HB 552 (BR 1343) - T. Thompson, B. Yonts
AN ACT relating to mortgages and declaring an emergency.
Create a new section of KRS Chapter 198A to permit the Kentucky Homeownership Protection Center to be established by or through the Kentucky Housing Corporation; declare the purpose of the center to be providing a centralized location for information on public services to assist a homeowner who is in default or in danger of default on a home loan; create a new section of Subtitle 2 of KRS Chapter 286 to require the mortgagee to provide to the homeowner at the time of closing any brochure, pamphlet, or brief document prepared or approved by the Kentucky Housing Corporation that describes services provided by the center; create a new section of Subtitle 2 of KRS Chapter 286 to declare it is unlawful for a person in the course of a mortgage transaction to improperly influence the development, report, result, or review of a real estate appraisal in connection with a mortgage loan; amend KRS 286.8-010 to define terms; amend KRS 286.8-020 to clarify who is subject to the subtitle; establish procedure for any mortgage loan company, loan broker, or branch to apply for an exemption; amend KRS 286.8-030 to specify when it is unlawful to make a mortgage loan; amend KRS 286.8-032 to permit the executive director to require electronic filing of applications and fees; exempt a broker from the educational training course required of applicants if the broker has held a license for at least 1 year and has held a license within a 5 year period prior to filing the application; require a broker-applicant to establish that the district, state, or territory from which the applicant applies, resides, or performs the primary portion of his business has rules, regulations, or other provisions which by reciprocity or comity are at least equal to the ones in this section; require a mortgage loan company or broker to give at least 10 days' notice to the executive director of a change in location or business name or addition of a branch; require every mortgage loan company to maintain an agent for service of process in Kentucky; amend KRS 286.8-034 to increase license fees for each principal office and branch office; amend KRS 286.8-090 to create new actions for which the executive director may suspend or revoke a license or take other action against an applicant, licensee, person, or registrant; declare that surrender or expiration of a license, registration, or exemption shall not affect the licensee's civil or criminal liability for acts committed prior to the surrender or expiration; amend KRS 286.8-100 to allow the executive director to deem an application abandoned when it is received incomplete and the applicant fails to provide required information and fees or fails to respond to a request for information; amend KRS 286.8-110 to prohibit prepayment penalties after the third anniversary of the mortgage or after 60 days prior to the date of the first interest rate reset, whichever is less; restrict prepayment penalties to not more than 3% of the outstanding balance the first year, 2% the second year, and 1% the third year; amend KRS 286.8-140 to permit the executive director to require electronic filing of certain filings and fees; amend KRS 286.8-160 to require mortgage loan companies and brokers to keep records for a period determined by regulation by the executive director but no more than 5 years after a mortgage loan application is completed; permit preservation of records in an electronic retrievable format; require a mortgage loan company or broker that will cease operations to notify the executive director prior to discontinuance of the mortgage lending business as to the physical location where records are preserved and require the designation of a custodian of records; amend KRS 286.8-190 to make technical changes; amend KRS 286.8-220 to prohibit the use of prescreened trigger lead information derived from a consumer report to solicit a consumer who has applied for a mortgage loan with another mortgage loan company or broker under certain conditions; amend KRS 286.8-250 delete the definition of "physical location"; amend KRS 286.8-255 to require registration of mortgage loan originators and mortgage loan processors; permit the executive director to require submission of federal and state criminal background records as part of an application; designate when a certificate of registration expires; require mortgage loan originators and mortgage loan processors to notify the executive director in writing of a change of employment within 30 days of the change; amend KRS 286.8-260 to require the executive director to approve professional education courses and education providers to meet the continuing professional education requirements; amend KRS 286.8-270 to require the mortgage loan broker to act in good faith towards the borrower and comply with certain duties; amend KRS 286.8-990 to create the Kentucky Residential Mortgage Fraud Act; increase fines that may be imposed by courts for violations of this subtitle; amend KRS 286.8-060 to require surety bonds to be payable to the executive director and provide that bonds shall be available for recovery of expenses, fines, and fees levied by the executive director and for losses and damages; create new sections of Subtitle 8 of KRS Chapter 286 to create the mortgage lending fraud prosecution account; allow expenditures from the fund for criminal prosecution of fraudulent activities within the residential mortgage lending process; authorize the executive director to file administrative complaints for potential or actual violations of this subtitle; permit the executive director to levy a civil penalty of $1,000 to $25,000 for violation of any provision of this subtitle or any administrative regulation promulgated thereunder; declare it unlawful for a licensee or entity holding a claim of exemption to broker or fund a mortgage loan if the total net income generated on the loan exceeds $2,000 or 4% of the total loan amount, whichever is greater; authorize the executive director to establish standards and requirements by administrative regulation for license testing, prelicensure education and continuing education requirements for mortgage professionals subject to testing and education requirements under this subtitle; require any person applying for a