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Issues & Research » Banking, Insurance & Financial Services » Predatory Mortgage and Subprime Lending 2008 Enact
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2008 Enacted Predatory Mortgage & Subprime Lending Legislation
Last Updated: November 13, 2008
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State:
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Bill Summary:
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| Connecticut |
H.B. 5577
Signed by governor 6/12/08, Public Act 176
Creates three mortgage assistance programs and establishes a 10-member mortgage assistance program committee to develop standards for and procedures to implement them within the Department of Economic and Community Development (DECD). The programs must be funded by state bonding and loan repayments under the programs. The governor, House speaker, Senate president pro tempore, House and Senate majority and minority leaders, the banking commissioner and the Banks Committee chairpersons must each appoint one member to the mortgage assistance program committee. The committee must elect a chair from among its members. The committee must develop written standards that, at a minimum, establish (1) the standards for qualifying mortgages and mortgagors for the emergency mortgage assistance programs; (2) the scope and nature of the emergency assistance available; and (3) the terms and conditions under which DECD will provide, and be repaid for the assistance provided under the programs. The committee must also develop an application for relief and procedures for the committee's determination of eligibility. The standards and procedures the committee will develop must be adopted in regulations by DECD by October 1, 2008. For all loans, the bill establishes a fiduciary duty from all lenders and mortgage brokers to borrowers. The bill prohibits the financing of insurance and refinancing that do not benefit the borrower. It requires mortgage professionals to use reasonable care, requires disclosures with regard to yield spread premiums, and prohibits the influencing of real estate appraisals. It also prescribes on-line continuing education for mortgage lending professionals and increases mortgage broker surety bonds. The bill also allows the banking commissioner to impose a case-by-case foreclosure moratorium of up to six months. The bill defines "nonprime loans." For nonprime loans, it establishes a specific fiduciary duty. It prohibits certain provisions in a nonprime loan, such as prepayment penalties and interest rate increases after default. It also prohibits the making of these loans unless the borrower is properly qualified and takes a course, funds are escrowed, and a specific notice is provided. For all of these lending provisions, the bill defines a "mortgage broker" as a Department of Banking (DOB)-licensed person who, for a fee, commission, or other valuable consideration, negotiates, solicits, arranges, places, or finds a mortgage, or his successors or assigns. It defines a "lender" as any DOB-licensed person or entity originating a mortgage, or its successors or assigns. |
| District of Columbia |
B17-0167
Approved 1/29/08, Law L17-0090
Amends the Mortgage Lender and Broker Act of 1996 to require mortgage lenders to provide clear and complete information to District consumers for all non-conventional mortgage loans; and amends §28-3904 of the District of Columbia Official Code to make the failure of mortgage lenders to provide disclosures to consumers an unfair trade practice.
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| Kentucky |
H.B. 552
Signed by governor 4/24/08, Chapter 175
Creates a new section of KRS Chapter 198A to permit the Kentucky Homeownership Protection Center to be established by or through the Kentucky Housing Corporation; declares the purpose of the center to be providing a centralized location for information on public services to assist a homeowner who is in default or in danger of default on a home loan; creates a new section of Subtitle 2 of KRS Chapter 286 to require the mortgagee to provide to the homeowner at the time of closing any brochure, pamphlet, or brief document prepared or approved by the Kentucky Housing Corporation that describes services provided by the center; creates a new section of Subtitle 2 of KRS Chapter 286 to declare it is unlawful for a person in the course of a mortgage transaction to improperly influence the development, report, result, or review of a real estate appraisal in connection with a mortgage loan; amends KRS 286.8-010 to define terms; amends KRS 286.8-020 to clarify who is subject to the subtitle; establishes procedure for any mortgage loan company, loan broker, or branch to apply for an exemption; amends KRS 286.8-030 to specify when it is unlawful to make a mortgage loan; amends KRS 286.8-032 to permit the executive director to require electronic filing of applications and fees; exempts a broker from the educational training course required of applicants if the broker has held a license for at least one year and has held a license within a five year period prior to filing the application; requires a broker-applicant to establish that the district, state, or territory from which the applicant applies, resides, or performs the primary portion of his business has rules, regulations, or other provisions which by reciprocity or comity are at least equal to the ones in this section; requires a mortgage loan company or broker to give at least 10 days' notice to the executive director of a change in location or business name or addition of a branch; require every mortgage loan company to maintain an agent for service of process in Kentucky; amends KRS 286.8-034 to increase license fees for each principal office and branch office; amends KRS 286.8-090 to create new actions for which the executive director may suspend or revoke a license or take other action against an applicant, licensee, person, or registrant; declares that surrender or expiration of a license, registration, or exemption shall not affect the licensee's civil or criminal liability for acts committed prior to the surrender or expiration; amends KRS 286.8-100 to allow the executive director to deem an application abandoned when it is received incomplete and the applicant fails to provide required information and fees or fails to respond to a request for information; amends KRS 286.8-110 to prohibit prepayment penalties after the third anniversary of the mortgage or after 60 days prior to the date of the first interest rate reset, whichever is less; restricts prepayment penalties to not more than three percent of the outstanding balance the first year, two percent the second year, and one percent the third year; amends KRS 286.8-140 to permit the executive director to require electronic filing of certain filings and fees; amends KRS 286.8-160 to require mortgage loan companies and brokers to keep records for a period determined by regulation by the executive director but no more than five years after a mortgage loan application is completed; permits preservation of