Issue #27: Other proposals that are related

The attached bill (Appendix # 1) contains three proposals perhaps maybe perhaps not particularly addressed in the ask for Public Comment, but which can be relevant towards the dilemma of legislation of home loan lending. The very first is found in Section hands down the bill. This part would allow (although not require) Maine to become listed on in an important mortgage that is multi-state certification project that is currently underway in a number of states. Just just What started as an endeavor to consider consistent permit application kinds has now resulted in a proposition, sponsored by two split state regulatory associations (the meeting of State Bank Supervisors, or CSBS, as well as the United states Association of Residential Mortgage Regulators, or AARMR), to operate a centralized certification system which could accommodate the requirements of loan providers, specially big home loan organizations with operations in lots of states. Patterned following the national registration procedure that regulates the securities industry, this method is made to decrease the burden on candidates as well as on participating states. Although some questions stay to be answered, OCCR believes it wise to set up destination the legislation required to allow Maine to become listed on this work, if so when it’s high time for this kind of move.

The next brand brand new problem can be found in Section 4 of this bill, and it also proposes to broaden protection of Article 9 associated with the credit rating Code to encompass a kind of loan that few regulators knew existed until recently; specifically, a second-lien purchase-money loan. Most frequently occurring each time a loan provider splits within the total purchase quantity as a first-lien loan and a higher-rate, second-lien loan, this sort of loan is totally unregulated under current law because of the verbiage of 9-A MRSA § 9-101, “Scope, ” which indicates that this article covers just first-lien loans. OCCR is associated with viewpoint that such loans deserve at least the protection granted first-lien purchase money or refinancing loans, or even the defenses for the complete Code relevant to second-mortgage, non-purchase, non-refinance loans.

The next and final “new” proposition can be found in Section 8 regarding the bill connected as Appendix number 1. It entails that loan agents disclose to customers quantities compensated to those agents by loan providers in the shape of yield spread premiums. Yield spread premiums enhance while the rate of interest on financing increases, causing a reason for a financial loan broker to set up a high-cost loan even in the event that customer may be eligible for a lowered price. We usually do not propose to limit the re re re payment of these premiums; and then need so it be disclosed towards the debtor. We feel this really is a crucial action toward the purpose of financial transparency when you look at the consumer-broker relationship.

We have the above actions, as further modified or supplemented through the process that is legislative will play a crucial role in helping to fight predatory mortgage financing in Maine. We have been also conscious that the so-called CEI bill is likewise considered because of the Legislature during its upcoming session, most likely because of the exact exact same committee, as well as or just around the time that is same. As the OCCR proposals are far more moderate compared to those proposed by CEI, we believe that the OCCR conditions are well-suited to your certain problems that have actually arisen in this State, also to Maine’s market that is limited for mortgages and its concomitant restricted capability to influence major nationwide financing forces. But, we additionally feel highly that CEI’s bill deserves severe debate, since Maine customers will in the long run reap the benefits of an energetic conversation of all of the viable ways to the task of preventing mortgage lending that is predatory.

William N. Lund, Director

Workplace of Credit Rating Regulation

Problem #19: Secondary market accountability

This report concludes that the members of the lending industry can absorb changes imposed on it because in those areas there exists an amount of flexibility or elasticity of supply with respect to certain proposals. Nevertheless, into the aspects of “net tangible benefit” (see Issue #18, above), and obligation for the additional market (talked about in this part), we believe imposition of strict conditions could drastically and adversely influence the willingness of loan providers as well as the additional market to produce loans or even buy them as assets, utilizing the impact that less home loan cash will be accessible to Maine borrowers, or that the price of borrowing those funds would significantly increase.

Because the additional market (known as “assignees” within the credit rating Code) is historically accountable for rectifying mistakes created by the initial loan provider as long as the violations are “apparent in the face associated with the disclosure statement” (see 9-A MRSA § 8-209, “Liability of assignees”), that secondary market becomes reluctant to purchase loans if elements which can be from their control or knowledge (as an example, the non-public monetary circumstances regarding the borrower) can help rescind a deal or to recover damages.

