Pursuant to Senate Paper 415 (SP 415), Maine’s Consumer Credit Code is being amended to conform to Federal law.  Among the numerous changes made to the Consumer Credit Code are those governing Maine’s high cost and higher-priced mortgage loan laws.  Accordingly, DocMagic, Inc.’s Compliance Department will be updating its Maine high cost test and higher-priced mortgage loan audit to comply with changes to the law governing these categories of loans that become effective on September 27, 2011. 

High Cost Loans

Currently, a high cost loan in Maine is referred to as a “high-rate, high-fee” loan.  Beginning September 27, 2011, these types of loans will be referred to as a “high cost mortgage loan.” (MRSA, tit. 9-A, §8-506(1)(H).)  In addition, what is considered “excluded points and fees” for purposes of the total points and fees threshold will change.  The previous definition of points and fees excluded tax service and attorneys’ fees, provided the fees were not paid to the creditor or an affiliate of the creditor; however, the new definition of points and fees includes tax service and attorneys’ fees regardless of who the fee is paid to. Also, the previous definition of points and fees excluded up to one percent (1%) of bona fide fees paid to a federal or state government agency that insures payment of some portion of a residential mortgage loan;  the revised definition excludes all bona fide fees paid to a federal or state government agency that insures payment of some portion of a residential mortgage loan.

On or before September 27, 2011, DocMagic’s Compliance Department will update its Maine high cost test accordingly and post an updated Maine High Cost Mortgage Loan memo to reflect these changes.  The current memo regarding “high-rate, high-fee” loans can be viewed here.

Higher-Priced Mortgage Loans

As described in our current memo regarding Maine’s higher-priced mortgage loan audit, a higher-priced mortgage loan is defined as either:

1. A residential mortgage loan (defined below) that is a “nontraditional mortgage” as described in the “Interagency Guidance on Nontraditional Mortgage Product Risks,” issued September 29, 2006 and published in 71 Federal Register, 58609 on October 4, 2006 and as updated from time to time; or
2. A “rate spread home loan” that:
   1. Has the same meaning as a “higher-priced mortgage loan” in 12 Code of Federal Regulations, Section 226.35(a); or
   2. Meets the criteria of a “high-rate, high- fee mortgage” under Maine’s anti-predatory lending law.  You can read a description of DocMagic’s high-rate, high- fee mortgage test.   

Effective September 27, 2011, the definition will have:

[t]he same meaning as set forth in the Federal Truth in Lending Act and its implementing regulation, Regulation Z, 12 Code of Federal Regulations, Section 226.35(a). "Higher-priced mortgage loan" also includes a residential mortgage loan that is a nontraditional mortgage as described in the "Interagency Guidance on Nontraditional Mortgage Product Risks" issued September 29, 2006 and published in 71 Federal Register, 58609 on October 4, 2006 and as updated from time to time, except that "higher-priced mortgage loan" does not include a mortgage that does not allow a borrower to defer repayment of principal or interest.  (MRSA, tit. 9-A, §8-506(1)(I).) 

In other words, the term, “rate spread home loan” will be eliminated and will effectively constitute a Federal higher-priced mortgage loan or, the same as it is now, a residential mortgage loan that is a nontraditional mortgage.

Accordingly, DocMagic’s Compliance Department will be updating its Maine higher-priced mortgage loan audit as well as its memo posted on this subject, currently posted here.

If you have any questions regarding the subject matter of this article, please contact DocMagic, Inc.’s Compliance Department.