from Division of Finance & Corporate Securities Administrator David
Statement of Need
The purpose of this policy statement is to clarify the division's policy against permitting or requiring consumers to sign promissory notes and trust deeds prior to the loan's final approval.
Oregon consumers have been harmed by lenders who permit or require consumers to sign promissory notes and trust deeds prior to a loan's final approval. In some cases, trust deeds have been recorded
prior to final loan approval, and consumers' loans were not approved or funded. In a few instances, it has taken up to six months to get the recorded trust deed released and the consumers were unable
to refinance until the existing lien was removed. This is a misleading or deceptive practice prohibited by ORS 59.865(2) and 59.930 and may result in the suspension, revocation, or denial of a license
in addition to administrative sanction.
Requiring or permitting consumers to sign promissory notes and trust deeds prior to final approval of a loan is an unfair and unethical practice constituting grounds for denial, suspension, or revocation
of a mortgage lender license. Loans should have received a written loan approval with the repayment terms of the loan fully disclosed prior to the time the loan documents are signed.
Lenders may not record trust deeds until they are prepared to fund the fully approved loan. Loan funds should be released to the borrower or the borrower’s approved representative, such as
a closing attorney or escrow agent, on the day of recording but no later than 24 hours following the recording.
For purposes of this policy, “lender” includes both mortgage brokers and mortgage bankers.