records in an electronic retrievable format; requires a mortgage loan company or broker that will cease operations to notify the executive director prior to discontinuance of the mortgage lending business as to the physical location where records are preserved and requires the designation of a custodian of records; amends KRS 286.8-190 to make technical changes; amends KRS 286.8-220 to prohibit the use of prescreened trigger lead information derived from a consumer report to solicit a consumer who has applied for a mortgage loan with another mortgage loan company or broker under certain conditions; amends KRS 286.8-250 delete the definition of "physical location"; amends KRS 286.8-255 to require registration of mortgage loan originators and mortgage loan processors; permits the executive director to require submission of federal and state criminal background records as part of an application; designates when a certificate of registration expires; requires mortgage loan originators and mortgage loan processors to notify the executive director in writing of a change of employment within 30 days of the change; amends KRS 286.8-260 to require the executive director to approve professional education courses and education providers to meet the continuing professional education requirements; amends KRS 286.8-270 to require the mortgage loan broker to act in good faith towards the borrower and comply with certain duties; amends KRS 286.8-990 to create the Kentucky Residential Mortgage Fraud Act; increase fines that may be imposed by courts for violations of this subtitle; amends KRS 286.8-060 to require surety bonds to be payable to the executive director and provide that bonds shall be available for recovery of expenses, fines, and fees levied by the executive director and for losses and damages; creates new sections of Subtitle 8 of KRS Chapter 286 to create the mortgage lending fraud prosecution account; allows expenditures from the fund for criminal prosecution of fraudulent activities within the residential mortgage lending process; authorizes the executive director to file administrative complaints for potential or actual violations of this subtitle; permits the executive director to levy a civil penalty of $1,000 to $25,000 for violation of any provision of this subtitle or any administrative regulation promulgated thereunder; declares it unlawful for a licensee or entity holding a claim of exemption to broker or fund a mortgage loan if the total net income generated on the loan exceeds $2,000 or four percent of the total loan amount, whichever is greater; authorizes the executive director to establish standards and requirements by administrative regulation for license testing, prelicensure education and continuing education requirements for mortgage professionals subject to testing and education requirements under this subtitle; requires any person applying for a license, registration, or claim of exemption to pass a written examination prior to issuance of a license, registration, or claim of exemption; requires an examination to be held at least weekly in Frankfort and permit an examination to be held on a monthly basis at a location in Kentucky designated by the executive director which is reasonably accessible to all applicants; requires the executive director to bar an applicant for two years from taking the examination if the applicant fails to pass three consecutive times; authorizes the executive director to enter an emergency order suspending, limiting, or restricting the license, claim of exemption, or registration of a mortgage loan company, broker, originator, or processor; amends KRS 360.100 to delete the minimum principal amount of a high-cost home loan; establishes an additional threshold of total points and fees that exceed the greater of $2,000 or four percent of the total loan amount; defines terms; prohibits a high-cost home loan lender from imposing prepayment penalties unless the lender offers the borrower a loan without prepayment penalties and the borrower initials the offer to indicate that the borrower rejected the offer; prohibits prepayment penalties of more than three percent the first 12 months, two percent the second 12 months, and one percent the third 12 months; establishes criteria which means a borrower is presumed to be able to make scheduled payments to repay the loan; requires loan documents to specifically authorize late payment fees if such fees are to be imposed; prohibits a lender from charging a fee for the first request in a calendar year for a written payoff calculation and permit a fee not to exceed $20 for each subsequent request in a calendar year; requires a lender to require an escrow account be established for taxes and insurance; prohibits a lender from using proceeds to repay the principal of an existing loan secured by the borrower's principal dwelling that is not a high-cost home loan; prohibits a lender from allowing a borrower to make payments that are applied only to interest and not to the principal; requires the lender to provide a borrower with timely notice of any material change in the terms of the high-cost loan; requires the lender to verify the borrower's income and financial resources and reasonable ability to repay the loan; creates a new section of KRS Chapter 367 to establish duties of a servicer who collects or processes payments on a residential mortgage loan; amends KRS 367.420 pertaining to home solicitation sales in which security is taken in the principal dwelling of the buyer to permit the buyer to rescind or cancel the transaction until midnight of the tenth, rather than the third, business day following the later of the consummation of the loan transaction or the delivery of the material disclosures required by the Truth in Lending Act.
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| Maine |
L.D. 2125
Signed by governor 1/8/08, Public Chapter 471
Public Law 2007, chapter 273 enacted into law, effective January 1, 2008, changes to the truth in lending laws of the Maine Consumer Credit Code to protect homeowners from predatory lending practices. This bill clarifies that law by: 1. Amending definitions in the current law such as "nontraditional mortgage," "points and fees" and "residential mortgage loan" and adding other definitions to aid in the implementation and enforcement of the law; 2. Specifying that a subprime mortgage loan is a type of residential mortgage loan; 3. Specifying what reasonable alternatives may be used by a creditor to verify a borrower's income, requiring the determination to be documented and removing language that allowed the creditor to consider and disregard statements submitted by or on behalf of the borrower regarding the borrower's income; 4. Providing an exemption from the general civil liability law for those residential mortgage loans that are subject to the penalties imposed specifically for violations of the law regarding residential mortgage loans; 5. Specifying that the restriction on flipping a loan only applies to a residential mortgage loan when making a subprime mortgage loan; and 6. Correcting several cross-references.
