9-A §8-206-I. Higher-priced mortgage loans
Title 9-A: MAINE CONSUMER CREDIT CODE
Article 8: TRUTH-IN-LENDING
Part 2: DISCLOSURE REQUIREMENTS
§8-206-I. Higher-priced mortgage loans
1. Higher-priced mortgage loans are subject to the following restrictions:
A. A creditor may not extend a higher-priced mortgage to a consumer based on the value of the consumer's collateral without regard to the consumer's repayment ability as of consummation, including the consumer's current and reasonably expected income, employment, assets other than the collateral, credit history, debt-to-income ratio, current obligations and mortgage-related obligations.
(1) For purposes of this paragraph, mortgage-related obligations are expected property taxes, premiums for mortgage-related insurance required by the creditor as set forth in paragraph C and similar expenses.
(2) Under this paragraph, a creditor must verify the consumer's repayment ability as follows.
(a) A creditor must verify amounts of income or assets that it relies on to determine repayment ability, including expected income or assets, by the consumer's federal Internal Revenue Service Form W-2, tax returns, payroll receipts, financial institution records or other 3rd-party documents that provide reasonably reliable evidence of the consumer's income or assets. For the purposes of this division, "reasonably reliable evidence of the consumer's income or assets" includes, but is not limited to, statements from investment advisors, broker-dealers and others in a fiduciary relationship with the consumer as long as the statements reflect the consumer's actual income and not estimated, projected or anticipated income or a range of earnings for a consumer's type or class of employment.
(b) A creditor must verify the consumer's current obligations.
(3) A creditor is presumed to have complied with this paragraph with respect to a transaction if the creditor:
(a) Verifies the consumer's repayment ability as provided in subparagraphs (1) and (2);
(b) Determines the consumer's repayment ability using the largest payment of principal and interest scheduled in the first 7 years following consummation and taking into account current obligations and mortgage-related obligations; and
(c) Assesses the consumer's repayment ability taking into account at least one of the following:
(i) The ratio of total debt obligations to income; and
(ii) The income the consumer will have after paying debt obligations.
(4) Notwithstanding subparagraph (3), no presumption of compliance is available for a transaction for which:
(a) The regular periodic payments for the first 7 years would cause the principal balance to increase; or
(b) The term of the loan is less than 7 years and the regular periodic payments when aggregated do not fully amortize the outstanding principal balance.
(5) This paragraph does not apply to a temporary or so-called "bridge" loan with a term of 12 months or less, such as a loan to purchase a new dwelling when the consumer plans to sell a current dwelling within 12 months. [2009, c. 362, Pt. A, §13 (NEW).]
B. Beginning October 1, 2009, a higher-priced mortgage loan may not include a penalty for paying all or part of the principal before the date on which the principal is due except as allowed under subparagraph (1). The exception under subparagraph (1) does not apply to high-rate, high-fee mortgages, which are subject to section 8-206-H, subsection 1, paragraph B, subparagraph (4), and alternative mortgage transactions, which are subject to section 9-308.
(1) A higher-priced mortgage loan may provide for a prepayment penalty, including a refund calculated according to the sum of the balances method, as defined in section 2-503, subsection 7, under the terms of the loan if:
(a) The penalty will not apply after the 2-year period following consummation;
(b) The penalty will not apply if the source of the prepayment funds is a refinancing by the creditor or an affiliate of the creditor; and
(c) The amount of the periodic payment of principal or interest or both may not change during the 4-year period following consummation. [2009, c. 362, Pt. A, §13 (NEW).]
C. Beginning April 1, 2010, higher-priced loans are subject to the following requirements relating to escrow accounts:
(1) A creditor may not extend a loan secured by a first lien on a principal dwelling unless an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor, such as insurance against loss of or damage to property, or against liability arising out of the ownership or use of the property or insurance protecting the creditor against the consumer's default or other credit loss.
(2) Notwithstanding the requirements set forth in subparagraph (1):
(a) Escrow accounts need not be established for loans secured by shares in a cooperative; and
(b) Insurance premiums described in subparagraph (1) need not be included in escrow accounts for loans secured by condominium units when the condominium association has an obligation to the condominium unit owners to maintain a master policy insuring condominium units.
(3) A creditor or servicer may permit a consumer to cancel the escrow account required in subparagraph (1) only in response to a consumer's dated written request to cancel the escrow account that is received no earlier than 365 days after consummation.
(4) For purposes of this paragraph, "escrow account" has the same meaning set forth in 24 Code of Federal Regulations, Section 3500.17(b). [2009, c. 362, Pt. A, §13 (NEW).]
D. A creditor may not knowingly or intentionally engage in the act or practice of flipping a residential mortgage loan when making a higher-priced mortgage loan. The administrator is authorized to adopt rules defining with reasonable specificity the requirements for compliance with this paragraph. Rules adopted pursuant to this paragraph are routine technical rules pursuant to Title 5, chapter 375, subchapter 2-A. [2009, c. 362, Pt. A, §13 (NEW).]
[ 2009, c. 362, Pt. A, §13 (NEW) .]
SECTION HISTORY
2009, c. 362, Pt. A, §13 (NEW).