An Act To Protect Maine Homeowners from Predatory Lending
Maine Legislature, Session 123, LD 1869
Committee: Insurance and Financial Services
Sponsors: CUMMINGS, BABBIDGE, BARSTOW, BEAUDETTE, BEAULIEU, BERRY, BLISS, BOLAND, BRAUTIGAM, BURNS, CAIN, CANAVAN, CARTER, CASAVANT, CLARK, CONNOR, CONOVER, CROCKETT, DRISCOLL, DUCHESNE, DUNN, EBERLE, FINCH, FINLEY, FISHER, FLOOD, GERZOFSKY, GILES, GROSE, HAMPER, HANLEY, HILL, HINCK, HOTHAM, JACKSON, JACOBSEN, KNIGHT, KOFFMAN, LORING, MAKAS, MARLEY, MILLER, MILLS, MIRAMANT, NORTON, PATRICK, PERCY, PERRY, PIEH, PILON, PINGREE, PINKHAM, PIOTTI, PLUMMER, PRATT, PRESCOTT, PRIEST, RAND, RECTOR, RICHARDSON, RINES, SAMSON, SILSBY, SIROIS, SMITH, TREAT, TRINW ARD, TUTTLE, VAUGHAN, WATSON, WEBSTER, WEDDELL, WHEELER, WOODBURY, BENOIT, BOWMAN, EDMONDS, HASTINGS, MARRACHE, MARTIN, MITCHELL, ROSEN, ROTUNDO
Amends: Title 12, Section 2601, 9-A MRSA §3, 9-A MRSA §6, 9-A MRSA §8, 9-A MRSA §9, 9-A MRSA §10, 10 MRSA §1330

Legislative Document 
No. 1869 
H.P. 1301 
House of Representatives, April 24, 2007 
An Act To Protect Maine Homeowners from Predatory Lending 
Reference to the Committee on Insurance and Financial Services suggested and ordered 
printed. 
Presented by Speaker CUMMINGS of Portland. 
Cosponsored by Senator DO\V of Lincoln and 
111~ 
1I?·711d£~ 
Mll...LICENT M. MacFARLAND 
Clerk 
Representati ves: ADAMS of Portland, BABBIDGE of Kennebunk, BARSTOW of Gorham, 
BEAUDETTE of Biddeford, BEAULIEU of Auburn, BERRY of Bowdoinham, BLISS of 
South Portland, BOLAND of Sanford, BRAUTIGAM of Falmouth, BURNS of Berwick, 
CAIN of Orono, CANAVAN of Waterville, CARTER of Bethel, CASAVANT of Biddeford, 
CHl .. SE of Wells, CLARK of Millinocket, CONNOR of Kennebunk, CONOVER of Oakland, 
CROCKETT of Augusta, DRISCOLL of Westbrook, DUCHESNE of Hudson, DUNN of 
Bangor, EBERLE of South Portland, FINCH of Fairfield, FINLEY of Skowhegan, FISHER of 
Rrc\vcr. FLETCf-J£R of Winslow, FLOOD of Winthrop, GERZOFSKY of Brunswick, GILES 
of Belfast, GROSE of Woolwich, HAMPER of Oxford, HANLEY of Gardiner, 
Pnntcil on recycled paper 
(H.P.1301) 
(L.D.1869) 
HASKELL of Portland, HILL of York, HINCK of Portland, HOTHAM of Dixfield, 
JACKSON of Allagash, JACOBSEN of Waterboro, KNIGHT of Livermore Falls, KOFFMAN 
of Bar Harbor, LORING of the Penobscot Nation, MacDONALD of Boothbay, MAKAS of 
Lewiston, MARLEY of Portland, McKANE of Newcastle, McLEOD of Lee, MILLER of 
Somerville, MILLS of Farmington, MIRAMANT of Camden, NORTON of Bangor, 
PATRICK of Rumford, PERCY of Phippsburg, PERRY of Calais, PIEH of Bremen, PILON of 
Saco, PINGREE of North Haven, PINKHAM of Lexington Township, PIOTTI of Unity, 
PLUMMER of Windham, PRATT of Eddington, PRESCOTT of Topsham, PRIEST of 
Brunswick, RAND of Portland, RECTOR of Thomaston, RICHARDSON of Carmel, 
RICHARDSON of Warren, RINES of Wiscasset, SAMSON of Auburn, SA V AGE of 
Falmouth, SILSBY of Augusta, SIROIS of Turner, SMITH of Monmouth. STRANG 
BURGESS of Cumberland, TREAT of Farmingdale, TRINW ARD of Waterville, TUTTLE of 
Sanford, VAUGHAN of Durham, WATSON of Bath, WEBSTER of Freeport, WEDDELL of 
Frankfort, WHEELER of Kittery, WOODBURY of Yarmouth, Senators: BENOIT of 
Sagadahoc, BOWMAN of York, President EDMONDS of Cumberland, HASTINGS of 
Oxford, MARRACHE of Kennebec, MARTIN of Aroostook, MILLS of Somerset, 
MITCHELL of Kennebec, ROSEN of Hancock, ROTUNDO of Androscoggin, SA V AGE of 
Knox, SCHNEIDER of Penobscot, SNOWE-MELLO of Androscoggin, STRIMLING of 
Cumberland, SULUV AN of York, TURNER of Cumberland. 
Printed nn recyclfll paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 9-A MRSA §3-315 is enacted to read: 
§3-315. Real estate settlement procedures 
A creditor and its loan officers shall comply with the provisions of the federal Real 
Estate Settlement Procedures Act of 1974, 12 United States Code, Section 2601 et seq. 
and its implementing regulation, Regulation X, 24 Code of Federal Regulations, Section 
3500 et seq. 
Sec. 2. 9-A MRSA §6-105-A is ena::ted to read: 
§6-105-A. Uniform multistate automated licensing system 
F 01: the purposes of participating in the establishment and implementation of a 
II 
uniform muItistate automated licensing system, referred to in this section as "the 
system," for loan brokers, supervised lenders that are not supervised financial 
organizations and individual loan officers thereof, the administrator may undertake the 
following actions. 
l-'--__ The administrator may establish new rules that are necessary for the State to 
participa!e in the system, including rules authorizing the system to collect license fees on 
behalf of the State and remit those fees to the State, authorizing collection fees by the 
mtem to pav for its services, authorizing the system to process and maintain license 
records and authorizing use of the system's uniform forms, upon the director's finding that 
each new rule is consistent with the public interest and the purposes of this Act. Rules 
adopted pursuant to this subsection are routine technical rules as defined in Title 5, 
chapter 375, subchapter 2-A. 
