US 2006 Introduced Predatory Mortgage & Subprime Lending Legislation Resources in United States
US 2006 Introduced Predatory Mortgage & Subprime Lending Legislation Resources
| State: | Bill Summary: |
| Arizona | H.B. 2844 Regulates practices regarding high cost home loans. |
| California | A.B. 408 Died pursuant to Art. IV, Sec. 10(c) of the Constitution 1/31/06 Existing law requires the secretary of Business, Transportation and Housing to monitor and investigate the lending patterns and practices of financial institutions for compliance with the prohibition against discrimination in the availability of, or in the provision of, financial assistance for the purpose of purchasing, construction, rehabilitation, improving, or refinancing housing accommodations. Existing law also requires the secretary to adopt regulations applicable to all persons who are in the business of originating residential mortgage loans in this state and who are not depository institutions. This bill repeals these provisions. |
| S.B. 790 Returned to Secretary of Senate pursuant to Joint Rule 56 1/31/06 Revises the definition of a covered loan. Prohibits a prepayment penalty after the first 12 months after the date of the consummation of the loan. Requires a borrower to be offered loan counseling and sign a certification that he or she has received or waived the counseling before a covered loan may be made. |
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| Connecticut | H.B. 5294 Failed Joint Favorable deadline 3/9/06 Prohibits mortgage brokers or lenders from advertising or representing that a loan or lock-in will be at a specific rate or with specific points when the broker or lender knew or should have known that the loan will not ultimately be made with those terms; prohibits advertising certain loan characteristics such as interest rate and fees when such loans are not generally available to applicants at the time of advertisement; requires all mortgage loan commitments by lenders or notices of loan approvals by brokers to be made in writing and signed by the borrower at least five days in advance of the closing; requires lenders or brokers to provide a notice to consumers at the time of submission of a loan application that informs the borrower: (A) To compare rates and fees with other lenders; (B) to seek professional advice from an attorney, credit counselor or financial advisor; (C) to be aware that failure to pay a mortgage could result in the loss of the home and poor credit rating; (D) to be aware that applying for a loan does not commit the borrower to sign the loan; and requires lenders or brokers to provide a notice to consumers with the mortgage commitment or notice of loan approval that informs the borrower: (A) To review the terms of the agreement and be certain that the borrower can afford the mortgage; (B) to ask whether the mortgage has an adjustable rate and what the monthly payment would be if interest rates remain the same and if the maximum interest rate was charged; (C) to calculate how much the borrower will need to pay for insurance and property taxes as well as the monthly mortgage payment; (D) that the borrower will be paying these bills with net income and not the gross income listed on the application; and (E) that the lender is only committed to terms that are contained in a written agreement and that the interest rate, fees and other aspects of the loan may change. |
| Florida | S.B. 558 Died in committee 5/5/06 Prohibits an employee or agent of a financial institution from denying loans or restricting the number of loans made to residents of a particular geographic area of a community based on race, national origin, or income of residents of that area; provides penalty. |
| Illinois | H.B. 5041 Amends the Illinois Fairness in Lending Act. Makes a technical change in a section concerning the short title. |
| H.B. 5353 Amends the Predatory Lending Database Article of the Residential Real Property Disclosure Act. Changes certain references in the Article from “predatory lending database” to “anti-predatory lending database” and from “broker” and “originator” to “licensee”. Changes time limits for taking various actions under the Act. Changes the conditions under which a licensee must resubmit information to the Department of Financial and Professional Regulation because of changes in the terms or other aspects of a loan. Provides that the licensee shall electronically transfer to the anti-predatory lending database all disclosure documents provided to the borrower. Makes changes regarding: information a licensee must submit for inclusion in the anti-predatory lending database for each loan for which the licensee takes an application; information a credit counselor must submit for inclusion in the anti-predatory lending database and other duties relating to review of the data entered the anti-predatory lending database by the licensee and comparison of the data to the application information and materials provided by the borrower; and information a title insurance company or closing agent must submit for inclusion in the anti-predatory lending database. Makes other changes. Amends the Freedom of Information Act to make a conforming change. |
