Georgia Senate Bill 331
The Georgia legislature has passed SB 331, which amends Georgia’s insurance laws to provide specifically for the issuance of closing protection letters. The legislation will be effective upon signature by the Governor.
The legislation broadens the authority of title insurers by providing that a title insurer may issue closing protection letters. “Closing protection letter” means insurance that indemnifies a buyer, lender or seller in transactions where title to real estate is being conveyed solely against losses not to exceed the amount of the settlement funds only because of the following acts of the person responsible for disbursement of settlement funds: (a) acts of fraud, dishonesty, or negligence in handling settlement funds or documents in connection with a closing, but only to the extent that the act affects status or priority of title in the real estate insured by the title insurance; and (b) failure to comply with written closing instructions by a proposed insured when agreed to by the title agency or title agent relating to title insurance coverage, but only to the extent that the acts affect status or priority of title in real estate insured by the title insurance.
Under the legislation, a title insurer may issue closing protection letters only for real estate transactions where its title insurance policies are issued and where its issuing agent or agency is also responsible for the disbursement of settlement funds. The Commissioner of Insurance is authorized to promulgate rules and regulations to implement these new provisions, including prescribing standard closing protection letter policy forms.
Georgia Senate Bill 365
The Georgia legislature has passed SB 365, which amends current provisions governing the disbursement of settlement proceeds. Once signed by the Governor, the legislation is effective July 1, 2012.
Current law governs the disbursement of loan settlement proceeds and requires lenders to provide such proceeds to the settlement agent in specific forms at or before loan closing (unless a refinance transaction). This legislation amends the definition of “settlement agent” and also imposes criminal penalties upon any person who is not a settlement agent but conducts a settlement or disburses loan funds.
As revised, “settlement agent” means the lender or an active member of the State Bar of Georgia responsible for conducting the settlement and disbursement of the settlement proceeds. While Georgia is an attorney-closing state, this revision further clarifies that only the lender or a Georgia-licensed attorney may conduct the settlement and disburse settlement proceeds. The legislation provides that any individual, corporation, partnership, or other entity conducting the settlement and disbursement of loan funds, when he, she or it is not the settlement agent, is guilty of a misdemeanor.
The legislation also provides that these restrictions apply only to transactions involving purchase money loans made by a lender, or refinance loans made by the current or a new lender, which loans will be secured by deeds to secure debt or mortgages on real estate within the State of Georgia containing not more than four residential dwelling units. The legislation adds a new section providing that the requirements above shall not prevent a real estate broker or real estate salesperson from exercising the rights and providing the duties and services specified by the Georgia Real Estate Brokers and Salespersons Act (O.C.G.A. § 43-40-1 et seq).
The legislation also amends licensing provisions applicable to appraisers and real estate agents and brokers.
Illinois High-Cost Points and Fees Limit for 2012
The Illinois Division of Banking has issued the high-cost points and fees dollar limit for 2012. The dollar amount for 2012 is $975, effective January 1, 2012. Under Illinois law, a loan is a high-cost loan if the total points and fees payable by a consumer at or before closing will exceed the greater of 5% of the total loan amount or $975 for 2012.
Illinois Senate Bill 3552
The Illinois Senate recently passed SB 3552, which amends current law relative to high-risk home loans. The legislation is currently being considered in the House. Once enacted, the legislation is effective January 1, 2013.
The legislation amends the definition of high-risk home loan by revising both the APR and points and fees thresholds. The legislation also broadens the scope of the high-cost loan definition.
The thresholds will apply to open and closed-end loans, and purchase and non-purchase money loans. The legislation also adds prepayment penalties as a third threshold.
Ohio Prepayment Penalty Adjustment
The Ohio Division of Financial Institutions released the prepayment penalty adjustment for 2012. Under Ohio law, a prepayment penalty may not be charged for the prepayment or refinancing of a residential mortgage obligation of less than $75,000 (adjusted annually) that is made or arranged by a mortgage broker, loan officer, or non-bank mortgage lender and is secured by a first lien.
The dollar amount to which the prepayment penalty restriction applies is $83,894.00 for 2012. Therefore, effective January 1, 2012, a prepayment penalty is prohibited for a prepayment or refinancing of a residential mortgage loan of less than $83,894.00.
Ohio Regulations – Ability to Repay and Probability of Payment Determination
The Ohio Office of the Attorney General recently released final revised rules regarding ability to repay and probability of repayment requirements. Current Ohio law provides that a supplier must not (1) enter into a consumer transaction knowing there is no reasonable probability of payment of the obligation by the consumer or (2) engage in a pattern or practices of providing residential mortgage loan transactions based predominantly on the realization of foreclosure or liquidation value of the consumer’s collateral without regard to the consumer’s ability to repay the loan in accordance with its terms.
The final rules provide that a consumer is considered to have a reasonable probability of payment or ability to repay if the lender is offering a fully-amortizing fixed-rate refinance loan that has the same or lesser interest rate as the rate of the consumer’s current loan, the same or lesser principal amount as the consumer’s current loan, and does not extend the payoff date of the consumer’s current loan. If the consumer currently has an adjustable rate mortgage, the interest rate of the consumer’s current loan is the interest rate the consumer is paying as of the date of the refinance.