~. The administrator may require a credit and background investigation of each 
applicant for a license as a loan broker, a supervised lender that is not a supervised 
financial organization or a loan officer of a loan broker or a supervised lender, by means 
including fingerprint checks for state and national criminal histories, commencing at the 
time the State joins the system pursuant to this section. The cost of the investigations 
must be charged to the applicants. Information obtained or held by the administrator 
pursuant to this subsection is nonpublic pursuant to section 6-116 and not subject to 
disclosure. 
Sec. 3. 9-A MRSA §8-103, sub-§l, as amended by PL 2003, c. 49, § 1, IS 
repealed. 
Sec. 4. 9-A MRSA §8-103, sub-§l-A is enacted to read: 
I-A. As used in this Article, unless the context otherwise indicates, the following 
words have the following meanings. 
Page I - 123LR0108(OI)-1 
~t 
~ 
lOi 
A. "Accepted credit card" means any credit card that the cardholder has requested 
and received or has signed or has used or authorized another to use for the purpose of 
obtaining money, property, labor or services on credit. 
B. "Adequate notice" as used in section 8-302 means a printed notice to a cardholder 
that sets forth the pertinent facts cleanly and conspicuously so that a person against 
whom it is to operate could re.asonably be expected to have noticed it and understood 
its meaning. Tihat notice: may be gjIVen to· a cardholder by printing the notice on any 
credit car:ci. gn each periodic: statement of acc.otlnt issued to the cardholder or by any 
other means reaseoably ensUl'ing t:fue Fe£cipt hy the' cardho Ider. 
C. "Affiliate" has the same meaning as set forth in 12 United States Code, Section 
1841. 
D. "Annual percentage rate" means the annual percentage rate for a loan ui£uJiated 
according to the provisions of 12 Code of Federal Regulations, Part 226. 
E. "Bona fide discount points" means an amount knowingly paid by a borrower for 
the express purpose of reducing, and which in fact does result in a bona fide 
reduction of, the interest rate applicable to a residential mortgage loan, as long as the 
undiscounted interest rate for the residential mortgage loan does not exceed the 
conventional mortgage rate by more than 2 percentage points for a residential 
mortgage loan secured by a first lien or by 3 1/2 percentage points for a residential 
mortgage loan secured by a subordinated lien. 
F. 
"Borrower" means any natural person obligated to repay a loan, including a 
coborrower, cosigner or guarantor. 
G. "Cardholder" means any person to whom a credit card is issued or any person 
who has agreed with the card issuer to pay obligations arising from the issuance of a 
card to another person. 
H. 
"Card issuer" means any person who issues a credit card or the agent of that 
person with respect to that card. 
I. "Conventional mortgage rate" means the most recently published annual yield on 
conventional mortgages published by the Board of Governors of the Federal Reserve 
System, as published in statistical release H.15 or any superseding publication, as of 
the applicable time set forth in 12 Code of Federal Regulations, Section 
226.32(a)(l)(i). 
J. 
"Conventional prepayment penalty" means any prepayment penalty or fee that 
may be collected or charged in a residential mortgage loan and that is authorized by 
law other than this section, as long as the residential mortgage loan does not have an 
annual percentage rate that exceeds the conventional mortgage rate by more than 2 
percentage points and does not permit any prepayment fees or penalties that exceed 
2% of the amount prepaid. 
K. "Creditor" has the same meaning as "lender" as set forth in 24 Code of Federal 
Regulations, Section 3500.2 and includes a mortgage broker. 
L. "Discount" as used in section 8-303 means a reduction made from the regular 
price. The term "discount" does not mean a surcharge. 
M. "Dwelling" means a residential structure or mobile home that contains one to 4 
family housing units, or individual units of condominiums or cooperatives. 
N. "Excluded points and fees" means, in connection with a residential mortgage loan, 
I % of the total loan amount attributable to bona fide fees paid to a federal or state 
government agency that insures payment of some portion of a residential mortgage 
loan plus an amount not to exceed 2% of the total loan amount attributable to bona 
fide discount points or a conventional prepayment penalty. 
O. 
"Flipping· a residential mortgage loan" means the making of a residential 
mortgage loan to a borrower that refinances an existing residential mortgage loan 
0 
when the new loan does not have reasonable, tangible net benefit to the borrower 
considering all of the circumstances, iucluding, but not limited to, the terms of both 
the new and refinanced loans, the cost of the new loan and the borrower's 
circumstances. 
P. "High-rate, high-fee mortgage" means a residential mortgage loan in which the 
terms of the loan meet or exceed one or more of the thresholds defined in paragraph 
Cc. 
Q. "Material disclosures" means the disclosure, as required by this Article, of the 
annual percentage rate, the method of determining the finance charge and the balance 
upon which a finance charge will be imposed, the amount of the finance charge, the 
amount to be financed, the total of payments, the number and amount of payments 
and the due dates or periods of payments scheduled to repay the indebtedness. 
R. 
"Mortgage broker" has the same meaning as set forth in 24 Code of Federal 
Regulations, Section 3500.2. 
S. "Nontraditional mortgage" has the same meaning as those mortgages described in 
the "Interagency Guidance on Nontraditional Mortgage Product Risks" issued 
September 29,2006 and published in 71 Federal Register, 58609 on October 4,2006 
and as updated from time to time. 
T. "Points and fees" means: 
(1) All items included in the definition of "finance charge" in 12 Code of Federal 
Regulations, Section 226.4(a) and 226.4(b) except interest or the time price 
differential; 
(2) All items described in 
Code of Federal Regulations, Section 
226.32(b)(l)(iii); 
(3) All compensation paid directly or indirectly to a mortgage broker from any 
source, including a mortgage broker that originates a loan in its own name in a 
table-funded transaction; 
(4) The cost of all premiums financed by a creditor directly or indirectly for any 
credit life, credit disability, credit unemployment or credit property insurance or 
any other life or health insurance, or any payments financed by the creditor 
directly or indirectly for any debt cancellation or suspension agreement or 
contract, except that insurance premiums, including private mortgage insurance 
or debt cancellation or suspension fees calculated and paid on a monthly basis or 
tJwough regularly scheduled periodic payments, may not be considered financed 
by the creditor; 
(5) The maximum prepayment fees and penalties that rna\' be charged or 
collected under the terms of the loan documents; and 
(6) All prepayment fees or penalties that are incurred by the borrower if the loan 
refinances a previous loan made or currently held by the same creditor or an 
affiliate of the creditor. 
