Today's Trends in Credit Regulation

More 2014 State Mortgage Law Developments
By Daniel J. Laudicina

In June, we detailed some of the changes state legislatures and regulators had made to mortgage laws during the first half of 2014. Though states have not been as active as in years past in enacting sweeping changes to their laws, they continue to make substantive changes to mortgage laws. Below is a brief survey of several recent developments since June.

California. Senate Bill 1051, enacted August 15, 2014, repeals the January 1, 2015 sunset date for the Buyer's Choice Act. Thus, California continues to prohibit a mortgagee or beneficiary under a deed of trust who acquired title to residential real property improved by 4 or fewer dwelling units at a foreclosure sale from requiring, directly or indirectly, as a condition of selling the property, that the buyer purchase title insurance or escrow services in connection with the sale from a particular title insurer or escrow agent.

In addition, California also enacted legislation affecting acknowledgements. Senate Bill 1050 requires a legible notice to be included in an enclosed box, as specified, stating that the acknowledgment, proof of execution, or jurat verifies only the identity of the individual who signed the document to which the acknowledgment, proof of execution, or jurat is attached, and not the truthfulness, accuracy, or validity of the document.

Connecticut. Public Act 14-219 amends Conn. Gen. Stat. Section 29-453 effective July 1, 2014 to remove the requirement that a transferor of 1-2 family residential real property certify in an affidavit to the transferee that the smoke and carbon monoxide detectors in the property do not exceed the standards under which such equipment was tested and approved and that installed carbon monoxide detectors are able to show the amount of carbon monoxide present as a reading. (In lieu of providing the affidavit, the statute allows the transferor to give the transferee a $250 credit.)

Florida. Florida SB 1012, effective July 1, 2014, repealed its high cost loan law, the Florida Fair Lending Act. As a result, lenders are no longer required to give the high cost loan disclosures or comply with high cost loan law requirements.

Florida also repealed various provisions of the Loan Originators and Mortgage Brokers Act, including the following disclosure requirements:

  • Mortgage broker agreement, including disclosure of a loan origination fee;
  • Disclosures regarding commitments and guarantees;
  • Notice of change in terms;
  • Good faith estimate for both brokers and lenders; and
  • Application disclosures regarding amounts and refundability of fees.

Indiana. The Indiana Department of Financial Institutions published the annual dollar amount increases for various provisions of the Indiana Uniform Consumer Credit Code (the "IUCCC"). See The increases became effective July 1, 2014.

The IUCCC's late fee has been increased from $18 to $18.50. Ind. Code § 24-4.5-3-203.5. The IUCCC's minimum loan finance charge has been increased from $45 to $48. Ind. Code § 24-4.5-3-201(7). The IUCCC's minimum amount financed to charge for property insurance has been increased from $1,080 to $1,110. Ind. Code § 24-4.5-3-201(7).

Massachusetts. Regulation 2209 C.M.R. 53.00, issued by the Massachusetts Division of Banks, implements the requirement pursuant to Mass. Stat. 183 § 28C that a lender may not knowingly refinance a home loan that was consummated within 60 months prior to the lender's receipt of an application for a new home loan, unless the refinancing is in the borrower's interest. The refinancing is determined to be in the borrower's interest if one of the following applies:

  • New loan is guaranteed, originated, or funded by FHA, VA, or another state or federal housing finance agency;
  • APR of new loan at consummation does not exceed the yield on US treasury securities by more than 2.5% for closed-end first lien loans, or by more than 3.5% for closed-end subordinate lien loans;
  • New loan is an open-end loan and APR under the agreement does not exceed the prime rate index as published by the Wall Street Journal plus a margin on 1%; or
  • New loan is a qualified mortgage under Reg. Z (See 12 C.F.R. 1026.43).

The borrower is able to recoup the cost of refinancing within 2 years, taking into account the costs and fees, and the interest rate on the new loan is reduced without increasing the amoritization period. The amendments became effective July 18, 2014.

Effective July 23, 2014, Massachusetts also enacted Chapter 177 of the Acts of 2014 (H3783), regulating flood insurance. Under the Act, no creditor may require, in a note or mortgage, a purchaser or owner of residential 1-4 units to purchase or pay for flood insurance on the property that:

  • Is at a coverage amount exceeding the outstanding principal mortgage balance at the beginning of the year for which the policy is in effect, and, in the case of a HELOC, home equity loan or subordinate lien mortgage, the full value of the credit line at the beginning of the year for which the policy is in effect;
  • Includes coverage for contents; and
  • Includes a deductible of less than $5,000.

In addition, the Act requires the creditor (and the insurance producer) to provide a certain notice to the home owner at the time the owner is required to purchase or pay for flood insurance.

Ohio. 2014 OH HB 483, enacted June 16, 2014, revises disclosure requirements applicable to Ohio Mortgage Broker Act registrants and licensees. Specifically, the timing requirements in Ohio Rev. Code § 1322.063(A) (concerning escrow of property taxes and description of items covered in monthly payments) will change from "not earlier than three business days nor later than twenty-four hours before a loan is closed" to "not later than three business days before a loan is closed."

The bill adds a new subsection (B) to Ohio Rev. Code § 1322.063, providing that this disclosure may be made by the model form on the Division of Financial Institution's website or providing the appropriate federal form that discloses substantially similar information as published in Appendix H of 12 C.F.R. Part 1026, as amended.

Effective January 1, 2015, Ohio also increased the minimum loan amount for prepayment penalties on refinancing of a residential mortgage loan made or arranged by a mortgage broker, loan officer, or non-bank mortgage lender to $88,410. The amount is currently $86,929 for calendar year 2014.

South Carolina. Senate Bill 356, effective June 2, 2014, affects execution of documents that are notarized or acknowledged and impacts the maximum fee that may be charged for a notarial act. The bill adopts statutory definitions for the notarial acts and clarification as to what a notary public can and cannot do, includes provisions for notarizing a signature by mark and notarizing for a person unable to sign or make a mark (such as individuals with physical disabilities), includes specific guidelines for authentication of official documents for foreign use and increases the maximum fees that a notary may charge for notarial acts to $5.00.

Rhode Island. House Bill 7792, effective July 2, 2014, provides that closing or settlement protection must be provided in connection with the issuance of any loan policy insuring a lender's interest in 1-4 unit residential property.

Vermont. Effective October 1, 2014, the Vermont Department of Financial Regulation adopted a new mortgage broker regulation, Vermont Banking Regulation B-2014-02 (VT ADC 4-2-3:1, 2, 3, 4, 5, 6, 7, 8, 9; VT ADC 4-2-3 Appendix), which supersedes and replaces Mortgage Broker Regulation B-96-1. Among other things the new mortgage broker regulation adopts a new form of Broker/Prospective Borrower Agreement. A form of the Broker/Prospective Borrower Agreement is available in the Appendix to the regulation:

Washington. The Real Property Electronic Recording Regulations, Wash. Admin. Code 434-661-020, 030, have been amended to allow electronically recorded documents that require notarization to be notarized by any authorized notary and to eliminate the requirement that the notary be appointed by the Washington Department of Licensing. The change became effective June 28, 2014.

*This survey of state law changes should not be viewed as a comprehensive list. Please see the state sections of HouseLaw for additional legislation.

Daniel J. Laudicina is a partner in the Hanover, Maryland office of Hudson Cook, LLP. Dan can be reached at 410-865-5435 or by email at

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