States Modify, Clarify New Legislation

California Mortgage brokers and lenders face new requirements under regulations that went into effect this month.

The regulations require license holders “to implement best risk-management practices with regard to nontraditional mortgage products,” according to the California Department of Corporations.

All nontraditional mortgages that are made must be disclosed to state regulators. In addition, borrowers have to be warned “of the potential disadvantages” of low document or no document loans; no income/no asset loans; stated income loans; stated asset loans; no ratio loans; and other similar loan products.

Also, all consumer complaints and responses made by brokers and lenders must be retained by the license holder and the terms of adjustable-rate loans must be disclosed to borrowers.

Lawmakers in Maine and the state’s governor, John Baldacci, have tweaked an anti-predatory lending law for fear it would prevent some qualified and legitimate borrowers from receiving loans.

According to a statement from Baldacci’s office, the law is “designed to fight excessive fees and abusive lending practices that strip home equity and put consumers at risk.”

Under the legislation, lenders had to prepare an analysis of each loan in an effort to reduce illegal property flipping. The law originally included conventional as well as subprime loans.

But the Maine Attorney General’s office found that state regulators went too far, so legislators added a better definition of subprime loans.

Concerns about over-aggressively legislation enacted in the wake of the credit crunch have been raised in Minnesota and Massachusetts as well.

Clarity was also used in defining a new mortgage broker licensing requirement in Colorado.

Like many states, Colorado passed a law last year that set up licensing requirement for brokers. But after some confusion arose over who should be licensed, the state’s Department of Regulatory Agencies Division of Real Estate issued a new interpretation of the law.

According to a statement from the department, a license is required for someone who directly supervises employees who will “negotiate, originate or offer or attempt to negotiate or originate for a borrower … a residential mortgage loan.”

“Individuals who perform purely administrative or clerical tasks do not fall within the licensing requirement,” regulators said.

And finally, in New York, loan originators must now register with the state under a new law that kicked in Jan. 1.

Originators must be registered by April 1. The requirements include fingerprinting, filling out an application and paying a fee. All mortgage bankers and brokers were required to submit the names of their originators to regulators by the end of last year.

Patrick Crowley is a feature journalist and blogger for MortgageDaily.com. He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at: PatCrowley@MortgageDaily.com