"Points and fees" does not include taxes, filing fees, recording fees and other charges 
and fees paid or to be paid to public officials for determining the existence of or for 
perfecting, releasing or satisfying a security interest or bona fide and reasonable 
charges and fees paid to a person other than the creditor or an affiliate of the creditor 
as follows: fees for tax payment services; fees for flood certification; fees for pest 
infestation and flood determination; appraisal fees; fees for inspections performed 
prior to closing; fees for credit reports; fees for surveys; attorney's fees; notary fees; 
escrow charges not otherwise included under subparagraph (1); title insurance 
premiums; and fire and hazard insurance and flood insurance premiums, as long as 
the conditions in 12 Code of Federal Regulations, Section 226.4(d)(2) are met. 
For open-end loans, the points and fees are calculated by adding the total points and 
fees known at or before closing, including the maximum prepayment penalties that 
may be charged or collected under the terms of the loan documents and the minimum 
additional fees the borrower would be required to pay to draw down an amount equal 
to the total credit line. 
U. 
"Rate spread home loan" means any loan for which the rate spread must be 
reported under the Home Mortgage Disclosure Act of 1975, Regulation C, 12 Code 
of Federal Regulations, Section 203.4(a)(l2); and any loan that meets the criteria of a 
high-rate, high-fee mortgage. 
V. "Residential mortgage loan" means an extension of credit, including an open-end 
credit plan, in which: 
(1) The loan does not exceed the maximum original principal obligation as set 
forth in and from time to time adjusted according to the provisions of 12 United 
States Code, Section 1454(a)(2); 
(2) The loan is considered a federally related mortgage loan as set forth in 24 
Code of Federal Regulations, Section 3500.2; and 
(3) The loan is not a reverse mortgage transaction or a loan made primarily for 
business, agricultural or commercial purposes. 
W. "Residential mortgage transaction" means a transaction in which a mortgage, 
deed of trust, purchase money security interest arising under an installment sales 
contract or equivalent consensual security interest is created or retained against the 
consumer's dwelling to finance the acquisition or initial construction of that dwelling. 
X. 
"Reverse mortgage transaction" means a nonrecourse transaction in which a 
mortgage, deed of trust or equivalent consensual security interest is created against 
the consumer's principal dwelling to secure one or more advances and with respect to 
which the payment of any principal, interest and shared appreciation or equity is due 
and payable, other than in the case of default, only after the transfer of the dwelling, 
after the consumer ceases to occupy the dwelling as a principal dwelling or after the 
death of the consumer. 
Y. "Servicer" has the same meaning as set forth in 24 Code of Federal Regulations, 
Section 3500.2. 
Z. "Servicing" has the same meaning as set forth in 24 Code of Federal Regulations, 
Section 3500.2 and includes any other activities or responsibilities undertaken in 
connection with a residential mortgage loan by a person who acts as a servicer with 
respect to that residential mortgage loan, including collection and default 
management functions. 
AA. "Surcharge" means any means of increasing the regular price to a cardholder 
that is not imposed upon customers paying by cash, check or similar means. 
SS. 
"Tax refund loan," also known as "refund anticipation loan," means a 
transaction in which a creditor lends an amount less than or equal to a consumer's 
expected tax refund. 
Cc. "Threshold" means either: 
(1) Rate threshold, which is, for a residential mortgage loan, the point at which 
the annual percentage rate equals or exceeds the rate set forth in 12 Code of 
Federal Regulations, Section 226.32(a)(l lei), without regard to whether the 
residential mortgage loan may be considered a "residential mortgage transaction" 
or an extension of "open-end credit" as those terms are set forth in 12 Code of 
Federal Regulations. Section 226.2; or 
(2) The total points and fees threshold, which is: 
Ca) For loans in which the total loan amount is $40,000 or more, the point at 
which the total points and fees payable in connection with the residential 
mortgage loan less any excluded points and fees exceed 5% of the total loan 
amount; and 
(b) For loans in which the total loan amount is less than $40,000, the point at 
which the total points and fees payable in connection with the residential 
mortgage loan less any excluded points and fees exceed 6% .of the total loan 
amount. 
DO. "Total loan amount" means the principal of a loan minus those points and fees 
that are included in the principal amount of the loan. For open-end loans, the total 
loan amount must be calculated using the total line of credit allowed under the 
residential mortgage loan at closing. 
EE. "Unauthorized use," as used in section 8-303, means a use of a credit card by a 
person other than the cardholder who does not have actual, implied or apparent 
authority for SUf.Q use and from which the cardholder receives no benefit. 
Sec. 5. 9-A MRSA §8-206} sub-§3, as enacted by PL 1981, c. 243, §25, is 
4! 
amended to read: 
3. 
In the ease of a residential mortgage transaction, \vhieh is also subject to the Real 
Estate Settlement Procedures Act of 1974, 11 United States Code, Title 12, Section 2601, 
et seq., good faith estimates of the disclosures required under subsection 1 sIlalt must be 
made in accordance with regHlations rules of the administrator under section 8-201, 
subsection 3, before the credit is extended, or sIlalt must be delivered or placed in the 
mail not later than 3 business days after the creditor receives the consumer's wRtten bona 
fide application, whichever is earlier. If the disclosure statement furnished within 3 days 
of the 'tYritten bona fide application contains an annual percentage rate whish that is 
subsequently rendered inaccurate within the meaning of section 8-106, subsection 3, the 
creditor shall furnish another statement at the time of settlement or consummation. If the 
disclosure statement furnished within 3 days of the bona fide application indicates that 
the consumer will not be assessed a prepayment penalty, and if that statement is 
subsequently rendered inaccurate, the creditor shall notifY the consumer of that change as 
soon as practicable and shall also furnish a corrected statement prior to the time of 
settlement or consummation. 
Sec. 6. 9-A MRSA §8-206-A, sub-§6, as enacted by PL 1995, c. 326, §5, is 
repealed. 
