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States Advance Mortgage Legislation

States Advance Mortgage Legislation

Recent mortgage legislative activity by state

March 10, 2008


photo of Patrick Crowley
Recent state legislative activity includes more thorough reporting procedures, stiffer broker licensing requirements and tougher loan qualifications for subprime and variable-rate loans.

In Maryland, mortgage servicers face a March 20 deadline for a new monthly reporting requirement recently enacted by state lawmakers and regulators.

The reports to the Commissioner of Financial Regulation must include the number of loans being serviced, how many are in default and a breakdown of delinquent loans by 30, 60 and 90 days.

The report must also include: the number of loans in “workout arrangements” along with a description of the arrangement; the steps taken to identify at-risk borrowers; information on the servicers’ adjustable rate mortgage loans; the number of loans in foreclosure; and other information the “commissioner may deem necessary”, according to a copy of the regulations.

Emergency rules have been handed down in Colorado that mandate brokers provide requested documents for investigations conducted by state regulators. The rule is designed to ensure that brokers maintain records of their transactions.

The Colorado Division of Real Estate has also enacted new rules regarding prepayment penalties.

Mortgage brokers who recommend or induce a borrower into a transaction that contains a prepayment penalty that extends past the adjustment date for any type of adjustable-rate mortgage is presumed to have violated their duty of good faith and fair dealing under state law, according to the regulations.

Violating the rule could lead to fines and loss of license.

New regulations have kicked-in that requires New York loan originators to be licensed and participate in continuing education. Criminal background checks, including fingerprinting, are a requirement of licensing, according to the regulations.

Connecticut Gov. M. Jodi Rell is trying to push through legislation that redefine subprime loans and provide for additional disclosures designed to alert consumers to the economic risk associated with the loans.

The legislation expands the definition of high-cost loans to including subprime loans. It “calls for new disclosures, tighter underwriting qualification standards, a ban on prepayment penalties, verification of borrower income and a requirement that brokers and lenders make only those loans where there is a reasonable belief that the borrower will be able to make the payments,” the governor said in a statement.

Rell’s legislative push also requires the escrowing of insurance and real estate taxes; increases the amount of tangible net worth required for brokers to become licensed from $25,000 to $50,000; and increases the amount of the surety bond required for lenders and brokers from $40,000 to $60,000 to ensure that those entering the business have the necessary means.

“This proposal protects homeowners and helps to prevent them from becoming another foreclosure statistic,” Rell said in the statement. “It is not only necessary but vital to make these changes to our banking laws. We must ensure the integrity of the mortgage process.”

Maine has also taken steps with legislation that tries to ensure that borrowers can afford the loans they receive.

A new law prohibits a lender from making a subprime loan to a borrower unless the lender believes the payments can be made. The legislation provides guidelines that a lender must consider when determining the borrower’s ability to pay.

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

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