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| S.B. 895 Passed Senate 4/6/06 Amends the Residential Real Property Disclosure Act with respect to the predatory lending database pilot program. Provides that the secretary of Financial and Professional Regulation shall declare in writing an inception date for the pilot program and shall give notice of that date. Provides that the pilot program applies to all mortgage applications governed by the predatory lending database Article of the Act that are made or taken on or after the inception date. Provides that the pilot program shall be in effect and operational for four years. Provides that the title insurance company or closing agent shall attach a certificate of compliance to the mortgage before recording the mortgage (rather than recording the certificate separately). |
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| S.B. 2305 Amends the High Risk Home Loan Act. Provides that, on or before October 1, 2006, but following the reporting requirements due for the six-month period ending June 30, 2006, the reporting requirements for default and foreclosure rates on conventional loans shall not apply to the listed state-regulated financial institutions. Permits the secretary of Financial and Professional Regulation or the director of the Division of Banking to impose reporting requirements whenever the secretary or director has cause to believe that a financial institution has experienced a rate of defaults or foreclosures on residential mortgage loans that substantially exceeds the rate of defaults or foreclosures experienced by other financial institutions in Illinois. |
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| Iowa | H.F. 422 Creates the “Iowa High-Cost Mortgage Act” in new Code chapter 535D. Applies to lenders who are licensed mortgage bankers or brokers under Code chapter 535B that make high-cost mortgages. A “high-cost mortgage” is secured by the borrower’s principal dwelling and is subject to a high rate of interest or a high percentage or amount of points and fees. Provides prohibitions, restrictions, and guidelines for lenders and high-cost mortgages. Addresses prepayment penalties, increased interest upon default, balloon payments, negative amortization, required disclosures, arbitration clauses, insurance, refinancing, home improvement contracts, acceleration, documentation procedures, loan criteria, late payment charges, and payoff information. A mortgage banker or broker can have the person’s license, issued pursuant to Code chapter 535B, suspended or revoked by the superintendent of the division of banking for a violation of the new Code chapter. |
| H.F. 2151 Creates a new Code chapter known as the “Home Loan Protection Act”. The bill is based on federal legislation designed to apply to all creditors that make real estate loans, including home equity loans. Prohibits various creditor practices in making and refinancing certain consumer home loans. When making home loans, a creditor isrestricted in all of the following areas: financing insurance premiums or debt cancellation fees; “flipping” a home loan (i.e., refinancing a home loan with no net benefit to a borrower); encouraging default on an existing loan prior to closing on a refinancing loan; imposing a late payment charge; and accelerating indebtedness. Additional restrictions apply to creditors that make loans meeting certain thresholds known as “high=cost” home loans. Provides for its enforcement and remedies. Any person who knowingly violates the bill is guilty of a serious misdemeanor. A serious misdemeanor is punishable by confinement for no more than one year and a fine of at least $250 but not more than $1,500. |
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| S.F. 2226 Relates to the making of high-cost home loans in this state. Defines “high-cost home loan.” Restricts lenders of high-cost home loans from including certain provisions in a high-cost home loan. A high-cost home loan shall not contain a provision relating to the collection of certain prepayment fees or penalties and allowing a lender to accelerate the indebtedness except in certain circumstances. A high-cost home loan shall not contain a payment schedule that causes the principal balance to increase or a provision which increases the interest rate after default except in a variable rate loan. Restricts high-cost home loans from requiring two or more periodic payments to be consolidated and paid in advance to the borrower. Prohibits lenders from charging certain fees to modify, renew, extend, or amend a high-cost home loan or to defer any payment due and requires lenders to provide certain notices to borrowers as described by the bill. Restricts lenders from providing high-cost home loans to borrowers who may not reasonably be able to make the scheduled payments. If a high-cost home loan is made to refinance an existing high-cost home loan with the same lender, the lender is prohibited from financing prepayment fees or penalties and certain points and