Sec. 7. 9-A MRSA §8-206-A, sub-§7, as enacted by PL 1995, c. 326, §5, is 
repealed. 
Sec. 8. 9-A MRSA §8-206-A, sub-§8, as amended by PL 2003, c. 49, §2, is 
repealed. 
Sec. 9. 9-A MRS A §8-206-A, sub-§9, as enacted by PL 1995, c. 326, §5, is 
repealed. 
Sec. 10. 9-A MRSA §8-206-A, sub-§l1, as enacted by PL 1995, c. 326, §5, is 
repealed. 
Sec. 11. 9-A MRSA §8-206-A, sub-§12, as enacted by PL 1995, c. 326, §5, is 
repealed. 
Sec. 12. 9-A MRSA §8-206-A, sub-§12-A, as enacted by PL 2003, c. 49, §4, is 
repealed. 
Sec. 13. 9-A MRSA §8-206-A, sub-§13, as enacted by PL 1995, c. 326, §5, is 
repealed. 
Sec. 14. 9-A MRSA §8-206- A, sub-§13-B, as enacted by PL 2003, c. 49, §5, is 
repealed. 
Sec. 15. 9-A MRSA §8-206-A, sub-§13-C, as enacted by PL 2003, c. 49, §5, is 
repealed. 
Sec. 16. 9-A MRSA §8-206-A, sub-§16-A, as enacted by PL 2003, c. 49, §6, is 
repealed. 
I 
Sec'. 17. 9-A MRSA §8-206-A, sub-§16-B, as enacted by PL 2003, c. 49, §6, is 
repealed. 
Sec. 18. 9-A MRSA §8-206-A, sub-§17, as enacted by PL 1995, c. 326, §5, is 
repealed. 
Sec. 19. 9-A MRSA §8-206-C is enacted to read: 
§8-206-C. High-rate, high-fee mortgages; additional requirements 
1. 
The making of a high-rate, high-fee mortgage is subject to the following 
prohibitions, except that, notwithstanding any other provision of law, a residential 
mortgage loan made by the Maine State Housing Authority pursuant to Title 30. chapter 
I is not subject to the following prohibitions. 
II 
A. 
In connection with a high-rate, high-fee mortgage, a creditor may not directly or 
indirectly finance any points or fees. 
B. 
A prepayment fee or penalty may not be included in the loan documents or 
charged under the terms of a high-rate, high-fee mortgage. 
C. A high-rate, high-fee mortgage may not contain a scheduled payment that is more 
than twice as large as the average of earlier scheduled payments. This paragraph 
does not apply when the payment schedule is adjusted to the seasonal or irregular 
I 8 
income of the borrower. 
D. 
A high-rate, high-fee mortgage may not include payment terms under which the 
outstanding principal balance or accrued interest will increase at any time over the 
course of the loan because the regularly scheduled periodic payments do not cover 
the full amount of interest due. 
E. 
A high-rate, high-fee mortgage may not contain a provision that increases the 
interest rate after default. This paragraph does not apply to interest rate changes in a 
variable rate loan otherwise consistent with the provisions of the loan documents, as 
long as the change in the interest rate is not triggered by the event of default or the 
acceleration of the indebtedness. 
F. 
A high-rate, high-fee mortgage may not include terms under which more than 2 
periodic payments required under the loan are consolidated and paid in advance from 
the loan proceeds provided to the borrower. 
If the date of maturity of such a 
I 
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 
~G.tuarial method, as that term is defined in the federal Housing and Community 
h?eveiopment Act of 1992, Public Law No. 102-550, Section 933(d) 106 Stat. 3672, 
3892 (1992). 
G. 
A creditor may not make a high-rate. high-fee mortgage without first receiving 
certification from a counselor with a 3rd-party, nonprofit organization approved by 
the United States Department of Housing and Urban Development, a housing 
.financing agency of this State Ot the regulatory agency that has jurisdiction over the 
,10 
s:reditor that the borrower has received counseling on the advisability of the loan 
IT<!JJsaction. 
H. A creditor may not make a payment to a contractor under a home improvement 
contract from amounts extended as credit under a high-rate, high-fee mortgage 
except: 
(1) In the form of an instrument that is payable to the consumer or jointly to the 
consumer and the contractor; or 
(1) At the election of the consumer, by a 3rd-party escrow agent in accordance 
with terms established in a written agreement signed by the consumer, the 
creditor and the contractor before the date of payment. 
I. 
All high-rate, high-fee mortgage documents that create a debt or pledge property 
as collateral must contain the following notice on the first page in a conspiclloUS 
manner: 
"Notice: This is a high-rate, high-fee mortgage subject to special rules 
under state law. Purchasers or assignees of this high-rate, high-fee mortgage may be 
liable for all claims and defenses by the borrower with respect to the high-rate, high: 
fee mortgage." 
2. 
The following provisions apply to a claim made by a borrower against a 
purchaser or assignee of a high-rate, high-fee mortgage. 
A. 
Any person who purchases or is otherwise assigned a high-rate. high-fee 
mortgage is subject to all affirmative claims and any defenses with respect to the loan 
that the borrower could assert against a creditor of the loan, except that this paragraph 
does not apply if the purchaser or assignee demonstrates by a preponderance of the 
evidence that it: 
(1) Has in place, at the time of the purchase or assignment of the subject loan, 
policies that expressly prohibit its purchase or acceptance of assignment of any 
high-rate, high-fee mortgages; 
(2) Requires by contract that a seller or assignor of residential mortgage loans to 
the purchaser or assignee represent and warrant to the purchaser or assignee that 
either the seller or assignor will not sell or assign any high-rate, high-fee 
mortgages to the purchaser or assignee or the seller or assignor is a beneficiary of 
a representation and warranty from a previous seller or assignor to that effect; 
and 
(3) Exercises reasonable due diligence, at the time of purchase or assignment of 
residential mortgage loans or within a reasonable period of time after the 
purchase or assignment of such residential mortgage loans, intended by the 
purchaser or assignee to prevent the purchaser or assignee from purchasing or 
taking assignment of any high-rate, high-fee mortgages. For purposes of this 
subsection, reasonable due diligence must provide for sampling and may not 
require loan-by-Ioan review. 
