The connected bill (Appendix # 1) contains three proposals perhaps maybe not particularly addressed in the ask for Public Comment, but which can be relevant to your dilemma of legislation of home loan financing. The foremost is found in part hands down the bill. This area would allow (although not need) Maine to participate in an important multi-state home loan business certification project that is presently underway in lot of states. Just exactly What began as an endeavor to consider license that is uniform kinds has resulted in a proposition, sponsored by two split state regulatory associations https://www.speedyloan.net/installment-loans-mi (the seminar of State Bank Supervisors, or CSBS, and also the United states Association of Residential Mortgage Regulators, or AARMR), to operate a centralized certification system that may accommodate the requirements of loan providers, particularly big home loan organizations with operations in a lot of states. Patterned after the nationwide registration procedure that regulates the securities industry, this technique is made to decrease the burden on candidates and on participating states. Although some questions stay to be answered, OCCR believes it wise to set up destination the legislation essential to allow Maine to participate this work, if so when it’s about time for this type of move.
The next brand new problem is situated in Section 4 associated with the bill, also it proposes to broaden coverage of Article 9 associated with the credit rating Code to encompass a form of loan that few regulators knew existed until recently; specifically, a purchase-money loan that is second-lien. Most frequently occurring whenever a loan provider splits up the purchase that is total right into a first-lien loan and a higher-rate, second-lien loan, this sort of loan is wholly 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 of this opinion that such loans deserve at the least the protection granted purchase that is first-lien or refinancing loans, or even the defenses associated with the complete Code relevant to second-mortgage, non-purchase, non-refinance loans.
The next and final “new” proposition can be found in Section 8 for the bill connected as Appendix # 1. It entails that loan agents disclose to customers quantities compensated to those agents by loan providers by means of yield spread premiums. Yield spread premiums enhance because the rate of interest on financing increases, leading to a bonus for the loan broker to set up a high-cost loan even in the event that customer may be eligible for a a lowered price. We try not to propose to limit the re re payment of these premiums; and then need so it be disclosed into the borrower. We feel that is a step that is important the aim of monetary transparency when you look at 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 financing in Maine. We are additionally mindful that the so-called CEI bill will also be considered by the Legislature during its future session, most likely because of the exact same committee, and also at or just around the exact same time. As the OCCR proposals are far more moderate than 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 lending forces. Nonetheless, we additionally feel highly that CEI’s bill deserves severe debate, since Maine customers will in the long run take advantage of a strenuous conversation of all of the viable ways to the challenge of preventing predatory home loan lending.
William N. Lund, Director
Workplace of Credit Regulation
Issue #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. Nonetheless, into the aspects of “net tangible benefit” (see Issue #18, above), and obligation of this additional market (talked about in this part), we believe imposition of strict provisions could drastically and adversely impact the willingness of loan providers and of the additional market to help make loans or even to buy them as opportunities, aided by the impact that less mortgage money will be offered to Maine borrowers, or that the price of borrowing those funds would greatly increase.
Because the additional market (referred to as “assignees” into the credit Code) is historically accountable for rectifying mistakes produced by the first loan provider only when the violations are “apparent in the face regarding the disclosure statement” (see 9-A MRSA § 8-209, “Liability of assignees”), that secondary market becomes reluctant to buy loans if elements which can be from their control or knowledge (for instance, the non-public monetary circumstances associated with debtor) could be used to rescind a deal or even to recover damages.
Therefore, increasing assignee liability is certainly not among OCCR’s suggestions included in the connected draft legislation. We believe that the State’s initial efforts at reform ought to be directed toward the front-line loan officers of loan agents and loan providers, and that secondary market obligation dilemmas must be addressed later on if required, and just after getting input that is specific after reviewing the consequence of assignee liability laws and regulations 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 maybe maybe not included certain servicing-related conditions into the draft legislation attached with this report.
In planning this report, we reviewed the existing appropriate responsibilities of servicers, such as the requirement to supply 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 respond immediately to demands for payoff numbers (§ 9-305-B); and also to provide a free of charge accounting of most payments produced in the last 15 months (§ 9-307(2)). As opposed to impose additional demands, OCCR can certainly make every work, with or without extra allotted resources, to more vigorously pursue any complaint-generated information about loan servicing, in order to wow upon servicers the importance of conformity in every such areas.
Issue #21: Effective notice of prepayment charges
This problem is talked about with regards to problems #13 and #14, above. Provisions relating to prepayment charges have now been included to the draft legislation connected as Appendix no. 1; see part 3 and area 7 of this proposed legislation.
Problem #22: needing that “unpaid balance” figures reflect additional funds needed as prepayment charges
Because a lot of customers have actually told OCCR which they didn’t understand these were at the mercy of a prepayment penalty until they attempted to pay their loan off early, this proposition could have necessary that every time the lending company notified the debtor associated with the unpaid stability on the loan (as an example, upon demand, or with every month-to-month declaration, or at year-end), the lending company could be necessary to include into that stability the prepayment penalty, to give a precise image of the particular buck quantity required to pay back the mortgage.
We felt that the proposition ended up being an easy and revolutionary solution to avoid “payoff shock. ” Nevertheless, we now have selected not to ever add it within our proposed legislation. Like many 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, and we additionally also note the actions other states have actually taken up to deal with, and indirectly discourage, such penalties (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 should always be imposed). Nevertheless, until or unless other states or federal regulators follow the style, we believe that it will 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 problem of high very early appropriate charges, because within our experience assisting customers that are delinquent within their re re payments it usually seemed that loan providers incurred significant appropriate costs just after files had been provided for solicitors with guidelines to start property property foreclosure. The imposition of these high costs hindered the talents of all of the events to “unwind” the situation and acquire the consumer straight straight straight back on track, because as well as gathering all delinquent re re re payments, interest and belated charges, loan providers additionally demanded reimbursement of appropriate charges incurred up to now.
The maximum amount of as we think this sort of incident deserves scrutiny, we have been now regarding the viewpoint that the specific situation must certanly be addressed by 1) requiring lenders to have certain information from their lawyers to show precisely how reported costs had been incurred very quickly; and, if required, 2) interacting with the solicitors and/or with all the Bar Overseers in egregious or duplicated situations. The attached legislation does not contain measures to address legal fees incurred at the pre-foreclosure stage for this reason.