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| Maryland |
H.B. 363
Signed by governor 4/8/08, Chapter 8
S.B. 270
Signed by governor 4/8/08, Chapter 7
Prohibits a lender from requiring or authorizing the imposition of prepayment charges in connection with specified subprime loans; prohibits lenders and credit grantors from making specified mortgage loans without giving due regard to the borrower's ability to repay the loans; requires a specified representation by a mortgage broker to be contained in a finder's fee agreement.
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| Michigan |
H.B. 4658
Signed by governor 7/15/08, Public Act 216
Removes the Michigan Housing and Community Development Fund from the Department of Treasury and establish a fund of the same name within the Michigan State Housing Development Authority (MSHDA). Allows MSHDA to solicit and accept aid from any person, government, or entity on behalf of the Fund, and to receive money or other assets from any source, including Federal funds, for deposit into the Fund. Expands the Housing and Community Development Program to include the financing of development in a downtown area or adjacent neighborhood. Includes municipalities, land bank fast track authorities, and partnerships organized to develop projects in downtown areas or adjacent neighborhoods, among applicants eligible for funding. Extends the uses of the Fund to foreclosure prevention and assistance, individual development accounts, predatory lending prevention and relief, and activities related to ending homelessness. |
| Minnesota |
H.F. 3236
Postponed indefinitely 3/19/08
S.F. 2881
Signed by governor 5/8/08, Chapter 276
Relates to commerce; regulates contracts for deed, rates of interest on certain contracts, and mortgage lending; providing verification of the borrower's reasonable ability to repay a mortgage loan; providing penalties and remedies for a mortgage broker's failure to comply with the broker's duties of agency.
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H.B. 3839
S.F. 3154
Signed by governor 4/25/08, Chapter 241
Relates to commerce; regulates residential mortgage originators and services; verifying the borrower's ability to pay.
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| New Jersey |
A.B. 2780
Signed by governor 9/15/08, Chapter 86
S.B. 1853
Substituted 6/23/08
This bill, entitled the "Save New Jersey Homes Act of 2008," requires creditors to provide a three year period of extension to borrowers who are obligated to repay introductory rate mortgage loans on residential properties under certain circumstances. As defined in the bill, an introductory rate mortgage provides for a introductory interest rate that resets after a period of time. The bill provides a period of extension, during which the introductory rate does not reset, to "eligible borrowers" whose mortgage interest rates are about to reset. The bill also provides a period of extension, during which the introductory rate does not reset and during which foreclosure proceedings are suspended, to "eligible foreclosed borrowers" whose mortgages are being foreclosed pursuant to the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-53 et seq.). The bill is intended to address an economic crisis resulting from the resetting of mortgage rates from low introductory rates to higher, variable rates, which is likely to contribute to the already increasing rate of defaults experienced by New Jersey homeowners. By providing a period of extension for existing mortgages, the bill allows time for creditors and borrowers to renegotiate more reasonable terms as to mortgage loans that are financially unworkable for the borrowers, so as to avoid foreclosures that result in a financial detriment to both creditor and borrower. The bill provides that prior to the date on which the interest rate will reset on an introductory rate mortgage, a creditor must provide to an eligible borrower a series of written notices, alerting the borrower to the impending interest rate reset, and providing certain information about the reset interest rate, any refinancing or renegotiation of the loan offered by the creditor, and the borrower's right to obtain a three year period of extension under the terms of the bill. The creditor must provide an eligible borrower with a three year period of extension, during which the interest rate on the introductory rate mortgage shall not increase above the original introductory rate, on the condition that the eligible borrower provides a certificate of extension to the creditor, prior to the date that interest rate resets under the terms of the introductory rate mortgage. The certificate of extension must contain certain statements, including that the eligible borrower: (1) is unable to pay the monthly payments that will apply after the date that the interest rate resets; (2) agrees to continue monthly payments calculated at the introductory interest rate, during the period of extension; (3) agrees to pay the creditor, at the time of transfer of the property, any interest deferred on account of the period of extension; and (4) agrees to accept the creditor’s placement of a subordinate lien on the property to secure the repayment of the interest deferred on account of the period of extension. An eligible borrower who makes a knowing material misrepresentation in a certificate of extension is guilty of a crime of fourth degree. A creditor who grants a period of extension to an eligible foreclosed borrower shall have the right to record a subordinate lien on the eligible foreclosed borrower’s property to secure the borrower’s repayment of the amount of interest deferred by the period of extension and any arrearages owed on the mortgage. The subordinate lien shall have the same priority as the lien of the introductory rate mortgage. An eligible borrower who fails to make the appropriate payments during the period of extension forfeits all rights concerning the deferment of interest payments and suspension of foreclosure. The bill also provides that a creditor that issues to an eligible foreclosed borrower a notice of intention to foreclose an introductory rate mortgage pursuant to the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-53 et seq.), shall send to the eligible