fees. Prohibits lenders from charging a borrower points and fees for a high-cost home loan for one year if the proceeds are used to refinance an existing high-cost home loan. Requires lenders to pay proceeds from a high-cost home loan to a contractor only by an instrument payable to the borrower or jointly to the borrower and the contractor, or a third-party escrow agent as agreed by the borrower by written agreement. Provides that a lender shall not refinance, replace, or consolidate a zero or low-interest-rate loan made by a governmental or nonprofit lender with a high-cost home loan. Prohibits a lender from financing certaintypes of insurance in connection with a high=cost home loan. Requires lenders to make available to borrowers ofhigh-cost home loans a video of the borrower’s rights and responsibilities regarding the bill. Lenders are prohibitedfrom including mandatory arbitration clauses in a high-cost home loan that are oppressive, unfair, unconscionable, or substantially in derogation of the rights of consumers. Permits a lender to charge a late payment fee on high-cost home loans only under certain circumstances. Restricts lenders from charging fees in excess of $10 or the actual costs for a written payoff calculation of a high-cost home loan. The bill restricts a lender of a high-costhome loan from initiating a foreclosure or other judicial process to terminate a borrower’s interest in residential real property subject to a high-cost home loan without providing at least 30 days notice of default and right to cure to the borrower. Prohibits a lender from recommending or encouraging default in connection with a high-cost home loan and prohibits lenders from making a high-cost home loan an interest-only payment loan. Provides that a violation of any of the provisions of new Code section 535D.2 is usurious and is unlawful as an unfair practice under Code section 714.16, subsection 2, paragraph “a”. Gives the attorney general authority to investigate unfair practices and issue a civil penalty in an amount up to $40,000 per violation. Prohibits any person to avoid application of new Code chapter 535D in bad faith by structuring or dividing a loan or through any other method. The attorney general, the superintendent of banking, and any other injured party to a high-cost home loan may bring a civil action for violations of new Code chapter 535D for injunctive relief, actual damages, reasonable attorney fees, costs, and any other remedy allowed by law. Restricts a person seeking damages from recovering damages either under new Code chapter 535D or as an unfair practice under Code section 714.16, but not both. Provides lenders with certain defenses for violations of new Code section 535D.2. A lender may avoid liability by either providing notice of the violation and appropriate restitution or by showing that the violation was not intentional and resulted from a bona fide error and making appropriate restitution. Defines “appropriaterestitution.” Describes the applicability of new Code chapter 535D to certain extensions of credit, or oral or written solicitation to lend depending on where the offer to lend is made, the residence of the borrower, the location of the real property that is the subject of the loan, and the location of the acceptance of the offer. |
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| Kentucky | H.B. 132 Amends KRS 360.100 to prohibit a lender from making a high-cost home loan which allows the borrower to make payments, for at least part of the loan, that are applied only to interest and not to principal. |
| H.B. 202 Amends KRS 360.100 to prohibit a lender from making a high-cost home loan which allows the borrower to make payments, for at least part of the loan, that are applied only to interest and not to principal. |
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| H.B. 637 Amends KRS 360.010 to prohibit a real estate mortgage loan subject to this section from including a provision that permits the lender to charge or collect prepayment fees or penalties more than 36 months after the loan closing or which exceed three percent of the amount prepaid during the first 12 months, two percent of the amount prepaid during the second 12 months, or one percent of the amount prepaid during the third 12 months. |
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| Louisiana | H.B. 1338 Creates the Louisiana Predatory Lending Prevention Act, which protects borrowers by prohibiting unfair or deceptive acts or practices when making home loans, by requiring disclosures, and by providing a cause of action against noncompliant lenders. |
| S.B. 6, Second Extraordinary Session Relates to certain single premium insurance in connection with residential mortgage loan transactions; to provide for a maximum premium to be charged for single premium title insurance policies in connection with residential mortgage transactions. |
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| S.B. 438 Creates the “Predatory Lending Prevention Act” to regulate high-cost home loans for “borrowers” – defined as any individual obligated to repay a loan, including coborrowers, cosigners, or guarantors. |
