Governor Steve Beshear Signs Mortgage Bill Into Law.
GOV. BESHEAR SIGNS MORTGAGE BILL INTO LAW
Legislation enhances consumer protection
FRANKFORT, Ky. (April 28, 2008) – Gov. Steven L. Beshear today ceremonially signed into law House Bill 552, which makes widespread changes in the state’s mortgage industry. The official signing was April 24. Unless stated otherwise in the bill, these changes take effect immediately.
“This important legislation will increase consumer protection and reduce mortgage fraud and predatory lending,” said Gov. Beshear. “It will hold mortgage brokers to a higher standard and will allow the Office of Financial Institutions – the state agency that regulates the mortgage industry – greater authority to oversee lenders and enforce the mortgage statutes.”
HB 552 was sponsored by House Banking & Insurance Committee Chairman Rep. Tommy Thompson (D-Owensboro). It was drafted by the Office of Financial Institutions (OFI) in conjunction with members of the House and Senate B&I committees, consumer groups and industry representatives, including the Mortgage Bankers Association of Kentucky, the Kentucky Mortgage Brokers Association, the Kentucky Bankers Association, the Kentucky Housing Corp. and others.
“HB 552 expands and clarifies the mortgage terminology in the statute and increases the scope of OFI’s jurisdiction,” said OFI Executive Director Cordell Lawrence. “It generally focuses on three areas: consumer protection, industry regulation and enforcement.”
The following are some of the provisions the legislation includes:
· Establishes a Kentucky Homeownership Protection Center to provide mortgage foreclosure counseling and education programs by or through the Kentucky Housing Corp.
· Reduces the maximum prepayment penalty to 3 percent for the first year, 2 percent for the second year and 1 percent for the third year (rather than 5 percent for five years).
· Prohibits prepayment penalties within 60 days prior to the date of the first interest rate reset.
· Creates the Mortgage Fraud Act, which will clarify and better define mortgage fraud and will make it easier to prosecute.
· Sets up a Mortgage Prosecution Fund to provide extra funding to assist local prosecutors and the attorney general in prosecuting mortgage fraud cases. OFI does not have jurisdiction and powers to criminally prosecute these cases, Lawrence noted. It will be funded through fines/penalties.
· Establishes among mortgage brokers a heightened standard of care toward borrowers. A broker may no longer act as an agent for the lender and must act in the best interest of the borrower.
· Caps total net income for mortgage loan brokers and mortgage loan companies at 4 percent.
· Establishes by 2010 testing requirements for all individuals originating mortgage loans who are required to register with OFI, including HUD-exempt individuals.
· Eliminates an exemption for those making fewer than five loans per year; HUD-exempt companies must now annually request a claim of exemption in writing.
· Adds a new section making it unlawful to improperly influence a real estate appraisal.
· Requires mortgage loan processors to register.
· Provides for a number of technical changes to bring Kentucky laws in line with the use of the Nationwide Mortgage Licensing System (NMLS), which is a national, online database all mortgage companies and individuals operating in Kentucky must now use to register.
An OFI Web page at www.kfi.ky.gov/industryinformation/hb552.htm outlines the specific changes for different areas of the mortgage industry and for consumers. Mortgage companies and individuals are urged to visit this page and implement these changes as soon as possible.
OFI is an agency of the Department of Public Protection in the Environmental and Public Protection Cabinet. It supervises the financial services industry by examining, chartering, licensing and registering various financial institutions, securities firms and professionals operating in Kentucky. OFI’s mission is to serve the public through effective and efficient regulation that promotes consumer confidence and economic growth.
Legislation enhances consumer protection
FRANKFORT, Ky. (April 28, 2008) – Gov. Steven L. Beshear today ceremonially signed into law House Bill 552, which makes widespread changes in the state’s mortgage industry. The official signing was April 24. Unless stated otherwise in the bill, these changes take effect immediately.
“This important legislation will increase consumer protection and reduce mortgage fraud and predatory lending,” said Gov. Beshear. “It will hold mortgage brokers to a higher standard and will allow the Office of Financial Institutions – the state agency that regulates the mortgage industry – greater authority to oversee lenders and enforce the mortgage statutes.”
HB 552 was sponsored by House Banking & Insurance Committee Chairman Rep. Tommy Thompson (D-Owensboro). It was drafted by the Office of Financial Institutions (OFI) in conjunction with members of the House and Senate B&I committees, consumer groups and industry representatives, including the Mortgage Bankers Association of Kentucky, the Kentucky Mortgage Brokers Association, the Kentucky Bankers Association, the Kentucky Housing Corp. and others.
“HB 552 expands and clarifies the mortgage terminology in the statute and increases the scope of OFI’s jurisdiction,” said OFI Executive Director Cordell Lawrence. “It generally focuses on three areas: consumer protection, industry regulation and enforcement.”
The following are some of the provisions the legislation includes:
· Establishes a Kentucky Homeownership Protection Center to provide mortgage foreclosure counseling and education programs by or through the Kentucky Housing Corp.
· Reduces the maximum prepayment penalty to 3 percent for the first year, 2 percent for the second year and 1 percent for the third year (rather than 5 percent for five years).
· Prohibits prepayment penalties within 60 days prior to the date of the first interest rate reset.
· Creates the Mortgage Fraud Act, which will clarify and better define mortgage fraud and will make it easier to prosecute.
· Sets up a Mortgage Prosecution Fund to provide extra funding to assist local prosecutors and the attorney general in prosecuting mortgage fraud cases. OFI does not have jurisdiction and powers to criminally prosecute these cases, Lawrence noted. It will be funded through fines/penalties.
· Establishes among mortgage brokers a heightened standard of care toward borrowers. A broker may no longer act as an agent for the lender and must act in the best interest of the borrower.
· Caps total net income for mortgage loan brokers and mortgage loan companies at 4 percent.
· Establishes by 2010 testing requirements for all individuals originating mortgage loans who are required to register with OFI, including HUD-exempt individuals.
· Eliminates an exemption for those making fewer than five loans per year; HUD-exempt companies must now annually request a claim of exemption in writing.
· Adds a new section making it unlawful to improperly influence a real estate appraisal.
· Requires mortgage loan processors to register.
· Provides for a number of technical changes to bring Kentucky laws in line with the use of the Nationwide Mortgage Licensing System (NMLS), which is a national, online database all mortgage companies and individuals operating in Kentucky must now use to register.
An OFI Web page at www.kfi.ky.gov/industryinformation/hb552.htm outlines the specific changes for different areas of the mortgage industry and for consumers. Mortgage companies and individuals are urged to visit this page and implement these changes as soon as possible.
OFI is an agency of the Department of Public Protection in the Environmental and Public Protection Cabinet. It supervises the financial services industry by examining, chartering, licensing and registering various financial institutions, securities firms and professionals operating in Kentucky. OFI’s mission is to serve the public through effective and efficient regulation that promotes consumer confidence and economic growth.
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