foreclosed borrower a series of written notices, by regular and registered mail, separate and distinct from all other correspondence and written in plain language. The notices shall include: (1) A statement that the information in the notice is being provided as required by the “Save New Jersey Homes Act of 2008,” which was enacted by the New Jersey Legislature and which provides certain rights to borrowers who homes are the subject of a mortgage foreclosure action; (2) A list of alternatives to foreclosure that an eligible foreclosed borrower may pursue, including any refinancing of the loan offered by the creditor and any renegotiation of loan terms offered by the creditor; (3) An explanation of the eligible foreclosed borrower’s right to obtain a period of extension for three years and an explanation of the procedure that an eligible foreclosed borrower must follow to obtain a period of extension; and (4) A certification of extension form that can be completed by an eligible foreclosed borrower in order to obtain the period of extension. The notices shall be sent within 10 days of issuing the notice of intention and also at the time that the creditor applies for entry of final judgment of foreclosure. The notices shall be sent in envelopes with certain information on the outside front portion of the envelope that alerts the borrower to the enactment of the Save New Jersey Homes Act of 2008 and to the period of extension from foreclosure available under the act. The bill also provides that a creditor must provide an eligible foreclosed borrower with a three year period of extension, during which the interest rate on the introductory rate mortgage shall not increase above the original introductory rate, and during which foreclosure proceedings pursuant to the “Fair Foreclosure Act” are suspended. The creditor must grant this relief on the condition that the eligible foreclosed borrower provides a certification of extension to the creditor no later than 90 days of the date that the creditor applies for entry of final judgment of foreclosure. The certification of extension must contain certain statements, including that the eligible borrower agrees: (1) to continue monthly payments, with interest calculated at the introductory rate, during the period of extension; (2) to pay the creditor, at the time of transfer of the property, any interest deferred on account of the period of extension and any arrearages on the mortgage; and (3) to accept the creditor’s placement of a subordinate lien on the property to secure the repayment of the interest deferred on account of the period of extension, and any arrearages owed on the mortgage. A creditor who grants a period of extension to an eligible foreclosed borrower shall have the right to record a subordinate lien on the eligible foreclosed borrower’s property to secure the borrower’s repayment of the amount of interest deferred by the period of extension and any arrearages owed on the mortgage. The subordinate lien shall have the same priority as the lien of the introductory rate mortgage. An eligible foreclosed borrower who fails to make the appropriate payments during the period of extension forfeits all rights concerning the deferment of interest payments and suspension of foreclosure. Any person who violates any provision of the bill shall be liable to a penalty of not more than $10,000 for the first offense, and not more than $20,000 for the second and subsequent offense, which penalty may be collected in a summary proceeding pursuant to the “Penalty Enforcement Law of 1999,” P.L.1999, c.274 (C.2A:58-10 et seq.). The bill provides that its terms become effect immediately upon enactment, and remain in effect until January 1, 2011. |
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A.R. 156
Adopted 10/27/08
S.R. 91
Urges the United States attorney general, the United States secretary of the Treasury, the chairman of the Federal Deposit Insurance Corporation, the chairman of the Federal Reserve, and the chairman of the United States Securities and Exchange Commission to enforce existing federal laws and regulations governing financial institutions in as vigorous a manner as possible in view of the present economic circumstances, specifically focusing on oversight of financial institutions' risk management practices and closer supervision of underwriting standards for new mortgage products. |
| New York |
A.B. 10817
Substituted 6/23/08
S.B. 8143
Signed by governor 8/5/08, Chapter 472
Requires lender and mortgage loan servicers to give borrowers with high-cost home loans or higher-priced home loans notice before certain actions are taken; establishes all home loans shall be subject to certain standards and limitations; creates the crimes of residential mortgage fraud in the first, second, third, fourth and fifth degrees; relates to distressed property consulting contracts. |
| North Carolina |
H.B. 2463
Signed by governor 8/17/08, Chapter 228
Regulates mortgage servicing; requires mortgage servicer licensure under the mortgage lending act; and makes technical and clarifying changes to the mortgage lending act. |
| Pennsylvania |
H.B. 2428
Signed by governor 7/4/08, Act 51
Prohibits lenders from requiring a borrower, as a condition of obtaining or maintaining a secured loan, to obtain property insurance coverage which exceeds the replacement value of buildings and structures situate on the land used to secure the loan. A borrower on a loan secured by real property may not be required to insure the value of the land. |
| Washington |
H.B. 2770
Signed by governor 3/21/08, Chapter 108
Provides that a residential mortgage loan may not be made unless a disclosure summary of all material terms is placed on a separate sheet of paper and has been provided by a financial institution to the borrower. Declares that a financial institution may not make or facilitate the origination of a residential mortgage loan that includes a prepayment penalty or that imposes negative amortization under certain circumstances. Provides that certain acts and
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| Wisconsin |
S.B. 386
Signed by governor 3/25/08, Act 170
Prohibits a lender from requiring property insurance in an amount that exceeds the replacement value of improvements.
