Maine Anti-Predatory Lending Law

The new Maine anti-predatory lending law (Public Law, Chapter 273) makes significant changes to, among other things, various provisions of the current Consumer Credit Code relative to "residential mortgage loans," and a particular subset of residential mortgage loans defined as "high-rate, high-fee mortgage" loans.  The new law becomes effective January 1, 2008. 

Coverage: The new law applies generally to any loan meeting the definition of a "residential mortgage loan."  A residential mortgage loan is defined as any extension of credit (including an open end loan) that:

• is equal to or less than the Freddie Mac conforming loan limit, and
• meets the definition of a "federally related mortgage loan" under Section 3500.2 of Regulation X promulgated under the Real Estate Settlement Procedures Act of 1974 ("RESPA"). A "federally related mortgage loan" is defined generally as a loan that is secured by a first or subordinate lien loan on a one- to four-family dwelling (including a condominium, cooperative or manufactured home).

Among the types of loans excluded from the definition of residential mortgage loan are reverse mortgages, construction loans (Loan Type = Construction and Construction to Permanent), multifamily (5+ units) loans (Property Type = Multifamily, bridge loans and loans primarily for business, agricultural or commercial purposes (Owner Occupied = No and Property Type = Commercial and Land and Lots).

The new law places a number of substantive restrictions (described below) on residential mortgage loans in general and on a particular subset of residential mortgage loans defined as high-rate, high fee mortgage loans.

1. Rate Threshold: The loan's annual percentage rate (APR) equals or exceeds by either 8% (for first liens) or 10% (for subordinate liens) the yield on Treasury securities having comparable periods of maturity on the 15^th day of the month immediately preceding the month in which the application is received by the creditor; or
2. Total Points and Fees Threshold: The total points and fees payable in connection with the residential mortgage loan exceed either (i) five percent (5%) of the total loan amount if total loan amount is $40,000 or more, or (ii) six percent (6%) of the total loan amount if total loan amount is less than $40,000.

The Rate Threshold: The loan APR is calculated in the same manner as under Regulation Z (12 CFR 226.32).

Total Points and Fees Threshold: The points and fees are defined to include (or exclude) the following items:

	Prepaid Finance Charge - the total amount of prepaid finance charges
-	Prepaid Interest - to be deducted from prepaid finance charge
-	Other Excludable Charges - to the extent they have been included in prepaid finance charges, the following fees may be excluded: tax service fees and attorneys' fees provided they are not paid to the creditor or a creditor affiliate; and up to one percent (1%) of bona fide fees paid to any federal or state government agency insuring some portion of the loan (e.g., FHA and VA).
+	Other Charges Paid to Creditor/Affiliate - the total amount of all Regulation Z Section 226.4(c)(7) charges not included as a part of the Prepaid Finance Charge if paid to the creditor or creditor affiliate.
+	Other Mortgage Broker Compensation - the total amount of all non-prepaid finance charges paid to a mortgage broker regardless of who pays it (i.e., not only borrower-paid items are included, but all items going to the broker regardless of source), including lender-paid premiums (e.g., YSP).
+	Single Premium Option Insurance and Related Products and Financed - premiums for optional credit life/disability/unemployment/property or other life or health insurance or any debt cancellation or suspension agreement or contract that are financed by the lender.
+	Maximum Prepayment Fees Permitted Under the Loan Documents - For purposes of our high-cost home loan analysis and determination, we assume that, if the loan provides for a prepayment penalty, the maximum prepayment fee or penalty is equal to the "conventional prepayment penalty," defined in part as not exceeding two percent (2%) of the amount prepaid.  For purposes of completing this analysis, if the loan has a prepayment provision, we simply multiply the original principal loan amount of the loan by 2% and add that amount to points and fees.
+	Any Prepayment Fee Assessed on Refinanced Loan Made or Held by the Creditor or Affiliate - if the new loan is refinancing a preexisting loan that was made or is currently being held by the creditor or a creditor affiliate, and a prepayment penalty is assessed on the payoff of the preexisting loan.
-	Bona Fide Discount Points/Conventional Prepayment Penalty - either up to two (2) bona fide discount points or a conventional prepayment penalty may be excluded; the selection appears to be left up to the creditor to make.  If a DocMagic user indicates in the worksheet that the discount points are bona fide, we will deduct up to two (2) points; if the worksheets indicates that the discount points are not bona fide, we will not deduct any discount points.  If the loan provides for a prepayment penalty but no discount points, for purposes of our high cost analysis, we assume that the prepayment penalty does not meet the definitional requirements of a conventional prepayment penalty and we will make no deductions.  "Bona fide discount points" means an amount knowingly paid by a borrower for the express purpose of reducing, and which in fact does result in a bona fide reduction of, the interest rate, as long as the undiscounted interest rate does not exceed the conventional mortgage rate as published in statistical release H.15 as of the 15th day of the month immediately preceding the month in which the application is received by the creditor by more than two percentage points (2%) for a residential mortgage loan secured by a first lien or by three and one-half percentage points (3.5%) for a residential mortgage loan secured by a subordinated lien.
+/-	Creditor Requested Adjustments - the total amount of all customer requested overrides

Total Loan Amount is defined as the original principal balance minus points and fees financed.  For open-end loans, the total loan amount is equal to the credit limit.