandum is intended to provide information and general guidance regarding minimum documentation a licensee is expected to maintain for examination purposes. Routine examinations will encompass a variety of areas including a review of general mortgage business conduct to assess competent and legitimate business practices; and a review of loan files to ensure consumer protection and compliance with state and federal laws.
For the purposes of this memorandum, loan documentation is divided into two categories depending on the nature of the mortgage transaction. The first category includes mortgage transactions in which the licensee does not close the mortgage loan in their name (Broker Transactions). The second category of mortgage transactions includes all those in which the licensee provides monies to fund the loan or closes the mortgage loan in their name, whether or not advancing monies to fund the loan (Lender/Broker Transactions). In addition, other documents related to the general business practices of all licensees' are also included within this memorandum.
Pursuant to K.S.A. 9-2216(a), "a licensee shall keep for at least 25 months copies of all deposit receipts, canceled checks, trust accout records, required federal and state disclosures and other relevant documents or correspondence received or prepared by the licensee in connection with a loan or loan application." At a minimum, the specific documents itemized below should be retained and made available for inspection at time of examination.
Broker Transactions - those transactions in which the licensee does not close the loan in their name.
Documents to be retained for review:
Application (1003)
Good Faith Estimate
Early Truth in Lending
Any written agreements with borrower describing fees, broker compensation, etc.
Kansas Disclosure (Pursuant to K.S.A. 9-2208)
Appraisal within 12 months or most recent tax assessment
Hud-1 Settlement Statement
Paid invoices (appraisals, third party fees, etc.)
Lender/Broker Transactions - those transactions in which the licensee provides monies to fund the loan, and those transactions in which the licensee closes the loan in their name but does not provide monies to fund the loan (table funding).
Documents to be retained for review:
All closing documents, including but not limited to:
Application (1003)
Good Faith Estimate
Early Truth in Lending
Any written agreements with borrower describing fees, broker compensation, etc.
Kansas Disclosure (Pursuant to K.S.A. 9-2208)
Appraisal within 12 months or most recent tax assessment
Interest rate lock-in agreement or float agreement
Hud-1 Settlement Statement
Final Truth in Lending
Promissory Note
Mortgage
Assignment of mortgage and note, if applicable
Initial Escrow Statement
Right of Rescission, if applicable
Transfer of Servicing Disclosure, if applicable
Mortgage Servicing Disclosure, if applicable
Paid invoices (appraisals, third party fees, etc.)
Complete payment histories on any accounts being serviced.
Other documents related to general business review of the licensee:
Advertising records (copies of printed ads, solicitations, etc.)
Business account check ledger or register
Financial statement, balance sheet, or statement of condition
Escrow account ledger and related deposit statement (Pursuant to K.S.A. 9-2213)
Lease agreements on Kansas branch locations
Schedule of licensee's fees and charges
The documentation described in this memorandum represent minimum guidelines. Depending upon circumstances, Examiners may request additional information. Please feel free to contact this office if you have questions or concerns.
