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Busy Legislature Acts on
Mortgage and Credit Issues
As this issue of the Maine Creditor Update goes to press, the Legislature is wrapping up its work on a record number of bills. Action has been taken on many proposals affecting mortgages, personal loans and other consumer credit issues. A partial listing of the status of those proposals is found below:
1. LD 116, the "funded settlement" bill, appears headed for enactment. It will require that a mortgage lender provide funds to the closing agent at or before the time of closing.
2. LD 1434, an omnibus bill to update and correct financial regulation laws, was amended in committee to (a) increase the permitted minimum finance charge for small loans of $75-$250 from $7.50 to $15; (b) permit a late fee on a closed-end, fixed-rate second mortgage in which a payment is more than 15 days late; and (c) permit the sharing of information between and among state and federal financial regulators, so long as the originating agency’s confidentiality rules remain "attached" to the information. The bill has been passed by both houses of the Legislature.
3. LD 1586, sponsored by Representative LaVerdiere of Wilton, will require the automatic filing of mortgages discharge within 60 days after the consumer pays off the loan. It establishes joint liability between the lender which owns the loan, and the servicer which accepts the final payment. It has been passed by the full Legislature, and will affect mortgages paid off beginning January 1, 2000.
4. LD 1608, proposed by the Maine Association of Community Banks, appears headed for enactment. It (a) removes the requirement for a notice telling consumers that they have a right to a copy of a credit contract, but clarifies that the creditor must provide such a copy; (b) permits binding "changes in terms" notices for credit card accounts; (c) deletes the current requirement for disclosure of hypothetical examples in home equity loans and lines of credit; and (d) establishes a 90-day period from a mortgage application decision during which a consumer can request a free copy of a real estate appraisal.
5. LD 1991, which has been approved by both houses and is awaiting the Governor’s signature, would require cash dispensing machines owned and operated by companies other than banks and credit unions, to be registered with the Office of Consumer Credit Regulation.
6. LD 17, which would have required that lenders or purchasers of mortgages identify themselves to cities and towns for property tax purposes each year, was voted out "ought not to pass." However, a task force was set up, and regulators were asked to encourage the voluntary flow of information from lenders and homeowners to the municipal tax authorities (see related story, How to Get Mortgage Information to Town Tax Collectors?, pages 1).
7. LD 97 would have required that lenders reduce escrow accounts to offset tax obligation reductions resulting from Maine’s "homestead exemption." While the bill was voted "ought not to pass," regulators of banks, credit unions and mortgage companies agreed to remind all lenders of their obligations to avoid overages in escrow accounts (see Homestead Exemption story and Advisory Ruling #108,pages 6 and 7).
8. LD 831 would have capped the allowable interest rate charged by all lenders and creditors under the jurisdiction of state law, to 10 ½ ‰ APR. It was voted down after a testimony revealed that out-of- state lenders would not be affected by the law.
9. LD 925 would have created a "superlien" for unpaid condominium association dues. It was rejected as a result of concerns that it could lower the value of Maine condo mortgages on the secondary market.
10. LD 1060 would have permitted or encouraged credit card companies to offer credit life, accident and health insurance to Maine consumers. During the committee process, it was determined that such coverage can be offered under current laws, but that some lenders are opting not to offer it. The bill was voted down, but at the request of the Banking and Insurance Commitee, state regulators have contacted lenders to determine what market conditions or misunderstanding of current law have led them to exclude coverage for Maine consumers (see the Committee's letter of request, page 4).
11. LD 2072, which would have clarified the legality of electronic records and signatures, including the content of consumer credit disclosures and contracts, was tabled until the next Legislative session.
12. LD 588, which would have permitted state agencies to recover the "merchant discount" from persons paying the state by credit card for fees or fines, was voted out "ought not to pass" because a similar provision is contained in Part E of the Governor's Part II budget bill, LD 617.