Notwithstanding this paragraph, liability pursuant to this subsection may not accrue 
to a purchaser or assignee of a high-rate, high-fee mortgage as a result of an alleged 
violation by a creditor of section 8-206-D, subsection 1. paragraph B. 
I 
B. . A borrower acting only in an individual capacity may assert claims that the 
borrower could assert against a creditor of the high-rate, high-fee mortgage against 
any subsequent holder or assignee of the high-rate, high-fee mortgage as follows: 
(1) Within 5 years of the closing of a high-rate, high-fee mortgage, the borrower 
may assert a violation of this section in connection with the loan as an original 
action; and 
(2) Within 10 years of the closing of a high-rate, high-fee mortgage, after an 
action to collect on the residential mortgage loan or foreclose on the collateral 
securing the residential mortgage loan has been initiated or the debt arising from 
the residential mortgage loan has been accelerated or the residential mortgage 
II 
loan has become 60 days in defaul~, the borrower may assert any defense, claim 
or counterclaim or action to enjoin foreclosure or preserve or obtain possession of 
the property that secures the loan. 
A claim asserted by a borrower under this paragraph is limited to amounts required to 
reduce or extinguish the borrower's liability under the high-rate, high-fee mortgage 
plus amounts required to recover costs, including reasonable attorney's fees. 
3. 
This section applies notwithstanding any other provision of law, except that 
nothing in this section may be construed to limit the substantive rights, remedies or 
procedural rights available to a borrower against any creditor, assignee or holder of a 
high-rate, high-fee mortgage under any other law. The rights conferred on borrowers in 
subsection 2, paragraphs A and B are independent of each other and do not limit each 
other. 
Sec. 20. 9-A MRSA §8-206-D is enacted to read: 
§8-206-D. Residential mortgage loan requirements 
1. 
The following acts and practices are prohibited in the making of a residential 
mortgage loan. 
A. A creditor may not recommend or encourage default on an existing loan or other 
debt prior to and in connection with the closing or planned closing of a residential 
mortgage loan that refinances all or any portion of the existing loan or debt. 
B. A creditor may not knowingly or intentionally engage in the act or practice of 
I 
flipping a residential mortgage loan. 
LA borrower may not be charged for a late payment unless the loan documents 
wecifically authorize the charge, the charge is not imposed unless the payment is past 
due for 10 days or more and the sharge does not exceed 5% of the amount of the late 
wyment. A late payment charge may not be imposed more than once with respect to 
~articu!ar late payment. If a iate payment charge is deducted from a payment made 
on the residential mortgage loan and that deduction results in a subsequent default on 
a subsequent payment, a late payment charge may not be imposed for that default. A 
creditor or servicer may applv any payment made in the order of maturity to a prior 
period's payment due even if the result is late payment charges accruing on 
subsequentpayments due. 
D. A residential mortgage loan may not contain a provision that permits the creditor, 
in its sole discretion, to accelerate the indebtedness. This paragraph does not prohibit 
the acceleration of the loan in good faith due to the borrower's failure to abide by the 
material terms of the loan. 
E. 
A creditor making a residential mortgage loan may not finance directly or 
indirectly any credit life, credit disability, credit unemployment or credit property 
insurance or any other life or health insurance or any payments directly or indirectly 
for any debt cancellation or suspension agreement or contract, except that insurance 
premiums or debt cancellation or suspension fees calculated and paid on a monthly 
basis or through regularly scheduled periodjc payments may not be considered 
financed by the creditor. 
F. A borrower may not be charged a fee in addition to the actual public discharge fee 
to provide a release upon prepayment. Payoff balances must be provided in 
accordance with section 9-305-B. 
G. 
A residential mortgage loan may not be extended to a borrower unless a 
reasonable creditor would believe at the time _ the loan is closed that the borrower 
residing in the home will be able to make the scheduled payments associated with th~ 
loan.! 
(I) The determination of a borrower's reasonable ability to repay a loan must 
include, but may not be limited to, consideration of the borrower's income, 
including statements submitted by or on behalf of the borrower in their loal} 
application, except that a creditor may not disregard facts and circumstances that 
indicate that the income statements submitted by or on behalf of the borrower are 
inaccurate or incomplete, credit history, current obligations and employment 
status; the debt-to-income ratio of the borrower's monthly gross income, 
including the costs of property taxes and insurance; and other available financial 
resources other than the borrower's equity in the principal dwelling that secures 
or would secure the residential mortgage loan. 
(2) 
The calculation assumptions used in evaluating the ability to repay for 
nontraditional mortgages and rate spread home loans must include: 
I 
(a) The monthly payment amounts based on, at a minimum, the fully indexed 
rate, assuming a fully amortizing repayment schedule; 
(b) Verification of all sources of income by tax returns, payroll receipts, bank 
records, reasonable alternative or reasonable 3rd-party verification; and 
(c) For products that permit negative amortization, the repayment analysis 
based upon the initial 10'ln amount plus any balance increase that may accrue 
from the negative amortization provision. 
(3) The administrator shall adopt, amend and repeal routine technical rules in 
accordance with Title 5, chapter 375. subchapter 2-A defining with reasonable 
specificity the requirements set forth in subparagraphs (1) and (2). In adopting 
rules under this subparagraph, the administrator shall give due consideration and 
weight to the following federal regulations and guidelines, as amended from time 
to time: 
(a) Final Interagency Guidance on Nontraditional Mortgage Product Risks; 
(b) Credit Risk Management Guidance for Home Equity Lending; 
(c) Expanded Guidance for Subprime Lending Programs; and 
(d) Interagency Guidance on Subprime Lending. 
2. 
The following provisions apply with respect to a right to cure default of a 
residential mortgage loan. 
A. If all defaults in connection with a residential mortgage loan are cured after the 
initiation of any action to foreclose, the creditor or the servicer shall take steps as 
necessary to terminate the foreclosure proceeding or other action. Cure of default 
reinstates the borrower to the same position as if the default had not occurred and 
nullifies, as of the date of the cure, any acceleration of any obligation under the 
security instrument or note arising from the default. 
B. A borrower has the right to cure a default prior to commencing a foreclosure 
i 4 
proceeding under this section once in a 12-month period. 
3. The administrator, by rule or order. shall prohibit acts or practices in connection 
with: 
A. 
Residential mortgage loans that the administrator finds unfair, deceptive or 
designed to evade the provisions of this section; and 
B. 