Pennsylvania “Base Figure” Annual Adjustment
The Pennsylvania Department of Banking announced the adjusted “base figure” for calendar year 2012. Under the Loan Interest and Protection Law, certain restrictions and limitations are applicable to loans with a loan amount equal to or less than the base figure. The adjusted base figure for 2012 is $230,110. Fees are limited for loans of the base figure or less. Additionally, prepayment penalties are prohibited for loans of the base figure or less.
Pennsylvania House Bill 398
The Governor of Pennsylvania signed into law HB 398, which establishes a registration requirement for appraisal management companies. The substantive provisions of the legislation are effective on the earlier of: (a) 60 days after the effective date of temporary regulations that provide for the registration of appraisal management companies; or (b) 180 days from February 2, 2012.
Under the legislation, appraisal management companies are required to register with the State Board of Certified Real Estate Appraisers. “Appraisal management company” means a person that provides appraisal management services and acts as a third-party intermediary between a person seeking a valuation of real estate located in Pennsylvania and an appraiser or firm or appraisers. “Appraisal management services” means conducting business by telephone, electronic means, mail or in person directly or indirectly for compensation or in the expectation of compensation to manage the performance of appraisals for a client, including, without limitation: (1) recruiting appraisers; (2) contracting with appraisers to perform appraisals; (3) negotiating fees with appraisers; (4) receiving appraisal orders and appraisals; (5) submitting appraisals received from appraisers to the client; (6) providing related administrative and clerical duties.
The legislation exempts certain companies from the registration requirement. AMCs that are exempt from registration must maintain accounts, correspondence, memoranda, papers, books and other records as may be required by rule.
Utah House Bill 191
The Governor of Utah signed into law HB 191, which amends various provisions of Utah law relating to the Mortgage Practices and Licensing Act, appraisal management company registration, appraisal licensing, and real estate licensing. The majority of the provisions are effective May 8, 2012.
As amended, the legislation exempts from the registration requirement an entity that: (a) exclusively employs an individual on an employer-employee basis for the performance of a real estate appraisal activity in the normal course of the entity’s business; (b) is responsible for ensuring that the real estate appraisal activity being performed by an employee is performed in accordance with applicable appraisal standards; and (c) is an appraisal management company that is a subsidiary owned and controlled by a financial institution regulated by a federal financial institution regulatory agency.
The legislation also provides that unless exempted, an appraisal management company is required to register if the company: (a) contracts with one or more appraisers for the performance of 10 or more appraisals in Utah in a calendar year; or (b) oversees a network or panel of more than 15 appraisers certified or licensed in Utah.
Virginia House Bill 761
The Governor of Virginia signed into law HB 761, which amends current requirements regarding the recordation of deeds. Under current law, a clerk of court has the authority to reject any writing filed for recordation unless the first page of the document shows the name of either the person or entity who drafted the instrument, except that papers or documents prepared outside of Virginia may be recorded without such an entry.
The legislation adds a new provision which states that the clerk has the authority to reject any deed for filing or recordation unless the deed states on the first page of the document that it was prepared by the owner of the real property or by an attorney licensed to practice law in Virginia. If prepared by an attorney, the statement must include the name and Virginia State bar number of the attorney. The legislation is effective July 1, 2012.
Washington House Bill 2255
The Governor of Washington signed into law HB 2255, which amends certain provisions of the Consumer Loan Act and Mortgage Broker Practices Act. The legislation is effective June 7, 2012.
Under current law, consumer loan and mortgage broker licensees are required to provide a mortgage loan disclosure summary to the borrower within three business days following receipt of a loan application. The Department of Financial Institutions has promulgated a model form. The legislation amends this disclosure requirement. Specifically, the legislation provides that disclosure in compliance with the Real Estate Settlement Procedures Act and Regulation X (collectively, “RESPA”), as it exists on the effective date of the legislation, is deemed to comply with the mortgage loan disclosure summary requirement.
The legislation amends the prohibited practices section to provide that it is now a prohibited practice to make loans from any unlicensed location. The legislation also removes a requirement that licensees conspicuously post the license in the place of business of the licensee. The legislation gives the Director of the Department of Financial Institutions authority to engage in informal settlement of complaints or enforcement actions including, but not limited to, payment to the Department for financial literacy and education programs. Persons are prohibited from advertising that such payments have been made.
The legislation makes similar changes to the Mortgage Broker Practices Act. The legislation removes the requirement that a mortgage broker license be permanently displayed in the mortgage broker’s place of business. The legislation also gives the Director of the Department of Financial Institutions authority to engage in informal settlement of complaints or enforcement actions including, but not limited to, payment to the Department for financial literacy and education programs. Persons are prohibited from advertising that such payments have been made.
West Virginia Senate Bill 551
The Governor of West Virginia signed into law SB 551, which amends current provisions of the Residential Mortgage Lender, Broker and Servicer Act regarding lending practices. Current law provides that in making a primary or subordinate mortgage loan, a licensee must not secure a loan in a principal amount that, when added to the aggregate total of the outstanding principal balances of all other primary or subordinate mortgage loans secured by the same property, exceeds the fair market value of the property on the date the latest mortgage loan is made. The legislation amends this section and provides that beginning January 1, 2012, and continuing until January 1, 2015, this prohibition does not apply to any mortgage modification or refinancing loan made in participation with and in compliance with the federal Homes Affordable Modification Program, a part of the federal Making Home Affordable program, or any other mortgage modification or refinancing loan funded through any other federal or state program or litigation settlement.