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2008 Enacted Predatory Mortgage & Subprime Lending Legislation
Last Updated: November 13, 2008
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State:
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Bill Summary:
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| Connecticut |
H.B. 5577
Signed by governor 6/12/08, Public Act 176
Creates three mortgage assistance programs and establishes a 10-member mortgage assistance program committee to develop standards for and procedures to implement them within the Department of Economic and Community Development (DECD). The programs must be funded by state bonding and loan repayments under the programs. The governor, House speaker, Senate president pro tempore, House and Senate majority and minority leaders, the banking commissioner and the Banks Committee chairpersons must each appoint one member to the mortgage assistance program committee. The committee must elect a chair from among its members. The committee must develop written standards that, at a minimum, establish (1) the standards for qualifying mortgages and mortgagors for the emergency mortgage assistance programs; (2) the scope and nature of the emergency assistance available; and (3) the terms and conditions under which DECD will provide, and be repaid for the assistance provided under the programs. The committee must also develop an application for relief and procedures for the committee's determination of eligibility. The standards and procedures the committee will develop must be adopted in regulations by DECD by October 1, 2008. For all loans, the bill establishes a fiduciary duty from all lenders and mortgage brokers to borrowers. The bill prohibits the financing of insurance and refinancing that do not benefit the borrower. It requires mortgage professionals to use reasonable care, requires disclosures with regard to yield spread premiums, and prohibits the influencing of real estate appraisals. It also prescribes on-line continuing education for mortgage lending professionals and increases mortgage broker surety bonds. The bill also allows the banking commissioner to impose a case-by-case foreclosure moratorium of up to six months. The bill defines "nonprime loans." For nonprime loans, it establishes a specific fiduciary duty. It prohibits certain provisions in a nonprime loan, such as prepayment penalties and interest rate increases after default. It also prohibits the making of these loans unless the borrower is properly qualified and takes a course, funds are escrowed, and a specific notice is provided. For all of these lending provisions, the bill defines a "mortgage broker" as a Department of Banking (DOB)-licensed person who, for a fee, commission, or other valuable consideration, negotiates, solicits, arranges, places, or finds a mortgage, or his successors or assigns. It defines a "lender" as any DOB-licensed person or entity originating a mortgage, or its successors or assigns. |
| District of Columbia |
B17-0167
Approved 1/29/08, Law L17-0090
Amends the Mortgage Lender and Broker Act of 1996 to require mortgage lenders to provide clear and complete information to District consumers for all non-conventional mortgage loans; and amends §28-3904 of the District of Columbia Official Code to make the failure of mortgage lenders to provide disclosures to consumers an unfair trade practice.
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| Kentucky |
H.B. 552
Signed by governor 4/24/08, Chapter 175
Creates a new section of KRS Chapter 198A to permit the Kentucky Homeownership Protection Center to be established by or through the Kentucky Housing Corporation; declares the purpose of the center to be providing a centralized location for information on public services to assist a homeowner who is in default or in danger of default on a home loan; creates a new section of Subtitle 2 of KRS Chapter 286 to require the mortgagee to provide to the homeowner at the time of closing any brochure, pamphlet, or brief document prepared or approved by the Kentucky Housing Corporation that describes services provided by the center; creates a new section of Subtitle 2 of KRS Chapter 286 to declare it is unlawful for a person in the course of a mortgage transaction to improperly influence the development, report, result, or review of a real estate appraisal in connection with a mortgage loan; amends KRS 286.8-010 to define terms; amends KRS 286.8-020 to clarify who is subject to the subtitle; establishes procedure for any mortgage loan company, loan broker, or branch to apply for an exemption; amends KRS 286.8-030 to specify when it is unlawful to make a mortgage loan; amends KRS 286.8-032 to permit the executive director to require electronic filing of applications and fees; exempts a broker from the educational training course required of applicants if the broker has held a license for at least one year and has held a license within a five year period prior to filing the application; requires a broker-applicant to establish that the district, state, or territory from which the applicant applies, resides, or performs the primary portion of his business has rules, regulations, or other provisions which by reciprocity or comity are at least equal to the ones in this section; requires a mortgage loan company or broker to give at least 10 days' notice to the executive director of a change in location or business name or addition of a branch; require every mortgage loan company to maintain an agent for service of process in Kentucky; amends KRS 286.8-034 to increase license fees for each principal office and branch office; amends KRS 286.8-090 to create new actions for which the executive director may suspend or revoke a license or take other action against an applicant, licensee, person, or registrant; declares that surrender or expiration of a license, registration, or exemption shall not affect the licensee's civil or criminal liability for acts committed prior to the surrender or expiration; amends KRS 286.8-100 to allow the executive director to deem an application abandoned when it is received incomplete and the applicant fails to provide required information and fees or fails to respond to a request for information; amends KRS 286.8-110 to prohibit prepayment penalties after the third anniversary of the mortgage or after 60 days prior to the date of the first interest rate reset, whichever is less; restricts prepayment penalties to not more than three percent of the outstanding balance the first year, two percent the second year, and one percent the third year; amends KRS 286.8-140 to permit the executive director to require electronic filing of certain filings and fees; amends KRS 286.8-160 to require mortgage loan companies and brokers to keep records for a period determined by regulation by the executive director but no more than five years after a mortgage loan application is completed; permits preservation of records in an electronic retrievable format; requires a mortgage loan company or