July 20: State lending law changes run the gamut and indicate trends in the biz

We’re not seeing the headline-grabbing Consumer Finance Protection Bureau news anymore. What’s up with that? Either companies are taking compliance seriously and are doing everything right, or the CFPB has shifted its focus. One hopes the former is true, but indeed, the CFPB appears to be shifting from enforcement to education, and only took 12 enforcement actions during the first six months of 2019 versus 23 in the first six months of 2017. Financial literacy is a good thing – just ask any LO who has dealt with borrowers who don’t know why they have to make a monthly payment. Last year the CFPB’s strategic plan listed helping consumers make responsible decisions as its top priority while listing protecting consumers from harmful industry behavior and discrimination as #2.

But plenty of states have created mini-CFPBs, leading to higher compliance costs for multi-state lenders. And certainly state lending law changes have continued unabated from coast to coast, and skimming through them helps originators determine trends.

Let’s see what’s happening in several states east of the Mississippi.

Maine has passed 2 amendments with the purpose of ensuring timely completion of foreclosures and to ensure that proper notification is made to defendants in foreclosure proceedings. Amendment HP 1020 – LD 1405 extends the mortgagee’s time to sell the property following an adjournment of the sale, provides for a waiver of foreclosure with written consent of the mortgagor, and establishes a time frame for a mortgagee to file a report of sale. And Amendment HP. 671- L.D. 907 requires that a mortgagee provide notice to a mortgagor and any cosigner to their last known address(s) by both certified mail, return receipt requested, and first-class mail, postage prepaid.

Vermont has passed S.154 an act which provides for a multitude of miscellaneous modifications to its banking provisions. The purpose of the act is to consolidate and modernize the laws and regulations relating to non-depository licensing and compliance. The provisions of S.154 take effect July 1, 2019.

Among the many revisions and updates included in the act are: the consolidation of common provisions spanning several chapters which govern the different types of non-depository lenders that operate within the state, changes to the exam cycles for loan solicitation companies, modifications to administrative penalties to bring consistency among all licensees, the addition of provisions authorizing the Department of Financial Regulation to provide advisory opinions and other letters, and the updating of references to federal laws and regulations.

Delaware has recently modified its provisions relating to licensing and fees for mortgage brokers and licensed lenders with House Bill 199 to facilitate the modernization of certain practices and procedures at the Office of the State Bank Commissioner.

The new provisions authorize the State Bank Commissioner to require applicants for a variety of additional financial services licenses to provide fingerprints for purposes of criminal background checks.  In addition to mortgage loan brokers and licensed lenders, these include money transmitters, check cashers, and motor vehicle sales finance companies.

For any of the above licenses, the Commissioner may require the applicant, the spouse of the applicant, a principal of, individual who is a person in control of, or proposed responsible individual of the applicant, or any other individual associated with the applicant and the proposed licensed activities, to provide the Commissioner or the Commissioner’s designee with a complete set of fingerprints for purposes of a criminal background investigation.

Additionally, this Act establishes a sunset provision of July 1, 2019 for §2509E of Title 6 concerning the maximum rate of interest on debts for federal workers in response to a federal government shutdown.

Delaware HB 154 passed the House Sunset Committee on June 5. If enacted, among various provisions, the bill would amend the Real Estate Appraisers€™ Practice Act to comply with federal law by clarifying the definition of federally related transaction and would add a definition for federal financial institutions regulatory agencies.

New Jersey amended its provisions relating to foreclosure with Senate Bill 362 to provide that a deed restriction on affordable housing is not extinguished in the event of a foreclosure on the property. This bill also requires that whenever a debtor is given notice that a foreclosure is pending on residential property that is a unit of affordable housing subject to affordability controls, notice must be given to the municipal clerk and the Commissioner of Community Affairs.

The foreclosing lender is also required to furnish the debtor with the address and phone number of the municipal affordable housing manager and the New Jersey Housing and Mortgage Finance Agency.  The bill further removes the ability of a foreclosing lender to use alternative methods of foreclosure not requiring a public sale when the housing unit involved is subject to affordability controls. Finally, the bill requires a creditor serving a “Notice of Intention to Foreclose” on an affordable housing unit to serve a copy of the notice on the municipal affordable housing liaison, if one has been appointed.

New Jersey AB 2085 passed the Assembly Housing and Community Development Committee with amendments on June 6. If enacted, it would create an expedited process for residential mortgage lenders to foreclose vacant and abandoned residential properties. Identical Senate bill SB 1243 is pending in the Senate Community and Urban Affairs Committee.

New Jersey AB 5084 passed the Assembly Housing and Community Development Committee on June 6. If enacted, it would establish a new registration requirement for all vacant and abandoned residential and commercial properties. Its most recent committee analysis can be read here. Identical Senate bill SB 1155 is pending in the Senate Budget and Appropriations Committee.

New Jersey SB 3147 is scheduled for a June 13 hearing in the Senate Commerce Committee. If enacted, it would create standards for remote online notaries public, including procedures for acknowledgement and proof via communication technology. Identical AB 4860 is pending in the Assembly Appropriations Committee.

New Jersey Senator Anthony Bucco introduced SB 3836 on June 3. If enacted, the bill would create an affirmative defense for certain security breaches. SB 3836 is pending in the Senate Economic Growth Committee. Identical Assembly bill AB 5467 is pending in the Assembly Science, Innovation and Technology Committee.

Through House Bill 740, the state of New Hampshire has exempted a specific type mortgage from the current law regarding licensing of non-depository mortgage bankers, brokers, and servicers.  In New Hampshire, RSA 397-A regulates the licensing of non-depository mortgage bankers, brokers, and servicers.  The new provisions exempt second mortgage loans from RSA 397-A under certain circumstances.