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| Maryland | H.B. 216 Prohibits a contract for a loan secured by a mortgage or deed of trust on an interest in owner-occupied residential real property from requiring a borrower to pay a prepayment charge or penalty on a partial or full prepayment of the unpaid principal balance of the loan; prohibits a presently existing obligation or contract right from being impaired in any way by the Act; and applies the Act. |
| Mississippi | H.B. 1359 Died in committee 1/31/06 Creates the Mississippi Predatory Lending Act; defines certain terms; prescribes certain procedures, limitations and restrictions regarding home loans, consumer home loans and consumer loans to protect borrowers; provides for enforcement of the provisions of this act. |
| H.B. 1417 Died in committee 1/31/06 Creates the “Mississippi Home Loan Protection Act”; provides definitions; prescribes certain prohibited acts and practices regarding home loans; provides limitations and prohibited practices for high-cost home loans; defines procedures for curing any default and reinstatement of the home loan prior to foreclosure; to provide civil and criminal penalties for violations of this act; authorizes the attorney general to enforce the provisions of this act. |
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| S.B. 2756 Died in committee 1/31/06 Creates the “Mississippi Home Loan Protection Act”; provides definitions; prescribes certain prohibited acts and practices regarding home loans; provides limitations and prohibited practices for high-cost home loans; defines procedures for curing any default and reinstatement of the home loan prior to foreclosure; provides civil and criminal penalties for violations of this act; authorizes the attorney general to enforce the provisions of this act. |
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| Missouri | H.B. 1492 Establishes the High Risk Home Loan Act. In its main provisions, the bill: (1) Defines “approved credit counselor,” “borrower,” “good faith,” “high risk home loan,” “points and fees,” and “total loan amount”; (2) Prohibits creditors from making high risk home loans to any borrower if his or her monthly payment on the loan, including principal, interest, taxes, insurance, and assessments, combined with the scheduled payments for all other disclosed debts, exceeds 50 percent of the borrower’s monthly gross income; (3) Requires lenders to verify the borrower’s ability to repay the loan; (4) Requires lenders to act in good faith and not employ deceptive acts or practices; (5) Specifies penalty provisions and amounts a lender may charge; (6) Prohibits lenders from: (a) Financing insurance premiums; (b) Refinancing loans within 12 months unless the borrower benefits; (c) Charging finance points and fees exceeding six percent of the loan; (d) Making payments directly to a contractor; (e) Making loans where the outstanding balance will increase; (f) Charging excessive late fees; (g) Requiring more than two payments be paid in advance of the loan; (h) Accelerating loan payments without cause; and (i) Making loans without notice to the borrower that he or she may be able to obtain a loan at a lower cost; (7) Specifies the lender’s and borrower’s duties regarding late payments and defaults. Before actions to foreclose or collect money can be taken, the lender must deliver the borrower a notice of the right to cure the default, informing the borrower of his or her rights; (8) Establishes the Mortgage Awareness Program within the Division of Finance and the Division of Credit Unions to provide counseling and education on residential mortgage loans; (9) Requires each servicer of Missouri residential mortgage loans on or before October 1 and April 1 of each year to report to the Director of the Division of Finance or the Director of the Division of Credit Unions the default and foreclosure data of conventional loans for the six-month period ending June 13 and December 31 respectively; and (10) Specifies that any violation of these provisions is considered an unlawful practice under Section 407.020, RSMo. |
| S.B. 1043 Under the act, lenders may not encourage nonpayment of existing debts in connection with the closing of a home loan that refinances portions of the existing debt. Lenders may not affect appraiser’s independent judgment with respect to the value of real estate covered by a home loan or is being offered as security in an application for a home loan. In addition, lenders may not leave any blanks in any loan document, to be filled in after the borrower signs the documents and if the discussion between the borrower and the lender is in a language other than English, the lender must provide a copy, free of charge, of all disclosures in the language in which the discussion was primarily conducted. This act bars the lender from allowing advance collection of premiums for life or health insurance, or other fees in connection with a home loan. The lender may not knowingly refinance an existing home loan when the new loan does not have tangible benefit