Refinancing of residential mortgage loans that the administrator finds are 
associated with abusive lending practices or that are otherwise not in the interest of 
the borrowing public. 
4. The Attorney General of this State has jurisdiction to enforce this section against 
loan brokers and supervised lenders who are not supervised financial organizations 
through their general regulatory powers and through civil process. The administrator, 
through the Attorney General, may bring a civil action to restrain any person from 
violating this section. 
5. The rights conferred by this section are independent of and in addition to any other 
rights under this Title and other state and federal laws. 
Sec. 21. 9-A MRSA §8-206-E is enacted to read: 
§8-206-E. Violations of residential mortgage loan and high-rate, high-fee mortgage 
requirements 
1. This section applies to any violation of section 8-206-A, 8-206-C or 8-206-0 in 
connection with the origination, brokering or servicing of a residential mortgage loan. 
2. Any person who has been found in violation of section 8-206-A, 8-206-C or 8-
206-0 by a court may be liable to the borrower for the following: 
A. Actual damages, including consequential and incidental damages. The borrower 
may not be required to demonstrate reliance in order to receive actual damages: 
B. Statutory damages as follows: 
(1) For violations described in 8-206-C, statutory damages equal to 2 times the 
finance charge paid under the loan and forfeiture of the remaining interest under 
the loan; and 
(2) For violations described in 8-206-0, statutory damages in the amount of 
$5,000 per violation; 
C. Punitive damages when the violation was malicious or reckless; and 
O. Costs, including reasonable attorney's fees. 
3. A borrower may be granted injunctive, declaratory and other equitable relief the 
court determines appropriate in an action to enforce compiiance with this section and 
sections 8-206-A, 8-206-C and 8-206-0. 
4. 
The right of rescission granted under 15 United States Code, Chapter 41, 
Subchapter I, Part A for a violation of that law is available to a borrower acting only in an 
individual capacity by way of recoupment as a defense against a party foreclosing on a 
residential mortgage loan at any time during the term of the loan. Any recoupment claim 
asserted pursuant to this provision is limited to amounts required to reduce or extinguish 
the borrower's liability under the residential mortgage loan plus amounts required to 
recover costs, including reasonable attorney's fees. This section may not be construed to 
limit recoupment rights available to the borrower under any other law. 
5. 
The remedies provided in this section are not intended to be the exclusive 
remedies available to a borrower, nor must the borrower exhaust any administrative 
remedies provided under this section or any other applicable law before proceeding under 
this section. 
6. 
Any person who knowingly violates section 8-206-A, 8-206-C or 8-206-0 is 
guilty of a Class E crime and, on conviction, is subject to a fine not exceeding $5,000, 
community service for not more than 500 hours or imprisonment not exceeding 6 months, 
or any combination of the preceding. A person who is convicted of a 2nd or subsequent 
violation is subject to a fine not exceeding $10,000, community service for not more than 
1,000 hours or imprisonment not exceeding 12 months, or any combination of the 
preceding. 
7. A creditor in a residential mortgage loan who, when acting in good faith, fails to 
comply with the provisions of section 8-206-A, 8-206-C or 8-206-0 is deemed not to 
have violated those sections if the creditor establishes that either: 
A. 
Within 30 days of the loan closing and prior to receiving any notice of the 
compliance failure, the creditor has made appropriate restitution to the borrower and 
appropriate adjustments have been made to the loan; or 
B. 
Within 60 days of the loan closing and prior to receiving any notice of the 
compliance failure, when the compliance failure was not intentional and resulted 
from a bona fide error notwithstanding the maintenance of procedures reasonably 
adopted to avoid such errors~e borrower is no!iiied of the compliance failure, 
appropriate restitution is made to the borrower and appropriate adjustments are made 
to the loan. Examples of a bona fide error include clerical, calculation, computer 
malfunction and programming and printing errors. An error of legal judgment with 
respect to a person's obligations under this section is not a bona fide error. 
8. The remedies provided in this section are cumulative. 
9. 
Notwithstanding any other provision of law, a residential mortgage loan 
agreement may not include any provision that waives any borrower's remedies available 
at law or equity, whether acting individually or on behalf of others similarly situated, or 
the borrower's rights to civil discovery or appeal. Any such provision is unenforceable 
and void as a matter of law. 
10. Without regard to whether a borrower is acting individually or on behalf of 
II 
others similarly situated, any provision of a residential mortgage loan agreement that 
allows a person to require a borrower to assert any claim or defense in a forum that is less 
convenient, more costly or more dilatory for the resolution of a dispute than a judicial 
forum established in this State where the borrower may otherwise properly bring a claim 
or defense or that limits in any way any claim or defense the borrower may have IS 
unconscionable and void as a matter of law. 
11. It is a violation of section 8-206-A, 8-206-C or 8-206-0 for any person to 
attempt in bad faith to avoid the application of those sections by dividing any loan 
transaction into separate parts or structuring a residential mortgage loan transaction as an 
open-end loan for the purpose of evading the provisions of those sections when the loan 
would have been a high-rate, high-fee mortgage if the loan had been structured as a 
closed-end loan or by engaging in any other subterfuge with the intent of evading any 
provision of this section. 
Sec. 22. 9-A MRSA §8-206-F is enacted to read: 
§8-206-F. Investigative and legal compliance personnel 
1. The Director of the Office of Consumer Credit Regulation shall establish the 
following positions: 
A. 
A position with the responsibility for promoting compliance with, and 
investigating alleged violations of, the provisions of this section by entities or 
individuals subject to the jurisdiction of the Office of Consumer Credit Regulation; 
and 
B. 
A staff attorney position with the responsibility for compliance with and 
enforcement of the provisions of this section by entities or individuals subject to the 
jurisdiction of the Office of Consumer Credit Regulation. 
2. 
Notwithstanding section 6-203, subsection 3-C, the Director of the Office of 
Consumer Credit Regulation may by rule adjust the fees paid with respect to creditors 
that are not supervised financial organizations making residential mortgage loans to 
support the costs of the positions established in subsection 1. Rules adopted pursuant to 
this subsection are major substantive rules as defined in Title 5, chapter 375, subchapter 
2-A. 
Sec. 23. 9-A MRSA §9-101, as enacted by PL 1987, c. 396, § 12, is amended to 
read: 
§9-101. Scope 
This article applies to all consumer credit transactions made by creditors that are not 
supervised financial organizations, that are made to finance or refinance the acquisition of 
real estate or the initial construction of a dwelling or that are secured by a first-lien 
mortgage on real estate. 