The new provisions exempt second mortgage loans from licensing laws, for the purpose of financing down payments or closing costs associated with the first mortgage loan, if the second mortgage loan is funded by a state entity that is already exempt and the second mortgage loan is originated by a licensed loan originator in association with the first mortgage.  According to the House Commerce and Consumer Affairs Committee, this change will make it possible for the Housing Authority to provide second mortgage support for projects that it cannot currently offer.

Connecticut HB 6996 passed the Senate on June 5 and is now waiting delivery to Governor Ned Lamont. If enacted, the bill would extend the state’s foreclosure mediation program until June 30, 2023. A detailed analysis of the bill can be read here.

Indiana amended its provisions relating to notaries public that include notarial acts, fees, remote notarial acts and other miscellaneous provisions.

The amendment provides that a statement of withdrawal of registration by a registered foreign entity may include an electronic mail address to which service of process may be made and where an electronic mail address is included in the statement of withdrawal, the statement of withdrawal must include a commitment to notify the secretary of state in the future of any change in its electronic mail address. The amendment also provides that for certain filings like articles of conversion; articles of merger or articles of domestication, the provision of an electronic mail address is discretionary.

The amendment strikes the current Uniform Commercial Code financing statement form and provides that a filing office that accepts written documents may not refuse to accept a written document for filing if the document conforms to a format approved by the International Association of Commercial.

Beginning October 1, 2019, the fee for filing and indexing a record other than an initial financing statement is increased from $4 to $12 if the record is communicated in writing. There is no statutory fee if the record is communicated by electronic filing. The fee for filing and indexing an initial financing statement is increased from $8 to $12 if the financing statement indicates that it is filed in connection with a public-finance transaction; or if the financing statement indicates that it is filed in connection with a manufactured-home transaction. The amendment further states that the number of names under which a record must be indexed does not affect the amount of fee described above.

A notary public may charge a fee of not more than $10 per for each notarial act performed. However, no fee may be collected for an attestation pertaining to: (i) a birth or death certificate issued by the state of Indiana; (ii) a diploma issued by an academic institution domiciled in Indiana and attested to in a notarial act by the academic institution’s registrar or equivalent official.

The amendment specifies that a notary public is eligible to register as a remote notary public if he or she passes a remote notarial act examination administered by the secretary of state and the fee that a notary public may charge for a remote notarial act is increased from $15 to $25. A remote notary who resigns or whose commission expires is required to maintain the contents of his or her electronic journal for at least 10 years. The amendment also provides that the law concerning remote notarial acts is applicable only to a remote notarial act performed after the earlier of the effective date of certain administrative rules or July 1, 2020.

Effective May 1st, 2019, Indiana passed House Bill 1668 into law which affects how consumer reporting agencies match consumer inquiries to credit files. 1) The bill prohibits the use of the SSN as the sole identifying factor to pull credit reports; 2) The bill requires that name, SSN and at least one additional identifier (Current address, DOB etc.) is used in determining whether a credit report in a credit bureau’s files matches the identity of a person who is the subject of a credit inquiry from a user of credit reports. Click here to learn more about the State of Indiana House Bill 1668.

Indiana also modified provisions relating to fees and charges under its Uniform Consumer Credit Code (UCCC) under House Bill 1136.

The amendment makes changes to the delinquency charges provision by replacing the $5 delinquency charge for consumer credit sales and consumer loans with a delinquency charge of: (i) $5, if installments are due every 14 days or less; (ii) $25, on any installment or minimum payment due that is not paid in full within 10 days, if installments are due every 15 days or more; or (iii) $25, on any installment or minimum payment due that is not paid in full within 10 days, in the case of a single installment due at least 30 days after the sale or loan is made.

The amendment also specifies that “a creditor may not charge or collect a delinquency charge on a payment that: (i) is paid within 10 days after its scheduled due date; and (ii) is otherwise a full payment of the payment due for the applicable installment period; if the only delinquency with respect to a consumer credit sale or a consumer loan is attributable to a delinquency charge for an earlier installment”

The amendment changes the provisions authorizing specified additional charges for consumer loans by permitting a lender to contract for and receive a transaction fee for a revolving loan account that may not exceed the greater of: (i) 2% of the amount of the transaction; or (ii) $10. Existing law authorizes the lender to charge a transaction fee in the lesser of these two amounts.

The amendment adds a new provision titled “Debt Buyers” which goes in effect after December 31, 2019. “Debt buyer” is defined to mean “a person that regularly engages in the business of purchasing debt for collection purposes regardless of whether the person: (i) collects the debt; (ii) hires another person to collect the debt; or (iii) hires an attorney for litigation connected to the collection of the debt”. The amendment lays down certain information required for an action on a debt or an arbitration proceeding requesting a judgment on a debt by a debt buyer. The amendment urges the legislative council to assign to an interim study committee that would study revisions to the UCCC and lays down the issues for consideration by an interim study committee assigned.

Illinois Senator Don Harmon introduced SB 2263 on May 31. If enacted, the bill would provide regulation of the use and sale of consumer data. It would establish consumer rights to copies of information held by persons who control and process data and would create a process to correct inaccurate data. The bill would preempt home rule and would provide that the regulation of data use and privacy are exclusively powers and functions of the state. SB 2263 is pending in the Senate Assignments Committee.

“I hear it’s easy to get ladies not to eat Tide pods. It’s more difficult to deter gents, though.”

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Rob Chrisman