Mortgage Daily Logo

States Legislate Lenders

Mortgage News

Some of the country’s biggest states have drafted or passed legislation designed to help borrowers and crack down on mortgage lenders. One state is attempting to impose suitability standards while another is giving borrowers who were victimized by fraud up to six months to rescind their loans.

California lawmakers, Gov. Arnold Schwarzenegger and state regulators have taken action to try and stem the torrent of foreclosures that have rocked the state’s housing market.

Schwarzenegger has signed three bills into law that are designed to help homeowners avoid the expensive pitfalls that have snared thousands of consumers. State regulators have also moved to help future borrowers of subprime loans fall into similar circumstances.

“It is critical that we continue to take steps to protect Californians against unscrupulous lending practices and to ensure that consumers can make informed decisions,” Schwarzenegger said in a statement.

The bills were sponsored by Sen. Mike Machado, a Linden Democrat. One makes it a crime for appraisers to handle work if their pay is tied to a property’s sales price. The other allows the state to adopt emergency measures and policies subjecting all mortgage lenders and brokers federal subprime mortgage lending guidelines.

The state’s licensing department is also moving to strengthen California’s underwriting and consumer disclosures so “consumers have the tools to fully understand the ramifications of taking out a subprime loan,” officials said in the statement.

The effort includes a multilingual consumer disclosure from to illustrate worst-case payment scenarios to buyers.

All states have been hit hard by the fallout of the subprime mortgage market, but California’s pain is among the deepest. Its foreclosure rate is twice the national average and California homeowners hold 20 percent of the nation’s subprime adjustable rate mortgages, according to the Mortgage Bankers Association.

“The worst thing someone can do is nothing,” Schwarzenegger said. “It is absolutely critical that Californians racing the threat of foreclosure reach out to their lenders and discuss available options to save their homes.”

Texas’ Gov. Rick Perry has also signed new legislation into law regarding that state’s mortgage market.

Under the law, a new criteria of “Registered Financial Services Company” has been added to the Texas Finance Code. Such companies can perform mortgage brokerage services as if the company were licensed as a broker but only through individuals who are exclusive agents of the company, according to Lotstein Buckman, a Washington-based law and government relations firm.

Eligibility requirements, registration fees and renewal procedures are also included in the bill.

Maine is drafting new rules that address property flipping and a borrower’s ability to pay.

Under the proposed rules, drafted by the state’s Department of Professional and Financial Regulation, a lender may not “knowingly or intentionally” make a loan on property that “does not have reasonable, tangible net benefit to the borrower,” according to a copy of the new rules.

The rule is designed to cut down on property flipping.

Under the proposed rules, which regulators are taking up in mid-October, lenders will be prohibited from making subprime loans unless a “reasonable creditor” would believe that the borrower will be able to repay the loan.

In Nevada, legislation went into effect on Oct. 1 that adds new definitions and penalties for mortgage fraud, according to a statement issued by the legislature.

Mortgage fraud is now a felony and a borrower will have up to six months to rescind a purchase if the property was involved in a fraud scheme.

Brokers must now have their backgrounds checked and cannot make loans to borrowers who do not have the ability to repay the loan, a provision similar to what Maine is considering adopting.

New York also has a mortgage law on the books, according to Lotstein Buckman.

Lenders or note holders attempting to foreclose on a mortgage loan must provide an additional notice to the borrower. The notice must state “in bold letters that the borrower is in danger of losing their home and must respond to the complaint by filing a response in court.”

The statement must also indicate that a payment will not stop the foreclosure proceeding.

Related Posts

Centex Home Equity Announces Name and Brand Change to National Mortgage, LLC

Third-Quarter 2012 Mortgage Litigation Index

Lawsuits involving excessive fees, servicing fees and loan fees beyond state maximums. Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story Fannie Mae and Freddie Mac Orangeburg County, Richland County, South...

Centex Home Equity Announces Name and Brand Change to National Mortgage, LLC

Net Branch Lawsuits

Litigation involving net branch operations. Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story PHH Mortgage Corp. Mathews Supreme Court of Virginia na Court held that the term "branch office" includes not only...

Centex Home Equity Announces Name and Brand Change to National Mortgage, LLC

Whistleblower Lawsuits

Litigation related to loan servicing, including escrow issues, transfer of servicing and servicing borrowers in bankruptcy and foreclosure.   Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story Bank of...

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming paperwork has been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and furniture need to...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand-new mortgage loan can be a difficult task, especially for first-time homeowners.   After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first...


Don’t worry, we don’t spam