HB 287 (BR 315) - R. Damron, S. Westrom, A. Arnold, P. Bather, S. Baugh, J. Coleman, K. Hall, C. Hoffman, D. Pasley, A. Simpson
AN ACT relating to mortgage loans.
Amend KRS 294.010 to define "loan officer', "originator", "loan processor", and "classroom"; amend KRS 294.020 to clarify who is exempt from KRS Chapter 294; amend KRS 294.030 to make it unlawful to act as a mortgage loan broker or loan officer unless registered with the Department of Financial Institutions; amend KRS 294.032 to provide that a license issued to a mortgage loan company or a mortgage loan broker entitles all officers and employees, association members and employees, partnerships, natural persons, or trusts to engage in the mortgage loan business, subject to registration requirements; amend KRS 294.034 to increase the license reinstatement fee from $100 to $250; create new sections of KRS Chapter 294 to provide that beginning July 1, 2004, and annually thereafter, mortgage loan brokers and loan officers must register with the Department of Financial Institutions and pay a registration fee of $50; require in the case of initial registrations of loan officers that the applicant must complete 12 hours of education courses; provide that beginning July 1, 2005, renewals of registration of mortgage loan brokers and loan officers must include evidence of completion of continuing education courses and a renewal fee of $50; provide that beginning July 2, 2004, all registered mortgage brokers and registered loan officers must complete at least 12 hours of continuing professional education by June 30, 2005, and annually thereafter; require that at least six of the hours must be classroom hours; permit up to 12 hours to be carried forward to the next education year; require each registered mortgage loan broker and registered loan officer to provide the Commissioner with written certification as to courses completed; require courses to be approved by the Department; permit the Commissioner to grant an extension of up to one year for good cause shown; provide that failure to comply with the continuing education requirement will result in termination of registration; authorize the Commissioner to deny, suspend, or revoke the registration or license of a mortgage loan company, mortgage loan broker, or loan officer if, after a hearing, the Commissioner finds failure to comply with this Act; list other grounds for denial, suspension, and revocation of registration and license; permit a mortgage loan broker to act as an agent for the individual or individuals attempting to obtain a mortgage loan and require disclosure as to whether the broker is acting as an agent; amend KRS 287.010 to define "municipality" and "political subdivision"; create a new section of KRS Chapter 287 to prohibit political subdivisions from enacting or enforcing ordinances, resolutions, and regulations pertaining to financial or lending activities of persons or entities which are subject to KRS Chapter 287 or to the Department of Financial Institutions, or are subject to the listed federal regulatory authorities, or who originate, purchase, sell, assign, securitize, assist, facilitate, or service property interests or obligations created by financial transactions or loans made, executed, or originated by the persons regulated by the listed state or federal authorities; create new sections of KRS Chapter 360 to define "high-cost home loan"; prohibit a high-cost home loan from containing a provision allowing the lender to charge or collect prepayment fees or penalties more than 36 months after the loan closing or which exceed three percent of amount prepaid during the first 12 months, two percent during the second 12 months, or one percent during the third 12 months; prohibit a provision allowing the lender to accelerate the indebtedness; prohibit a scheduled payment that is more than twice as large as the average of earlier scheduled payments; prohibit a payment schedule with regular periodic payments that cause the principal balance to increase; prohibit a provision which increases the rate after default; prohibit terms under which two or more periodic payments are consolidated and paid in advance from the loan proceeds; provide that a lender cannot charge a borrower fees to modify, renew, extend, or amend a high-cost home loan or to defer any payment, unless the fees are less than one-half of any fees that would be charged to refinance, or unless the borrower is in default, and it is in the best interest of the borrower; provide that a lender cannot make a high-cost home loan unless the borrower has been provided a written notice that the borrower could lose the home if the borrower fails to meet his or her obligations under the loan; require the notice to explain that mortgage rates and closing costs and fees vary based on many factors, including credit and employment history, loan-to-value requested, and the type of property; require the notice to suggest consulting a qualified independent credit counselor or other experienced financial advisor; require the notice to point out that the borrower is not required to complete the loan agreement, that homeowners insurance and property taxes are the responsibility of the borrower, and that payments on existing debts affect a person's credit rating; prohibit a lender from making a high-cost home loan unless the lender reasonably believes that one or more borrowers will be able to make the scheduled payments based upon consideration of their current and expected income, current obligations, current employment status, and other financial resources; provide that there shall be a presumption that the borrower can make the scheduled payments if the borrower's total monthly debts, including amounts owed under the loan, do not exceed 50% of the borrower's monthly gross income; provide that if the proceeds of the high-cost home loan are used to refinance an existing high-cost home loan held by the same lender, the lender may not finance any prepayment penalties or fees payable by the borrower or finance points and fees which in the aggregate exceed four percent of the total amount financed; prohibit a lender or mortgage loan broker, within one year of the consummation of a high-cost home loan, from charging the borrower points and fees in connection with a high-cost home loan if the proceeds of the high-cost home loan are used to refinance an existing high-cost home loan; prohibit a lender from paying a contractor under a home-improvement contract from the proceeds of a high-cost home loan other than by an instrument payable to the borrower or jointly to the borrower and the contractor, or at the election of the borrower, through a third-party escrow agent in accordance with a written agreement signed by the borrower, lender, and contractor; prohibit a lender from refinancing, replacing, or consolidating a zero interest rate or low interest rate loan made by a governmental or nonprofit lender with a high-cost home loan; prohibit a lender from financing single premium credit life, accident, health, disability, or loss of income insurance in connection with a high-cost home loan; provide that a high-cost home loan that violates certain provisions of this Act is usurious and is an unfair and deceptive act or practice in violation of KRS 367.170; provide that the Attorney General, the Commissioner of the Department of Financial Institutions, or any party to a high-cost home loan may enforce certain provisions of this Act; provide that a lender acting in good faith will not be deemed to be in violation if certain conditions are met; provide that any extension of credit shall be deemed to have been made in the Commonwealth of Kentucky and subject to this Act if the lender offers or agrees in Kentucky to lend to a borrower who is a Kentucky resident on real property located in Kentucky or if the borrower accepts or makes the offer within Kentucky to borrow regardless of the situs of the contract; amend KRS 367.410 to include consumer loans in the definition of "home solicitation sale"; amend KRS 367.420 to provide that, for home solicitation sales on loans in which a security interest is taken in the principal dwelling of the buyer, the buyer has the right to rescind or cancel the transaction until midnight of the third business day following the later of the consummation of the loan transaction or the delivery of the material disclosures required under the federal Truth in Lending Act.