Sec. 24. 9-A MRSA §9-311 is enacted to read: 
§9-311. Real estate settlement procedures 
A creditor and its loan officers shall comply with the provisions of the federal Real 
Estate Settlement Procedures Act of 1974, 12 United States Code, Section 2601 et seq. 
and its implementing regulation and Regulation X, 24 Code of Federal Regulations, 
Section 3500 et seq. 
Sec. 25. 9-A MRSA §9-312 is enacted to read: 
§9-312. False information on application for credit 
A supervised lender, or any loan officer of a supervised lender, may not knowingly 
permit, encourage or assist a consumer to submit false information on any application for 
credit, nor may a supervised lender or loan officer of a supervised lender knowingly 
falsify such infonrtation on a consumer's application. 
Sec. 26. 9-A MRSA §9-313 is enacted to read: 
§9-313. Rate locks 
If a supervised lender charges a consumer a fee to lock in a certain interest rate for a 
certain length of time, that supervised lender shall: 
1. Take steps that are necessary to actually secure or guarantee the specified rate for 
the appropriate length of time; 
2. Select a time period within which the loan can reasonably be expected to close; 
and 
3. Use good faith efforts to close the loan within the rate lock period. 
Sec. 27. 9-A MRSA §9-314 is enacted to read: 
§9-314. Prepayment penalty riders 
A supervised lender may not impose a prepayment penalty provision through use of a 
rider or amendment to the loan contract if the terms of the loan contract state that no such 
prepayment penalty may be imposed or that such a penalty is not specifically authorized 
under state law. 
Page i4 - i23LR0108(Ol)-1 
Sec. 28. 9-A MRSA §10-302, sub-§2, as amended by PL 2005, c. 274, §9, is 
further amended to read: 
2. 
The terms and conditions of payment, including the total of all payments to be 
made by the consumer for the service or by any other person or entity, whether to the loan 
broker or to some other person; and 
Sec. 29. 9-A MRSA §10-307 is enacted to read: 
§10-307. Real estate settlement procedures 
A loan broker and its loan officers shall comply with the provisions of 12 United 
States Code, Section 2601 et seq., the federal Real Estate Settlement Procedures Act of 
1974 and its implementing regulation and Regulation X, 24 Code of Federal Regulations, 
Section 3500 et seq. 
Sec.30. 9-A MRSA §10-308 is enacted to read: 
§10-308. False information on application for credit 
A loan broker or any loan officer of a loan broker may not knowingly permit, 
encourage or assist a consumer to submit false information on any application for credit, 
nor maya loan broker or loan officer of a loan broker knowingly falsify such information 
on a consumer's application. 
Sec. 31. 9-A MRSA §10-309 is enacted to read: 
§10-309. Rate locks 
If a loan broker collects a fee from a consumer to lock in a certain interest rate for a 
certain length of time, that loan broker shall: 
1. Take steps that are necessary to actually secure or guarantee the specified rate for 
the appropriate length of time; 
• 
2. Select a time period within which the loan can reasonably be expected to close; 
and 
3. Use good faith efforts to close the loan within the rate lock period. 
Sec. 32. 10 MRSA §1330 is enacted to read: 
§1330. 
Solicitation using prescreened trigger lead information from consumer 
report 
1. Use of prescreened tri!!!!er lead information. When using prescreened trigger 
lead information derived from a consumer report to solicit a consumer who has applied 
for a loan with another lender or loan broker, a lender or loan broker may not use unfair 
or deceptive practices described in subsection 2. 
I 
2. Unfair or deceptive practices. Without limitation, it is an unfair or deceptive 
practice to: 
A. Fail to state in the initial phase of the solicitation from a lender or loan broker that 
the solicitor is not affiliated with the lender or loan broker with which the consumer 
initially applied; 
B. 
Fail in the initial solicitation to conform to state and federal law relating to 
prescreened solicitations using consumer reports, including the requirement to make a 
firm offer of credit to the consumer; 
C. Knowingly or negligently use information regarding consumers who have opted 
out of prescreened offers of credit or who have placed their contact information on 
II 
the federal do-not-call registry; or 
D. Solicit a consumer with offers of certain rates, terms and costs with intent to 
subsequently raise the rates or change the terms to the consumer's detriment. 
Sec. 33. 
Authority to submit legislation. 
The Director of the Office of 
Consumer Credit Regulation within the Department of Professional and Financial 
Regulation may submit legislation to the Second Regular Session of the 123rd Legislature 
to amend definitions in the Maine Revised Statutes, Title 9-A to conform with the 
uniform forms used by the system described in this Act and to modify the license renewal 
dates set forth in Title 9-A, section 2-302, subsection 1 and section 10-201. 
Sec. 34. Maine Revised Statutes headnote amended; revision clause. In 
the Maine Revised Statutes, Title 9-A, Article 9, in the Article headnote, the words 
"consumer credit transactions secured by first-lien mortgages" are amended to read 
"consumer credit transactions made to acquire real estate or secured by first-lien 
mortgages," and the Revisor of Statutes shall implement this revision when updating, 
publishing or republishing the statutes. 
Sec. 35. Application. That section of this Act that amends the Maine Revised 
Statutes, Title 9-A, section 8-206-A and those sections of this Act that enact Title 9-A, 
section 8-103, subsection I-A and Title 9-A, sections 8-206-C, 8-206-0 and 8-206-E 
apply to all residential mortgage Ipans and high-rate, high-fee mortgages originated or 
entered into on or after the effective date of this Act. 
Sec. 36. Revisor's review; cross-references. The Revisor of Statutes shall 
review the Maine Revised Statutes and include in the errors and inconsistencies bill 
submitted to the Second Regular Session of the 123rd Legislature pursuant to Title I, 
section 94 any sections necessary to correct and update any cross-references in the 
statutes to provisions of law repealed in this Act. 
Sec. 37. Legislative findings and purposes. 
1. Legislative findings. The Legislature finds that the proliferation of predatory 
home lending in this State threatens our economy and the viability of many communities, 
causes decreases in home ownership, makes many homeowners victims of unprincipled 
creditors and places responsible Maine lending institutions at a disadvantage. 