broker that will cease operations to notify the executive director prior to discontinuance of the mortgage lending business as to the physical location where records are preserved and requires the designation of a custodian of records; amends KRS 286.8-190 to make technical changes; amends KRS 286.8-220 to prohibit the use of prescreened trigger lead information derived from a consumer report to solicit a consumer who has applied for a mortgage loan with another mortgage loan company or broker under certain conditions; amends KRS 286.8-250 delete the definition of "physical location"; amends KRS 286.8-255 to require registration of mortgage loan originators and mortgage loan processors; permits the executive director to require submission of federal and state criminal background records as part of an application; designates when a certificate of registration expires; requires mortgage loan originators and mortgage loan processors to notify the executive director in writing of a change of employment within 30 days of the change; amends KRS 286.8-260 to require the executive director to approve professional education courses and education providers to meet the continuing professional education requirements; amends KRS 286.8-270 to require the mortgage loan broker to act in good faith towards the borrower and comply with certain duties; amends KRS 286.8-990 to create the Kentucky Residential Mortgage Fraud Act; increase fines that may be imposed by courts for violations of this subtitle; amends KRS 286.8-060 to require surety bonds to be payable to the executive director and provide that bonds shall be available for recovery of expenses, fines, and fees levied by the executive director and for losses and damages; creates new sections of Subtitle 8 of KRS Chapter 286 to create the mortgage lending fraud prosecution account; allows expenditures from the fund for criminal prosecution of fraudulent activities within the residential mortgage lending process; authorizes the executive director to file administrative complaints for potential or actual violations of this subtitle; permits the executive director to levy a civil penalty of $1,000 to $25,000 for violation of any provision of this subtitle or any administrative regulation promulgated thereunder; declares it unlawful for a licensee or entity holding a claim of exemption to broker or fund a mortgage loan if the total net income generated on the loan exceeds $2,000 or four percent of the total loan amount, whichever is greater; authorizes the executive director to establish standards and requirements by administrative regulation for license testing, prelicensure education and continuing education requirements for mortgage professionals subject to testing and education requirements under this subtitle; requires any person applying for a license, registration, or claim of exemption to pass a written examination prior to issuance of a license, registration, or claim of exemption; requires an examination to be held at least weekly in Frankfort and permit an examination to be held on a monthly basis at a location in Kentucky designated by the executive director which is reasonably accessible to all applicants; requires the executive director to bar an applicant for two years from taking the examination if the applicant fails to pass three consecutive times; authorizes the executive director to enter an emergency order suspending, limiting, or restricting the license, claim of exemption, or registration of a mortgage loan company, broker, originator, or processor; amends KRS 360.100 to delete the minimum principal amount of a high-cost home loan; establishes an additional threshold of total points and fees that exceed the greater of $2,000 or four percent of the total loan amount; defines terms; prohibits a high-cost home loan lender from imposing prepayment penalties unless the lender offers the borrower a loan without prepayment penalties and the borrower initials the offer to indicate that the borrower rejected the offer; prohibits prepayment penalties of more than three percent the first 12 months, two percent the second 12 months, and one percent the third 12 months; establishes criteria which means a borrower is presumed to be able to make scheduled payments to repay the loan; requires loan documents to specifically authorize late payment fees if such fees are to be imposed; prohibits a lender from charging a fee for the first request in a calendar year for a written payoff calculation and permit a fee not to exceed $20 for each subsequent request in a calendar year; requires a lender to require an escrow account be established for taxes and insurance; prohibits a lender from using proceeds to repay the principal of an existing loan secured by the borrower's principal dwelling that is not a high-cost home loan; prohibits a lender from allowing a borrower to make payments that are applied only to interest and not to the principal; requires the lender to provide a borrower with timely notice of any material change in the terms of the high-cost loan; requires the lender to verify the borrower's income and financial resources and reasonable ability to repay the loan; creates a new section of KRS Chapter 367 to establish duties of a servicer who collects or processes payments on a residential mortgage loan; amends KRS 367.420 pertaining to home solicitation sales in which security is taken in the principal dwelling of the buyer to permit the buyer to rescind or cancel the transaction until midnight of the tenth, rather than the third, business day following the later of the consummation of the loan transaction or the delivery of the material disclosures required by the Truth in Lending Act.
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| Maine |
L.D. 2125
Signed by governor 1/8/08, Public Chapter 471
Public Law 2007, chapter 273 enacted into law, effective January 1, 2008, changes to the truth in lending laws of the Maine Consumer Credit Code to protect homeowners from predatory lending practices. This bill clarifies that law by: 1. Amending definitions in the current law such as "nontraditional mortgage," "points and fees" and "residential mortgage loan" and adding other definitions to aid in the implementation and enforcement of the law; 2. Specifying that a subprime mortgage loan is a type of residential mortgage loan; 3. Specifying what reasonable alternatives may be used by a creditor to verify a borrower's income, requiring the determination to be documented and removing language that allowed the creditor to consider and disregard statements submitted by or on behalf of the borrower regarding the borrower's income; 4. Providing an exemption from the general civil liability law for those residential mortgage loans that are subject to the penalties imposed specifically for violations of the law regarding residential mortgage loans; 5. Specifying that the restriction on flipping a loan only applies to a residential mortgage loan when making a subprime mortgage loan; and 6. Correcting several cross-references.
