1.    Q:  The Administrative Code seems to require all mortgage loan files to be maintained within an office in the State of North Carolina. Is that a requirement?

A: Yes, Banking Commission rules do require that a licensee maintain all loan files in the state of North Carolina (See 04 NCAC 03M.0502). However, a licensed Mortgage Lender may request approval to keep records outside the State, conditioned on the licensee's agreement to produce the records timely upon request, and at its own expense. NCCOB will generally approve requests by Mortgage Lender licensees who do not maintain an office in the State. Other requests will be considered on a case-by-case basis. NCCOB also does not object to the temporary removal of a file outside the State to handle a collection, bankruptcy, estate, collateral security or other similar issue.  However, removal from the State to thwart NCCOB's efforts to examine a file would be considered a violation of NC SAFE and the Administrative Code.

2.    Q:  What documents should I keep in my mortgage loan files?

A:   Banking Commission Rules require any licensee under the Mortgage Licensing Act to “…create and retain a file for each mortgage loan application which shall contain, as applicable, applicant's name, date, name of person taking the application, signed HUD-1 Settlement Statements, copies of all agreements or contracts with the applicant, including any commitment and lock-in agreements, and all disclosures required by State and Federal law.” (See 04 NCAC 03M.0501) A licensee should establish procedures to ensure that every document relevant to a particular loan and necessary to demonstrate compliance with North Carolina and Federal is included in the loan file.

3.    Q:  Does a loan file register need to be maintained for both denied and closed applications?

A:  Yes. A "master" loan file register of all applications (denied and closed) must be maintained by the mortgage broker/lender's main office and must include all branch activities.

4.    Q:  Do licensees need to keep a copy of the loan application in adverse action files?

A:  Yes. The licensee may keep a short application for those situations that do not require a complete residential loan application. The short application must identify, by legible signature, the mortgage loan originator; in addition, it must show the date the application was accepted.

5.    Q:  Are RESPA documents required to be in adverse action files when a property has not been identified?

A. No. RESPA documents are needed when the application is for a mortgage loan on a particular property. If no specific property has been identified, then the borrower is trying to pre-qualify for credit and not yet applying for a mortgage loan.

6.    Q:  Can loan files be stored electronically?

A:  Generally, this is permitted as long as the electronic records are available for examination and copying.  Some problems encountered while examining electronic records include:  (1) documents that were not scanned properly and cannot easily be read and (2) more than on PDF file per loan.  Please keep these things in mind when converting your records to an electronic format. Failure to ensure that legible records are maintained will be a violation of the rules requiring record retention.

7.    Q:  Are Brokers required to keep copies of the Right of Rescission? 

A:  Yes.

      8.   Q:  Are Brokers required to keep copies of the Adverse  Action Letter that is sent to the applicant?
            
           A:  Yes