An Act To Enhance Consumer Protections in Relation to Certain Mortgages
Maine Legislature, Session 121, LD 0494
Committee: Insurance and Financial Services
Sponsors: O'NEIL
Amends: 9-A MRSA §8-I, 9-A MRSA §8

Legislative Document 
No. 494 
H.P.383 
House of Representatives, February 4, 2003 
An Act To Enhance Consumer Protections in Relation to Certain 
Mortgages 
Reference to the Committee on Insurance and Financial Services suggested and ordered 
printed. 
Presented by Representative O'NEIL of Saco. 
Printed on ret:yc1ed paper 
!r/~ 
frJ.1Jl~~ 
MILLICENT M. MacFARLAND 
Clerk 
Be it enacted by the People of the State of Maine as follows: 
Sec. I. 9-A MRSA §8-I03. sub-§I. ~-I, as enacted by PL 1995, 
c. 326, §2, is repealed and the following enacted in its place: 
F-l. 
"High-rate, high-fee mortgage" means a consumer credit 
mortgage loan transaction, involving real property located 
within this State, that is considered a 
"mortgage" under 
Section 
of 
the 
federal 
Home 
Ownership 
and 
Equity 
Protection Act 
of 
1994, 
United States 
Code, 
Section 
1602(aa) and the regulations adopted pursuant thereto by the 
Federal 
Reserve 
Board, 
including 
Code 
of 
Federal 
Regulations. 
Section 
226.32 
and 
the 
official 
staff 
commentary to the regulations as each may be amended from 
time to time. 
Sec. 2. 9-A MRSA §8-206-A, sub-§8, as enac ted by PL 1995, c. 
326, §5, is amended to read: 
8. 
A high-rate, high-fee mortgage may not provide for an 
interest rate applicable after default that is higher than the 
interest rate that applies before default or for default charges 
in excess of 
5% 
of the amount in default. 
If the date of 
maturity of such a mortgage is accelerated due to default and the 
consumer is entitled to a rebate of interest, that rebate must be 
computed 
by 
a 
method 
that is 
not 
less 
favorable 
than 
the 
actuarial method, as that term is defined in the federal Housing 
and Community Development Act of 1992, Public Law No. 
102-550, 
Section 933(d) 106 Stat. 3672, 3892 (1992). 
Sec.3. 9-A MRSA §8-206-A. sub-§II-A is enacted to read: 
II-A. 
A lender who makes 
a high-rate, high-fee mortgage 
shall report both the favorable and unfavorable payment history 
of 
the 
borrower 
to 
a 
nationally 
recognized 
consumer 
credit 
reporting agency at least annually during the period the lender 
holds or services the loan. 
Sec. 4. 9-A MRSA §8-206-A, sub-§ 12, as enac ted by PL 1995, c. 
326, §5, is amended to read: 
12. 
A creditor may not engage in a pattern or practice of 
extending credit to 
a 
consumer 
under 
a 
high-rate, 
high-fee 
mortgage based on the consumer's collateral without regard to the 
consTh~er's repayment ability, including the consumer's current 
and expected income, current obligations and employment. 
There 
is a presumption that a creditor has violated this subsection if 
the creditor engages in a pattern or practice of making loans 
without verifying and documenting consumers' repayment ability. 
read: 
Sec. 5. 9·A MRS A §8·206·A, sub·§12.A is enacted to read: 
12-A. 
A creditor may not: 
A. 
Charge 
any 
points 
in 
connection with 
a 
high rate, 
high fee mortgage if the proceeds of the high rate, high-fee 
mortgage 
are 
used 
to 
refinance 
an 
existing 
high-rate, 
high fee mortgage owned by the lender and the last financing 
was within one year of the current refinancing; 
except, 
however, 
this paragraph does not prohibit a 
lender 
from 
charging points in connection with any additional proceeds 
received by the obligor or paid to 
3rd parties on the 
obligor's behalf in connection with the refinancing. 
For 
purposes of this subsection, 
"additional proceeds" for 
a 
closed end loan is the amount over and above the outstanding 
principal 
balance 
of 
the 
existing 
high-rate, 
high-fee 
mortgage: except, however, if the lender refunds all of the 
unearned points on the high rate, high fee mortgage being 
refinanced, 
"additional 
proceeds" 
means 
the 
principal 
balance of the new high-rate, high-fee mortgage; or 
B. 
Charge a borrower any fees to modify, renew, extend or 
amend a high-rate, high-fee mortgage or defer any payment 
due 
under 
a 
high rate, 
high fee 
mortgage if, after the 
modification, renewal, extension or amendment, the loan is 
still a high-rate, high-fee mortgage or, if no 
longer 
a 
high-rate, high-fee mortgage, the annual percentage rate has 
not 
been 
reduced 
by 
a 
least 
percentage points. 
For 
purposes of this paragraph, the term "fees" does not include 
interest that is otherwise payable and consistent with the 
provisions of the loan documents. 
The provisions of this 
paragraph do not prohibit a lender from charging, imposing 
or 
causing to 
be 
paid, 
directly or indirectly, 
prepaid 
finance charges in connection with any additional proceeds, 
as 
defined in paragraph A, 
received by the borrower in 
connection with 
the 
modification, 
renewal, 
extension or 
amendment, 
provided 
the 
prepaid 
finance 
charges 
on 
the 
additional 
proceeds 
do 
not exceed 
5% 
of 
the additional 
proceeds. 