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| Maryland |
H.B. 363
Signed by governor 4/8/08, Chapter 8
S.B. 270
Signed by governor 4/8/08, Chapter 7
Prohibits a lender from requiring or authorizing the imposition of prepayment charges in connection with specified subprime loans; prohibits lenders and credit grantors from making specified mortgage loans without giving due regard to the borrower's ability to repay the loans; requires a specified representation by a mortgage broker to be contained in a finder's fee agreement.
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| Michigan |
H.B. 4658
Signed by governor 7/15/08, Public Act 216
Removes the Michigan Housing and Community Development Fund from the Department of Treasury and establish a fund of the same name within the Michigan State Housing Development Authority (MSHDA). Allows MSHDA to solicit and accept aid from any person, government, or entity on behalf of the Fund, and to receive money or other assets from any source, including Federal funds, for deposit into the Fund. Expands the Housing and Community Development Program to include the financing of development in a downtown area or adjacent neighborhood. Includes municipalities, land bank fast track authorities, and partnerships organized to develop projects in downtown areas or adjacent neighborhoods, among applicants eligible for funding. Extends the uses of the Fund to foreclosure prevention and assistance, individual development accounts, predatory lending prevention and relief, and activities related to ending homelessness. |
| Minnesota |
H.F. 3236
Postponed indefinitely 3/19/08
S.F. 2881
Signed by governor 5/8/08, Chapter 276
Relates to commerce; regulates contracts for deed, rates of interest on certain contracts, and mortgage lending; providing verification of the borrower's reasonable ability to repay a mortgage loan; providing penalties and remedies for a mortgage broker's failure to comply with the broker's duties of agency.
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H.B. 3839
S.F. 3154
Signed by governor 4/25/08, Chapter 241
Relates to commerce; regulates residential mortgage originators and services; verifying the borrower's ability to pay.
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| New Jersey |
A.B. 2780
Signed by governor 9/15/08, Chapter 86
S.B. 1853
Substituted 6/23/08
This bill, entitled the "Save New Jersey Homes Act of 2008," requires creditors to provide a three year period of extension to borrowers who are obligated to repay introductory rate mortgage loans on residential properties under certain circumstances. As defined in the bill, an introductory rate mortgage provides for a introductory interest rate that resets after a period of time. The bill provides a period of extension, during which the introductory rate does not reset, to "eligible borrowers" whose mortgage interest rates are about to reset. The bill also provides a period of extension, during which the introductory rate does not reset and during which foreclosure proceedings are suspended, to "eligible foreclosed borrowers" whose mortgages are being foreclosed pursuant to the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-53 et seq.). The bill is intended to address an economic crisis resulting from the resetting of mortgage rates from low introductory rates to higher, variable rates, which is likely to contribute to the already increasing rate of defaults experienced by New Jersey homeowners. By providing a period of extension for existing mortgages, the bill allows time for creditors and borrowers to renegotiate more reasonable terms as to mortgage loans that are financially unworkable for the borrowers, so as to avoid foreclosures that result in a financial detriment to both creditor and borrower. The bill provides that prior to the date on which the interest rate will reset on an introductory rate mortgage, a creditor must provide to an eligible borrower a series of written notices, alerting the borrower to the impending interest rate reset, and providing certain information about the reset interest rate, any refinancing or renegotiation of the loan offered by the creditor, and the borrower's right to obtain a three year period of extension under the terms of the bill. The creditor must provide an eligible borrower with a three year period of extension, during which the interest rate on the introductory rate mortgage shall not increase above the original introductory rate, on the condition that the eligible borrower provides a certificate of extension to the creditor, prior to the date that interest rate resets under the terms of the introductory rate mortgage. The certificate of extension must contain certain statements, including that the eligible borrower: (1) is unable to pay the monthly payments that will apply after the date that the interest rate resets; (2) agrees to continue monthly payments calculated at the introductory interest rate, during the period of extension; (3) agrees to pay the creditor, at the time of transfer of the property, any interest deferred on account of the period of extension; and (4) agrees to accept the creditor’s placement of a subordinate lien on the property to secure the repayment of the interest deferred on account of the period of extension. An eligible borrower who makes a knowing material misrepresentation in a certificate of extension is guilty of a crime of fourth degree. A creditor who grants a period of extension to an eligible foreclosed borrower shall have the right to record a subordinate lien on the eligible foreclosed borrower’s property to secure the borrower’s repayment of the amount of interest deferred by the period of extension and any arrearages owed on the mortgage. The subordinate lien shall have the same priority as the lien of the introductory rate mortgage. An eligible borrower who fails to make the appropriate payments during the period of extension forfeits all rights concerning the deferment of interest payments and suspension of foreclosure. The bill also provides that a creditor that issues to an eligible foreclosed borrower a notice of intention to foreclose an introductory rate mortgage pursuant to the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-53 et seq.), shall send to the eligible foreclosed borrower a