New Mexico Lenders Face Big Changes

Modified legislation set to take effect on July 31 “greatly” expands the impact of the existing New Mexico Home Loan Protection Act, ComplianceEase announced today. The San Francisco-based firm, which hopes to provide mortgage risk management solutions to mortgage lenders in the state with its ComplianceAnalyzer, said the act was already one of the strictest.

The sweeping changes, which ComplianceEase said are mostly unprecedented, expand high-cost lending laws from just a limited set of high-cost loans to all home loans.

“The changes mean that nearly every conforming loan in New Mexico … will be subject to stricter requirements that were once reserved only for ‘high-cost’ loans,” Compliance ease warned. “It is expected that the law will have a noticeable impact on the types of loan programs that can legally be offered to borrowers in the state.”

Changes imposed by the modified legislation include restrictions on how and when interest rates on adjustable rate mortgages can change.

Extensive verifications will be required to determine a borrower’s ability to repay loans. This includes factoring in teaser rates and monthly escrows.

In addition, prepayment penalties will be prohibited on nearly all loans made in New Mexico, according to the statement.

A new liability for lenders that violate the law is the classifying of the violation as an “unfair or deceptive trade practice” under New Mexico’s existing Unfair Practices Act.

“Lenders that relied solely on trying to keep their fees and rates below the established thresholds in order to steer clear of additional restrictions will have to rethink that strategy,” the release stated.

ComplianceEase claimed it was prepared to audit loans under the revised law weeks before the law goes into effect.