to the borrower. This act provides restrictions on charging late payment fees. High-cost home loans shall not contain provisions allowing lenders to accelerate the loan upon their sole discretion. Amounts of compensation paid to a mortgage broker must be disclosed to the borrower no later than three days prior to closing. The act places restrictions on high-cost home loans pertaining to prepayment penalties, interest increases after default, payments of contractors under the loan, inability to make payments, and mandatory arbitration. The act also includes disclosure requirements of and procedures for curing high-cost home loans. Lenders who violate the provisions of this act are eligible for actual, statutory, and punitive damages along with injunctive, declaratory and other equitable relief. |
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| New Jersey | A.B. 3162 Amends the “New Jersey Home Ownership Security Act of 2002,” which prohibits certain abusive lending practices commonly known as predatory lending. Revises part of the definition of “bona fide discount points” to mean loan discount points which in fact reduce the interest rate applicable to the loan by a minimum of 25 basis points per loan discount point. In revising the definition of “bona fide discount points” the bill removes the requirement that loan discount points: (1) in fact reduce the interest rate or time price differential applicable to the loan from an interest rate which does not exceed the conventional mortgage rate for a home loan secured by a first lien, by more than two percentage points, or for a home loan secured by a junior lien, by more than three and one half percentage points; and (2) are recouped within the first five years of the scheduled loan payments. Provides that a creditor must provide a borrower with the mortgage payoff balance within five business days after a request is made. Finally, the bill provides that no provision of the “New Jersey Home Ownership Security Act of 2002” imposing liability shall apply to any act done or omitted in good faith in conformity with any regulation of the commissioner, notwithstanding that the regulation may, after the act or omission, be amended or rescinded or determined by judicial or other authority to be invalid for any reason. |
| New York | A.B. 7420 Passed Assembly 6/15/05 Establishes the financial literacy for military families program which is managed by the Department of Banking and provides information regarding mortgage and rental protections and obligations, credit card payments and fees and guidance with parental and other family obligations to persons serving in the armed forces of the United States and members of the family of such person. |
| Ohio | S.B. 275 Creates the Ohio Consumer Mortgage Commission, to transfer enforcement authority for the Mortgage Broker’s Act from the superintendent of financial institutions to the attorney general, authorizes the attorney general to create predatory lending strike forces, permits state regulatory authorities to share confidential information, requires first-time home buyers to receive pre-purchase home buyer counseling, adds financial literacy instruction to high school graduation requirements, establishes additional prohibitions and requirements for financial institutions, real estate appraisers, and mortgage brokers, and makes an appropriation. |
| Oklahoma | S.B. 1385 Passed Senate Creates the Oklahoma Homeowner’s Private Mortgage Insurance Protection Act. |
| Pennsylvania | H.B. 2784 Eliminates a mortgage prepayment penalty for all residential mortgages, regardless of amount. |
| Tennessee | H.B. 3849 S.B. 3990 Enacts the Tennessee Homeowners’ Protection Act of 2006. |
| West Virginia | S.B. 471 Relates to acts of a mortgage licensee when requiring insurance in connection with a mortgage loan and prepayment penalties. |
| S.C.R. 83 Requests the Joint Committee on Government and Finance study predatory mortgage lending practices. |
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| Wisconsin | S.B. 230 Failed to pass pursuant to Senate Joint Resolution 1 5/11/06 Eliminates the prepayment penalty requirements for variable rate loans and creates new requirements. Under the bill, a lender may not include a prepayment penalty in a variable rate loan unless the lender has, in writing, offered the borrower a variable rate loan without a prepayment penalty and the borrower initials the offer to indicate that the borrower has declined the offer. If the borrower declines the offer, the lender may include a prepayment penalty that applies if prepayment of the loan is made within the first three years of the loan and is not made in connection with the sale of the dwelling or mobile home secured by the loan. Limits the prepayment penalty or fee to three percent in the first year of the loan, two percent in the second year of the loan, or one percent in the third year of the loan, of the amount by which the prepayment exceeds 80 percent of the principal balance of the loan outstanding immediately prior to prepayment. |
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