Consequently, increasing assignee liability just isn’t among OCCR’s guidelines included in the draft legislation that is attached. We feel that the State’s initial efforts at reform should really be directed toward the front-line loan officers of loan agents and loan providers, and therefore secondary market obligation dilemmas must certanly be addressed later on if required, and just after getting particular input and after reviewing the consequence of assignee liability laws and regulations enacted various other states.

Problem #20: Increased regulation of servicers

Although OCCR identified servicing problems as being a cause that is major of complaints, we now have maybe perhaps maybe not included particular servicing-related conditions when you look at the draft legislation attached with this report.

In preparing this report, online installment loans mississippi residents we reviewed the existing appropriate responsibilities of servicers, such as the requirement to give you toll-free customer figures (9-A MRSA § 9-304); to pay for interest on escrow (§ 9-305); to pay for fees and insurance coverage from escrow on time (§ 9-305-A); to react immediately to demands for payoff numbers (§ 9-305-B); and also to provide a free of charge accounting of all payments manufactured in the last 15 months (§ 9-307(2)). As opposed to impose extra demands, OCCR will likely make every work, with or without extra allotted resources, to more vigorously pursue any complaint-generated details about loan servicing, in order to wow upon servicers the significance of conformity in most such areas.

Issue #21: Effective notice of prepayment charges

This matter is talked about pertaining to problems #13 and #14, above. Provisions relating to prepayment charges have now been integrated to the draft legislation connected as Appendix number 1; see Section 3 and area 7 of the proposed legislation.

Problem #22: needing that “unpaid balance” figures reflect extra funds needed as prepayment charges

Because plenty customers have actually told OCCR which they didn’t understand these were at the mercy of a prepayment penalty until they attempted to cover their loan off early, this proposition might have needed that every time the lending company notified the borrower regarding the unpaid stability on the loan (as an example, upon demand, or with each monthly statement, or at year-end), the lending company could be needed to include into that balance the prepayment penalty, to produce an exact image of the particular dollar quantity essential to repay the mortgage.

We felt that the proposal had been an easy and revolutionary option to prevent “payoff shock. ” Nonetheless, we now have opted for to not consist of it inside our proposed legislation. Like a lot of apparently easy answers to complex problems, this proposition may likely show too problematic for loan providers’ billing computers to allow for, at the very least only for borrowers within the State of Maine. We continue steadily to believe that the idea has merit, therefore we also note the steps other states have actually taken fully to deal with, and indirectly discourage, such charges (Massachusetts, for instance, calls for loan providers to add prepayment charges within the “points-and-fees” calculation to ascertain whether extra “Section 32”-type defenses ought to be imposed). Nonetheless, until or unless other states or federal regulators adopt the idea, we believe that it could be impracticable to need such calculations entirely for Maine loans.

Problem #23: High attorney’s fees when you look at the initial states of foreclosure or pre-foreclosure

The request Public Comment raised the matter of high very very early appropriate charges, because inside our experience assisting customers who’re delinquent within their re re payments it usually seemed that loan providers incurred significant appropriate fees right after files had been provided for solicitors with directions to start property foreclosure. The imposition of these fees that are high the talents of most events to “unwind” the situation and obtain the consumer back on track, because along with gathering all delinquent payments, interest and belated costs, loan providers additionally demanded reimbursement of appropriate costs incurred up to now.

Just as much we are now of the opinion that the situation should be addressed by 1) requiring the lenders to obtain specific information from their attorneys to demonstrate exactly how claimed fees were incurred in a short time; and, if necessary, 2) communicating with the attorneys and/or with the Bar Overseers in egregious or repeated cases as we think this type of occurrence deserves scrutiny. Because of this, the connected legislation will not include measures to deal with appropriate costs incurred in the pre-foreclosure phase.