This paragraph does not apply if the existing 
high-rate, high-fee mortgage is 60 or more days delinquent 
and 
the 
modification, 
renewal, 
extension, 
amendment 
or 
deferral is part of a work-out process. 
Sec. 6. 9·A MRSA §8·206-A. sub-§§13-A to 13-C are enacted to 
13-A. 
A 
creditor 
may 
not 
advertise 
that 
refinancing 
preexisting debt with a high rate, high fee mortgage will reduce 
a 
borrower's 
aggregate 
monthly 
debt 
payment 
without 
also 
disclosing that the high-rate, 
high-fee mortgage may increase 
both the borrower's aggregate number of monthly debt payments and 
the aggregate amount paid by the borrower over the term of the 
high-rate, high-fee mortgage. 
13-B. 
A creditor may not recommend or encourage default or 
further default by a borrower on an existing loan or other debt 
prior to the closing of 
a 
high-rate, high-fee mortgage that 
refinances all or any portion of the existing loan or debt. 
13-C. 
Beginning January 1, 
2004, 
a 
lender that makes 
a 
high-rate, 
high-fee 
mortgage 
to 
a 
borrower 
and 
offers 
the 
borrower the option to purchase an individual or group credi t 
life, 
accident, 
health, 
disability or 
unemployment 
insurance 
product on a prepaid single premium basis must also offer the 
borrower the option of purchasing that insurance product on a 
monthly premium basis. 
If a 
borrower purchases from a 
lender an individual or group 
credit 
life, 
accident, 
health, 
disability 
or 
unemployment 
insurance product, that borrower has the right to cancel the 
insurance product at 
any 
time 
and 
receive 
a 
refund 
of 
any 
unearned premiums paid. 
Notice of the right to cancel must be 
sent by mail to the borrower by the lender no later than 30 days 
after consummation. 
The notice must also disclose the type of 
insurance product purchased, 
the cost of the product and the 
procedure for canceling the product. 
Sec. 7. 9-A MRSA §8-206-A. sub~*§16-A. 16-B and 18 are enacted 
to read: 
16-A. 
The lender and any assignee of the lender have the 
obligation, 
jointly 
and 
severally, 
to 
refund 
or 
credit 
the 
borrower for any default charges, prepayment penalties or prepaid 
finance charges collected in excess of the limits set forth in 
this article. 
16-B. 
A high-rate, high-fee mortgage may not include a call 
provision that permits the lender, in its sole discretion, to 
accelerate the indebtedness. 
This subsection does not apply when 
repayment of the loan is accelerated by a 
bona fide default, 
pursuant to a due-on-sale clause provision or pursuant to another 
provision 
of 
the 
loan 
agreement 
unrelated 
to 
the 
payment 
schedule, 
including, 
but 
not 
limited 
to, 
bankruptcy 
or 
receivership. 
18. 
A political subdivision of this State is prohibited 
from enacting, 
issuing and enforcing ordinances, 
resolutions, 
rules, regulations, orders, requests for proposals or requests 
for bids pertaining to the financial lending activities of a 
person who: 
A. 
Is subject to the jurisdiction of the Office of Consume~ 
Credit 
Regulation, 
including activities 
subject 
to 
this 
B. 
Is subject to the jurisdiction or regulatory supervision 
of the Board of Governors of the Federal Reserve System, the 
Office of the Comptroller of the Currency, the Office of 
Thrift 
Supervision, 
the 
National 
Credit 
Union 
Administration, the Federal Deposit Insurance Corporation, 
the Federal Trade Commission or the United States Department 
of Housing and Urban Development; 
C. 
Is subject to the jurisdiction or regulatory supervision 
of a department or agency of another state; or 
D. 
Originates, purchases, sells, assigns, securitizes or 
services 
property 
interests 
or 
obligations 
created 
by 
financial transactions or locns made, executed or originated 
by a person referred to in paragraph A, B or C or assist or 
facilitate such transactions. 
This subsection applies to all ordinances, resolutions, rules, 
regulations, orders, requests for proposals and request for bids 
pertaining to financial 
or 
lending activities, 
including any 
ordinances, resolutions, rules, regulations, orders, requests for 
proposals and request for bids disqualifying persons from doing 
business with a political subdi':ision based upon financial or 
lending activities or 
imposing 
reporting requirements 
or 
any 
other obligations upon persons regarding financial or lending 
activities. 
This 
subsection 
applies 
retroactively 
to 
all 
ordinances, 
resol utions, rules, regulations, orders l 
requests for proposals 
and requests for bids in existence on the effective date of this 
subsection. 
SUMMARY 
This 
bill 
amends 
the 
law 
related 
to 
the 
provision 
of 
high-rate, 
high-fee 
mortgages. 
This 
bill 
enhances 
consumer 
protections, 
retains the State's already stringent regulatory 
oversight 
by 
the 
Office 
of 
Consumer 
Credit 
Regulation 
and 
preserves availability of such mortgages in the marketplace.