HB 287 - AMENDMENTS
HCS (1) - Retain original provisions of the Act; create a new section of KRS Chapter 294 to require each licensed mortgage loan broker to maintain a physical office in Kentucky; allow 90 day period for compliance by brokers licensed on the effective date of this Act who do not currently maintain a physical office in Kentucky; amend KRS 294.034 to prohibit the commissioner from approving license renewal if the information on office location is not received; amend KRS 294.032, relating to the application for a license and renewals, to include information on the location of the physical office location in Kentucky and whether the location is a residence; require photographs of exterior, interior, and exterior sign; require the lease of any nonresidence location to be for a term of at least 1 year; require proof of residence that must confirm the mortgage loan broker owns or leases the residence and lives in the residence as the broker's main residence; require at least 10 days' notice of the address change at the physical office location; create new provisions in Section 12 on high cost home loans to require the lender to make available a videotape or similar audio-video media to explain the borrower's rights and responsibilities; prohibit a lender from making the loan subject to mandatory arbitration that is oppressive, unfair, unconscionable, or substantially in derogation of the rights of consumers; restrict the late payment fee a lender may charge; restrict the fee that may be charged for a written payoff calculation; require at least 30 days prior notice of initiation of foreclosure; prohibit a lender from recommending or encouraging default on an existing loan or other debt in connection with the high cost home loan that refinances all or a portion of the existing loan or debt.
HCS (2) - Retain original provisions of House Committee Substitute 1; prohibit violation of civil rights by local government units under section 11; change the definition of high-cost home loan in section 12 to comply with the federal Home Ownership and Equity Protection Act of 1994 (HOEPA) on annual percentage rate and points and fees.
HFA (1, P. Bather) - Amend Section 11 to prohibit violation of civil rights by local government units by virtue of this section.
HFA (2, R. Damron) - Change the definition of high cost home loan to comply with the federal Home Ownership and Equity Protection Act of 1994 (HOEPA) on annual percentage rate and points and fees.
HFA (3, R. Webb) - Amend to insert a provision that prohibits lenders from refinancing, replacing, or consolidating an existing home loan if the primary tangible benefit of the refinancing to the borrower is an interest rate lower than the interest rate of debts satisfied or refinanced in connection with the home loan, and it will take more than four years for the borrower to recoup the costs of the points and fees and other closing costs through savings resulting from the lower interest rate.
HFA (4, R. Webb) - Define "lender" to provide that a person who purchases or is assigned a high-cost home loan is subject to certain claims and defenses.
HFA (5, R. Webb) - Establish a points and fees threshold for determining whether a home loan is a high-cost home loan.
HFA (6, R. Webb) - Prohibit financing points or fees.
HFA (7, R. Webb) - Permit recovery of attorney's fees.
SFA (1, R. Jones II) - Prohibit financing points or fees.
SFA (2, R. Jones II) - Establish a points and fees threshold for determining whether a home loan is a high-cost home loan.
SFA (3, R. Jones II) - Permit recovery of attorney's fees.
Feb 4-introduced in House
Feb 5-to Banking and Insurance (H)
Feb 7-posted in committee
Feb 12-reported favorably, 1st reading, to Calendar with Committee Substitute
Feb 13-2nd reading, to Rules
Feb 14-floor amendments (1) and (2) filed to Committee Substitute
Feb 19-floor amendments (3) (4) (5) (6) and (7) filed to Committee Substitute ; recommitted to Banking and Insurance (H)
Feb 20-reported favorably, to Rules with Committee Substitute (2) ; posted for passage in the Regular Orders of the Day for Friday, February 21, 2003
Feb 21-3rd reading, passed 96-0 with Committee Substitute (2)
Feb 24-received in Senate
Feb 26-to Banking and Insurance (S)
Mar 4-reported favorably, 1st reading, to Consent Calendar
Mar 5-2nd reading, to Rules; floor amendments (1) (2) and (3) filed
Mar 6-posted for passage in the Regular Orders of the Day for Thursday, March 6, 2003
Mar 10-3rd reading; floor amendments (1) (2) and (3) withdrawn ; passed 34-0; received in House
Mar 11-enrolled, signed by each presiding officer; delivered to Governor
Mar 12-signed by Governor (Acts ch. 64)