license, registration, or claim of exemption to pass a written examination prior to issuance of a license, registration, or claim of exemption; require an examination to be held at least weekly in Frankfort and permit an examination to be held on a monthly basis at a location in Kentucky designated by the executive director which is reasonably accessible to all applicants; require the executive director to bar an applicant for 2 years from taking the examination if the applicant fails to pass 3 consecutive times; authorize the executive director to enter an emergency order suspending, limiting, or restricting the license, claim of exemption, or registration of a mortgage loan company, broker, originator, or processor; amend KRS 360.100 to delete the minimum principal amount of a high-cost home loan; establish an additional threshold of total points and fees that exceed the greater of $2,000 or 4% of the total loan amount; define terms; prohibit a high-cost home loan lender from imposing prepayment penalties unless the lender offers the borrower a loan without prepayment penalties and the borrower initials the offer to indicate that the borrower rejected the offer; prohibit prepayment penalties of more than 3% the first 12 months, 2% the second 12 months, and 1% the third 12 months; establish criteria which means a borrower is presumed to be able to make scheduled payments to repay the loan; require loan documents to specifically authorize late payment fees if such fees are to be imposed; prohibit a lender from charging a fee for the first request in a calendar year for a written payoff calculation and permit a fee not to exceed $20 for each subsequent request in a calendar year; require a lender to require an escrow account be established for taxes and insurance; prohibit a lender from using proceeds to repay the principal of an existing loan secured by the borrower's principal dwelling that is not a high-cost home loan; prohibit a lender from allowing a borrower to make payments that are applied only to interest and not to the principal; require the lender to provide a borrower with timely notice of any material change in the terms of the high-cost loan; require the lender to verify the borrower's income and financial resources and reasonable ability to repay the loan; create a new section of KRS Chapter 367 to establish duties of a servicer who collects or processes payments on a residential mortgage loan; amend KRS 367.420 pertaining to home solicitation sales in which security is taken in the principal dwelling of the buyer to permit the buyer to rescind or cancel the transaction until midnight of the tenth, rather than the third, business day following the later of the consummation of the loan transaction or the delivery of the material disclosures required by the Truth in Lending Act; EMERGENCY.
HB 552 - AMENDMENTS
HCS - Retain original provisions; delete (8)(b) in Section 4; delete references to loan officer and mortgage loan broker in Section 4(10); add "any wholly owned subsidiary of such person" in Section 5(1)(b); add Section 20 in (c) in Section 5(10) and add Section 26 in (d); delete "within" before "five"; make technical change in Section 7(7) and (9); insert "person" in Section 9(1)(h); bracket and strikethrough KRS 286.8-990 in Section 9(4); make technical changes in Section 11(1) and (4); insert "business in the" and change "business" to "process" in Section 13(6); add "business in the" in Section 15(3); delete new material at the beginning of subsection (5) and create a new subsection (10) in Section 17; make a technical change in Section 20(2)(h); delete "subtitle" and insert "section" in Section 20 (12); delete current language in Section 26 and insert a new Section 26; require an exam to be held in Frankfort at least monthly rather than weekly in Section 29(1); delete "individuals" and insert "applicants" in Section 29(2); change the threshold in (1)(a)5.b. from $2,000 to $3,000 and from 4 percent to 6 percent in Section 31; prohibit a prepayment penalty from being assessed against the borrower following the third anniversary date of the mortgage or 60 days prior to the first interest rate reset, whichever is less in Section 31(2)(a)2.; prohibit a prepayment penalty form exceeding 3 percent the first year, 2 percent the second year, and 1 percent the third year of the outstanding balance of the loan; prohibit a prepayment penalty from being assessed against a borrower refinancing with the mortgage loan company that funded the mortgage; add Section 34 to amend KRS 286.8-275 to make a technical change; renumber Section 34 as Section 35.
SFA (1, D. Seum) - Amend the increased fee and penalty provisions to reduce to the existing fees and penalties.
SFA (2, T. Buford) - Amend penalties for residential mortgage fraud to create a Class D felony for the first or second offense and a Class C felony for each subsequent offense.
SFA (3/Title, D. Kelly) - Make title amendment.
Feb 14-introduced in House
Feb 15-to Banking & Insurance (H)
Feb 19-posting waived; posted in committee
Feb 27-reported favorably, 1st reading, to Calendar with Committee Substitute
Feb 28-2nd reading, to Rules; posted for passage in the Regular Orders of the Day for Friday, February 29, 2008
Feb 29-3rd reading, passed 87-0 with Committee Substitute
Mar 3-received in Senate
Mar 5-to Banking & Insurance (S)
Mar 24-taken from committee Banking & Insurance (S); 1st reading; returned to Banking & Insurance (S)
Mar 25-reported favorably, 2nd reading, to Rules
Mar 26-floor amendment (1) filed
Mar 27-posted for passage in the Consent Orders of the Day for Thursday, March 27, 2008; taken from the Consent Orders of the Day, placed in the Regular Orders of the Day; passed over and retained in the Orders of the Day
Mar 28-passed over and retained in the Orders of the Day
Apr 1-passed over and retained in the Orders of the Day; floor amendment (2) filed
Apr 2-3rd reading, passed 36-0 with floor amendments (1) and (2) ; received in House; to Rules (H); posted for passage for concurrence in Senate floor amendments (1) and (2) ; taken from Rules; House concurred in Senate floor amendments (1) and (2) ; passed 86-7
Apr 14-floor amendment (3-title) filed ; enrolled, signed by Speaker of the House
Apr 15-enrolled, signed by President of the Senate; delivered to Governor
Apr 24-signed by Governor (Acts Ch. 175)