Issue #27: Other proposals that are related

Issue #27: Other proposals that are related

The bill that is attachedAppendix no. 1) contains three proposals maybe perhaps not particularly addressed in the obtain Public Comment, but which can be relevant towards the problem of legislation of home loan financing. The foremost is found in area hands down the bill. This part would allow (although not need) Maine to participate in a significant multi-state home loan business certification project this is certainly currently underway in a number of states. Exactly just exactly What started as an endeavor to look at license that is uniform types has progressed into a proposition, sponsored by two split state regulatory associations (the meeting of State Bank Supervisors, or CSBS, therefore the United states Association of Residential Mortgage Regulators, or AARMR), to operate a centralized certification system which could accommodate the needs of loan providers, specially big home loan organizations with operations in lots of states. Patterned following the nationwide registration procedure that regulates the securities industry, this technique is built to lower the burden on candidates and on participating states. Although some concerns stay to be answered, OCCR believes it wise to include position the legislation essential to enable Maine to become listed on this effort, if so when it’s high time for this kind of move.

The 2nd brand new problem can be found in Section 4 associated with the bill, plus it proposes to broaden protection of Article 9 associated with credit rating Code to encompass a form of loan that few regulators knew existed until recently; specifically, a second-lien purchase-money loan. Mostly occurring each time a loan provider splits up the purchase that is total in to a first-lien loan and a higher-rate, second-lien loan, this kind of loan is totally unregulated under present legislation as a result of verbiage of 9-A MRSA § 9-101, “Scope, ” which indicates that this article covers just first-lien loans. OCCR is for the viewpoint that such loans deserve at the very least the protection granted purchase that is first-lien or refinancing loans, or even the defenses for the complete Code relevant to second-mortgage, non-purchase, non-refinance loans.

The 3rd and final “new” proposition can be found in Section 8 associated with the bill connected as Appendix #1. It needs 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 once the rate of interest on that loan increases, causing a motivation for the loan broker to prepare a loan that is high-cost in the event that customer may be eligible for a lower life expectancy price. We usually do not propose to limit the re payment of these premiums; simply to need so it be disclosed to your debtor. We feel this really is a step that is important the aim of monetary transparency within the consumer-broker relationship.

We have the above actions, as further modified or supplemented through the legislative procedure, will play a crucial role in helping to fight predatory home loan lending in Maine. Our company is additionally conscious that the so-called CEI bill will additionally be considered because of the Legislature during its future session, most likely by the exact exact exact same committee, and also at or just around the time that is same. Whilst the OCCR proposals are far more moderate than those proposed by CEI, we believe that the OCCR provisions are well-suited to your certain conditions that have arisen in this State, as well as Maine’s market that is limited for mortgages and its concomitant restricted power to influence major nationwide financing forces. Nevertheless, we additionally feel highly that CEI’s bill deserves severe debate, since Maine customers will in the long run reap the benefits of a strenuous conversation of most viable methods to the task of preventing mortgage lending that is predatory.

William N. Lund, Director

Workplace of Credit Regulation

Problem #19: additional market accountability

With regards to certain proposals, this report concludes that the people in the financing industry can take in modifications imposed about it because in those areas there is a sum of flexibility or elasticity of supply. Nonetheless, when you look at the regions of “net tangible benefit” (see Issue #18, above), and obligation associated with additional market (talked about in this part), we believe that imposition of strict conditions could drastically and adversely impact the willingness of loan providers and of the additional market to produce loans or even to buy them as opportunities, utilizing the impact that less home loan cash will be offered to Maine borrowers, or that the expense of borrowing those funds would significantly increase.

The personal financial circumstances of the borrower) can be used to rescind a transaction or even to recover damages since the secondary market (referred to as “assignees” in the Consumer Credit Code) is historically liable for rectifying errors made by the original lender only if the violations are “apparent on the face of the disclosure statement” (see 9-A MRSA § 8-209, “Liability of assignees”), that secondary market becomes reluctant to invest in loans if elements that are out of their control or knowledge (for example.

Consequently, increasing assignee liability just isn’t among OCCR’s suggestions contained in the attached draft legislation. We believe the State’s initial efforts at reform should really be directed toward the front-line loan officers of loan agents and lenders, and that secondary market obligation problems should always be addressed later on if required, and only after getting input that is specific after reviewing the end result of assignee liability guidelines enacted various other states.

Problem #20: Increased legislation of servicers

Although OCCR identified servicing problems as a cause that is major of complaints, we now have perhaps maybe perhaps not included certain servicing-related conditions within the draft legislation mounted on this report.

In planning this report, we reviewed the existing appropriate obligations of servicers, such as the requirement to supply consumer that is toll-free (9-A MRSA § 9-304); to pay for interest on escrow (§ 9-305); to cover fees and insurance coverage from escrow on time (§ 9-305-A); to react quickly to demands for payoff numbers (§ 9-305-B); and also to offer a free of charge accounting of all of the payments manufactured in the last 15 months (§ 9-307(2)). As opposed to impose extra demands, OCCR will likely make every effort, with or without extra allotted resources, to more vigorously pursue any complaint-generated details about loan servicing, to be able to wow upon servicers the necessity 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. Conditions relating to prepayment charges have now been included to the draft legislation connected as Appendix #1; see area 3 and part 7 of this 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 people were at the mercy of a prepayment penalty until they attempted to cover their loan off early, this proposition could have needed that each and every time the lending company notified the debtor for the unpaid stability to their loan (for instance, upon demand, or with every month-to-month declaration, or at year-end), the financial institution is necessary to include into that stability the prepayment penalty, to present an exact image of the specific dollar quantity required to pay back the mortgage.

We felt that the proposition had been a straightforward and revolutionary solution to avoid “payoff surprise. ” Nevertheless, we now have plumped for to not ever consist of it inside our proposed legislation. Like a lot of apparently simple answers to complex problems, this proposition may likely show too burdensome for loan providers’ billing computers to support, at the least only for borrowers within the State of Maine. We continue steadily to believe that the idea has merit, and now we also note the actions other states have actually taken fully to address, and indirectly discourage, such penalties (Massachusetts, as an example, calls for loan providers to incorporate prepayment charges when you look at the “points-and-fees” calculation to ascertain whether additional “Section 32”-type defenses ought to be imposed). Nevertheless, until or unless other states or federal regulators follow the idea, we believe that it will be impracticable to need such calculations entirely for Maine loans.

Problem #23: High attorney’s fees into the initial states of pre-foreclosure or foreclosure

The request Public Comment raised the problem of high very very very early appropriate charges, because inside our experience assisting customers that are delinquent inside their re payments it frequently seemed that loan providers incurred significant legal costs right after files had been provided for lawyers with directions to start property property foreclosure. The imposition of these high costs hindered the talents of most events to “unwind” the situation and obtain the consumer straight straight back on track, because as well as gathering all delinquent re re payments, interest and belated charges, loan providers additionally demanded reimbursement of appropriate charges incurred to date.

The maximum amount of 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. The attached legislation does not contain measures to address legal fees incurred at the pre-foreclosure stage for this reason.