The Legislature further finds that, because competition and self-regulation have not 
eliminated the predatory terms for home-secured loans, the consumer protection 
provisions of this Act are necessary to protect Maine consumers, ensure fairness for 
responsible lenders and ensure responsible lending practices. 
2. Purposes. The purposes of this Act are to protect home ownership and individual 
home equity and prohibit predatory lending practices in this State by addressing 
fraudulent or abusive lending practices in the mortgage market. 
Predatory lending 
practices restricted by this Act include: 
A. Lending practices ,that do not consider a borrower's genuine ability to repay, 
thereby increasing the probability of foreclosure; 
B. Loan flipping, which is repeatedly refinancing loans for the purpose of charging 
high fees to the consumer; 
C. Engaging in fraud or deception to conceal the true nature of the loan obligation, or 
ancillary products, from an unsuspecting or unsophisticated borrower; 
D. Adding excessive fees and "packing," which is the practice of adding fees far 
exceeding those justified on economic grounds, including without limitation 
7 
financing of excessive points and fees, adding excessive prepayment penalties and 
financing of unnecessary products. 
Sec. 38. Effective date. That section of this Act that enacts the Maine Revised 
Statutes, Title 9-A, section 8-206-F takes effect 90 days after adjournment of the 123rd 
Legislature. The remainder of this Act takes effect January 1, 2008. 
SUMMARY 
This bill makes significant changes to current Maine law relating to residential 
mortgage loans and permissible high-rate, high-fee mortgages. The bill updates and 
amends current law to address predatory and abusive lending practices and to provide 
additional protections for Maine consumers. 
With regard to the making of residential mortgage loans, the bill includes the 
following provisions. 
I. It lowers the threshold for fees that can be charged in connection with certain 
residential home mortgage loans from 8% of the total loan amount to 5% or 6% based 
upon the total loan amount. 
2. It prohibits creditors from recommending or encouraging default on an existing 
loan in connection with the closing or planned closing on a refinancing. 
3. It prohibits creditors from "flipping" loans, which means the refinancing of a loan 
with no tangible net benefit to the borrower. 
4. It places restrictions on the imposition of late payment fees or penalties. 
5. It prohibits creditors from financing premiums or payments for credit insurance or 
debt cancellation agreements as part of the loan. 
6. It prohibits the inclusion of a provision in mortgage loan contracts that permits the 
creditor, in its sole discretion, to accelerate the indebtedness. 
7. It prohibits creditors from charging a fee to receive the amount of the payoff 
balance for a loan or to receive a release upon prepayment and also requires creditors to 
provide a payoff balance as required by law. 
8. It requires that creditors have a reasonable belief at the time of closing that the 
borrower has the financial ability to make the scheduled payments on the loan. 
With regard to the making of high-rate, high-fee mortgages, the bill includes the 
following provisions. 
1. 
It requires that, before making the loan, creditors receive certification that a 
borrower has received counseling on the advisability of such a loan from a 3rd-party, 
nonprofit organization approved by the federal housing agency, a state housing financing 
agency or the state regulatory agency with jurisdiction over the creditor. 
2. It prohibits creditors from financing any points or fees in connection with the loan. 
3. It prohibits the inclusion of prepayment penalties or fees. 
4. It prohibits scheduled payments more than twice as large as the average of earlier 
scheduled payments unless the payment schedule is adjusted according to the seasonal or 
irregular income of a borrower. 
5. It prohibits payment terms under which outstanding principal or accrued interest 
will increase at any time because the scheduled payments do not cover the full amount of 
interest due. 
6. It prohibits loan terms that increase the interest rate following a default. 
7. It prohibits terms under which more than 2 periodic payments are consolidated 
and paid in advance from loan proceeds provided to the borrower. 
8. It prohibits fees in connection with the modification of the loan or deferral of 
payments under the terms of the loan. 
9. It requires certain disclosures related to the purchase or assignment of high-rate, 
high-fee mortgages and the effect on claims and defenses available to the borrower. The 
bill makes purchasers or assignees of high-rate, high-fee mortgages subject to all 
affirmative claims and any defenses that a borrower can assert against the creditor that 
originated the loan, except claims that the creditor did not have a reasonable belief at 
closing that the borrower had the financial ability to make scheduled payments, unless 
certain requirements are satisfied by the purchaser or assignee of the mortgage. 
10. It prohibits creditors from paying a contractor for home improvements from the 
proceeds of a high-rate, high-fee mortgage unless the payment instrument is payable 
jointly to the borrower and the contractor or paid to an escrow account and the creditor 
has received proof that the home repairs are completed. 
""" 
. 
The bill requires that a consumer be specifically notified if a prepayment penalty 
provision is added to the consumer's mortgage note just before closing. 
The bill applies consumer protections to so-called "piggy-back" loans, which are 
second-lien mortgages used in conjunction with first-lien loans to purchase real estate. 
This bill prohibits lenders and loan brokers from facilitating submission of false credit 
0 
application information by a consumer. 
~ ;" 
The bill regulates the sale and issuance of rate locks by lenders and brokers. 
The bill prohibits inclusion of contradictory information about prepayment penalties 
in a consumer's closing package. 
The bill requires disclosure to a consumer of any yield spread premium to be paid to 
a loan broker by a lender. 
The bill prevents unfair or deceptive practices with respect to trigger leads derived 
from consumers' credit reports. 
The bill increases the accountability of lenders and loan brokers operating across 
state lines by permitting state mortgage regulators to participate in a uniform automated 
nationwide mortgage licensing system once the system is developed and implemented. 
The bill adds 2 positions, an investigator and a staff attorney, within the Office of 
Consumer Credit Regulation, to implement the provisions. 
The bill makes creditors who violate the provisions enacted in the bill subject to 
monetary penalties and enforcement by the Department of Professional and Financial 
Regulation, Bureau of Financial Institutions, the Office of Consumer Credit Regulation as 
well as the Attorney General for entities regulated by the Office of Consumer Credit 
Protection. The bill also gives borrowers the right to bring a private court action against 
creditors for violations and to recover statutory, actual and punitive damages. 
The bill applies to all residential mortgage loans and high-rate, high-fee mortgages 
made in connection with residential property located in this State. The bill takes effect 
January 1, 2008, except for the provision establishing 2 positions in the Office of 
Consumer Credit Regulation, which takes effect 90 days after adjournment.