Sec. 09.03.09.04. Duty of Care

A. Good Faith and Fair Dealing. A mortgage loan originator has a duty of good faith and fair dealing in communications and transactions with a borrower, including, but not limited to:

(1) The duty to recommend to a borrower or induce a borrower to enter into only a mortgage loan refinancing that has a net tangible benefit to a borrower, considering all of the circumstances, including the terms of a loan, the cost of a loan, and the borrower's circumstances; and

(2) The duty to provide to a borrower who is offered a higher-priced mortgage loan information about the non-higher-priced mortgage loans that the licensee can make available and for which the borrower may qualify.

B. Method to Determine Net Tangible Benefit.

(1) When determining whether a refinance of a mortgage loan will provide a net tangible benefit to the borrower, a mortgage loan originator shall make a reasonable inquiry of a borrower to determine what net tangible benefit, if any, the borrower will receive from a mortgage loan. Net tangible benefits may include, but are not limited to:

(a) Obtaining a lower interest rate;

(b) Obtaining a lower monthly payment, including principal, interest, taxes, and insurance;

(c) Obtaining a shorter amortization schedule;

(d) Changing from an adjustable rate to a fixed rate;

(e) Eliminating a negative amortization feature;

(f) Eliminating a balloon payment feature;

(g) Receiving cash-out from the new loan in an amount greater than all closing costs incurred in connection with the loan;

(h) Avoiding foreclosure;

(i) Eliminating private mortgage insurance; and

(j) Consolidating other existing loans into a new mortgage loan.

(2) A mortgage loan originator is considered to have conducted a reasonable inquiry of whether a refinance of a mortgage loan provides a net tangible benefit to a borrower if the mortgage loan originator has the borrower complete and sign a net tangible benefit worksheet on the form prescribed by the Commissioner for that purpose, or a form that is substantially similar to the form prescribed by the Commissioner.