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SB 186 (BR 1789) - G. Neal

     AN ACT relating to mortgage lending.
     Create new sections of Subtitle 2 of KRS Chapter 286 to provide that, with regard to residential mortgage loans in a principal loan amount of under $200,000 and a loss ratio of greater than 80 percent, it shall be unlawful not to verify and document the borrower's income and financial resources and not to verify the borrower's reasonable ability to repay; require an escrow account for taxes and insurance on these loans; specify the method to determine reasonable ability to repay for loans with a variable interest rate; establish criteria which, if met, the borrower shall be presumed to have a reasonable ability to repay; declare it is unlawful to make a residential mortgage loan product that has a higher interest rate, higher points and fees, or other unfavorable terms if the borrower's credit score indicates the borrower may qualify for a residential mortgage loan product that has a lower interest rate, lower points and fees, or more favorable terms, unless there is a corresponding tangible benefit in servicing, underwriting, timely processing, origination fees, or closing costs; declare it unlawful to make a high-cost home loan without first requiring the borrower to obtain housing counseling; declare it unlawful for a residential mortgage loan to contain a provision that allows prepayment penalties more than 36 months after the loan or which exceed 3 percent in the first 12 months, 2 percent in the second 12 months, or 1 percent in the third 12 months; amend KRS 286.8-090 to permit the executive director to suspend or revoke a license or take other action against a mortgage loan company, loan broker, or loan officer who violates Section 1 or 2 of this Act; amend KRS 286.8-110 to delete provision regarding prepayment penalties; amend KRS 286.8-270 to require a mortgage loan broker to act in the borrower's best interest and require compliance with certain duties; amend KRS 360.100 to provide that a high-cost home loan with a fixed rate of interest for an introductory period that adjusts or resets after such period shall not contain any term which requires the borrower to pay a prepayment penalty after the beginning of the two-month period ending on the date of adjustment or reset; amend KRS 286.8-020 to subject certain entities to the provisions of Sections 1 and 2 of this Act.

     Feb 25-introduced in Senate
     Feb 27-to Banking & Insurance (S)

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