series of written notices, by regular and registered mail, separate and distinct from all other correspondence and written in plain language. The notices shall include: (1) A statement that the information in the notice is being provided as required by the “Save New Jersey Homes Act of 2008,” which was enacted by the New Jersey Legislature and which provides certain rights to borrowers who homes are the subject of a mortgage foreclosure action; (2) A list of alternatives to foreclosure that an eligible foreclosed borrower may pursue, including any refinancing of the loan offered by the creditor and any renegotiation of loan terms offered by the creditor; (3) An explanation of the eligible foreclosed borrower’s right to obtain a period of extension for three years and an explanation of the procedure that an eligible foreclosed borrower must follow to obtain a period of extension; and (4) A certification of extension form that can be completed by an eligible foreclosed borrower in order to obtain the period of extension. The notices shall be sent within 10 days of issuing the notice of intention and also at the time that the creditor applies for entry of final judgment of foreclosure. The notices shall be sent in envelopes with certain information on the outside front portion of the envelope that alerts the borrower to the enactment of the Save New Jersey Homes Act of 2008 and to the period of extension from foreclosure available under the act. The bill also provides that a creditor must provide an eligible foreclosed borrower with a three year period of extension, during which the interest rate on the introductory rate mortgage shall not increase above the original introductory rate, and during which foreclosure proceedings pursuant to the “Fair Foreclosure Act” are suspended. The creditor must grant this relief on the condition that the eligible foreclosed borrower provides a certification of extension to the creditor no later than 90 days of the date that the creditor applies for entry of final judgment of foreclosure. The certification of extension must contain certain statements, including that the eligible borrower agrees: (1) to continue monthly payments, with interest calculated at the introductory rate, during the period of extension; (2) to pay the creditor, at the time of transfer of the property, any interest deferred on account of the period of extension and any arrearages on the mortgage; and (3) to accept the creditor’s placement of a subordinate lien on the property to secure the repayment of the interest deferred on account of the period of extension, and any arrearages owed on the mortgage. A creditor who grants a period of extension to an eligible foreclosed borrower shall have the right to record a subordinate lien on the eligible foreclosed borrower’s property to secure the borrower’s repayment of the amount of interest deferred by the period of extension and any arrearages owed on the mortgage. The subordinate lien shall have the same priority as the lien of the introductory rate mortgage. An eligible foreclosed borrower who fails to make the appropriate payments during the period of extension forfeits all rights concerning the deferment of interest payments and suspension of foreclosure. Any person who violates any provision of the bill shall be liable to a penalty of not more than $10,000 for the first offense, and not more than $20,000 for the second and subsequent offense, which penalty may be collected in a summary proceeding pursuant to the “Penalty Enforcement Law of 1999,” P.L.1999, c.274 (C.2A:58-10 et seq.). The bill provides that its terms become effect immediately upon enactment, and remain in effect until January 1, 2011. |
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A.R. 156
Adopted 10/27/08
S.R. 91
Urges the United States attorney general, the United States secretary of the Treasury, the chairman of the Federal Deposit Insurance Corporation, the chairman of the Federal Reserve, and the chairman of the United States Securities and Exchange Commission to enforce existing federal laws and regulations governing financial institutions in as vigorous a manner as possible in view of the present economic circumstances, specifically focusing on oversight of financial institutions' risk management practices and closer supervision of underwriting standards for new mortgage products. |
| New York |
A.B. 10817
Substituted 6/23/08
S.B. 8143
Signed by governor 8/5/08, Chapter 472
Requires lender and mortgage loan servicers to give borrowers with high-cost home loans or higher-priced home loans notice before certain actions are taken; establishes all home loans shall be subject to certain standards and limitations; creates the crimes of residential mortgage fraud in the first, second, third, fourth and fifth degrees; relates to distressed property consulting contracts. |
| North Carolina |
H.B. 2463
Signed by governor 8/17/08, Chapter 228
Regulates mortgage servicing; requires mortgage servicer licensure under the mortgage lending act; and makes technical and clarifying changes to the mortgage lending act. |
| Pennsylvania |
H.B. 2428
Signed by governor 7/4/08, Act 51
Prohibits lenders from requiring a borrower, as a condition of obtaining or maintaining a secured loan, to obtain property insurance coverage which exceeds the replacement value of buildings and structures situate on the land used to secure the loan. A borrower on a loan secured by real property may not be required to insure the value of the land. |
| Washington |
H.B. 2770
Signed by governor 3/21/08, Chapter 108
Provides that a residential mortgage loan may not be made unless a disclosure summary of all material terms is placed on a separate sheet of paper and has been provided by a financial institution to the borrower. Declares that a financial institution may not make or facilitate the origination of a residential mortgage loan that includes a prepayment penalty or that imposes negative amortization under certain circumstances. Provides that certain acts and
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| Wisconsin |
S.B. 386
Signed by governor 3/25/08, Act 170
Prohibits a lender from requiring property insurance in an amount that exceeds the replacement value of improvements.
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