An Act Relating to Mortgage Lending and Credit Availability
Maine Legislature, Session 123, LD 2125
Committee: Insurance and Financial Services
Sponsors: CUMMINGS, SULLIVAN, BRAUTIGAM, SAMSON
Amends: 9-A MRSA §8

Legislative Document 
No. 2125 
H.P.1505 
House of Representatives, January 3,2008 
An Act Relating to Mortgage Lending and Credit Availability 
(EMERGENCY) 
Approved for introduction by a majority of the Legislative Council pursuant to Joint Rule 
203. 
Reference to the Committee on Insurance and Financial Services suggested and ordered 
printed. 
Presented by Speaker CUMMINGS of Portland. 
Cosponsored by Senator SULLIVAN of York and 
1J1~ 
/J7. 77lt1C~ 
MILLICENT M. MacFARLAND 
Clerk 
Representatives: BRAUTIGAM of Falmouth, SAMSON of Auburn. 
Prmted on recycleJ paper 
Emergency preamble. Whereas, acts and resolves of the Legislature do not 
become effective until 90 days after adjournment unless enacted as emergencies; and 
Whereas, some provisions of Public Law 2007, chapter 273, which enacted 
restrictions on predatory lending practices, took effect January 1, 2008; and 
Whereas, there are a number of questions regarding the intent of that Act that need 
to be clarified as quickly as possible to avoid future problems in lending practices; and 
Whereas, in the judgment of the Legislature, these facts create an emergency within 
the meaning of the Constitution of Maine and require the following legislation as 
immediately necessary for the preservation of the public peace, health and safety; now, 
therefore, 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 9-A MRS A §1-202, sub-§8, ~A, as amended by PL 2007, c. 273, Pt. C, 
§ 1, is further amended to read: 
A. 
With respect to advances of additional funds on the loan or credit sale made 
more than 30 days after the initial advance, this exclusion applies only to advances 
made: 
(1) Pursuant to the terms of a construction financing agreement; 
(2) To protect the security or to perform the covenants of the consumer; 
(3) 
As negative amortization of principal under the terms of the financing 
agreement; 
(4) From funds withheld at consummation pending the resolution of matters that 
otherwise would tend to delay or prevent closing, including, without limitation, 
remedy of title defects or repairs to meet appraisal standards; or 
(5) Pursuant to the terms of a reverse mortgage transaction, as defined in section 
8-103, subsection I-A, paragraph X Y, if the transaction is made pursuant to a 
commitment to purchase issued by, or is in a form approved for purchase by, any 
state or federal agency, instrumentality or government-sponsored enterprise, 
including, without limitation, the Federal National Mortgage Association or the 
Federal Home Loan Mortgage Corporation; 
Sec. 2. 9-A MRSA §8-103, sub-§l-A, W-l is enacted to read: 
P-l. "Fully amortizing payment schedule" means a schedule based on the term of the 
loan. For a balloon mortgage that contains an option for an extended amortization 
period, the fully amortizing payment schedule may be based on the full term 
available to the borrower. 
Sec. 3. 9-A MRSA §8-103, sub-§l-A, W-2 is enacted to read: 
P-2. 
"Fully indexed rate" means the index rate prevailing at origination plus the 
margin that will apply after the expiration of an introductory interest rate. 
Sec. 4. 9-A MRSA §8-103, sub-§l-A, ff, as enacted by PL 2007, c. 273, Pt. A, 
§4 and affected by §§37 and 41, is amended to read: 
T. "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, except that "nontraditional mortgage" does not 
include a mortgage that does not allow a borrower to defer repayment of principal or 
interest. 
Sec. 5. 9-A MRSA §8-103, sub-§l-A, ~, as enacted by PL 2007, c. 273, Pt. A, 
§4 and affected by §37 and 41, is amended to read: 
U. "Points and fees" means: 
(I) All items included in the definition of "finance charge" in 12 Code of Federal 
I 3 
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 
I 
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 
through regularly scheduled periodic payments, may not be considered financed 
by the creditor; 
(5) The maximum prepayment fees and penalties that may 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 
I 
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, per diem or odd days interest paid at 
closing, 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 
I 
otherwise included under subparagraph (I); 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. 
Sec. 6. 9-A MRSA §8-103, sub-§l-A, ~, as amended by PL 2007, c. 273, Pt. 
A, §4 and affected by §§37 and 41, is amended to read: 
W. "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; 
(3) The loan is not a reverse mortgage transaction or a loan made primarily for 
business, agricultural or commercial purposes; ami 
(4) The loan is not a construction loan"; and 
(5) The loan is secured by the borrower's principal dwelling. 
Sec. 7. 9-A MRSA §8-103, sub-§l-A, ~B, as enacted by PL 2007, c. 273, Pt. 
A, §4 and affected by §§37 and 41, is further amended to read: 
BB. "Subprime mortgage loan" means a residential mortgage loan that is either a 
nontraditional mortgage as defined in paragraph S I or a rate spread home loan as 
defined in paragraph Y v. 
Sec. 8. 9-A MRSA §8-104, sub-§4, as amended by PL 2007, c. 273, Pt. C, §3, is 
further amended to read: 
4. 
The administrator may exempt, by rule, from all or part of this Title any class of 
transactions, other than transactions involving a mortgage described in section 8-103, 
subsection I-A, paragraph P Q, for which, in the determination of the administrator, 
coverage under all or part of this Title does not provide a meaningful benefit to 
consumers in the form of useful information or protection. In determining which classes 
of transactions to exempt in whole or in part under this subsection, the administrator shall 
consider the following factors: 
A. 
The amount of the loans and whether the disclosures, right of rescission and 
other provisions provide a benefit to the consumers who are parties to such 
transactions, as determined by the administrator; 
B. 
The extent to which the requirements of this Title complicate, hinder or make 
more expensive the credit process for the class of transactions; 
C. 
The status of the borrowers, including: 
(1) Any related financial arrangements of the borrowers, as determined by the 
administrator; 
(2) The financial sophistication of the borrowers relative to the type of 
transaction; and 
(3) The importance to the borrowers of the credit, related supporting property 
and coverage under this Title, as determined by the administrator; 
D. 
Whether a loan is secured by the principal residence of the consumer; and 
E. 
Whether the goal of consumer protection would be undermined by such an 
exemption. 
Sec. 9. 9-A MRSA §8-106-A, sub-§I, as amended by PL 2007, c. 273, Pt. C, §5, 
is further amended to read: 
1. 
Beginning 2 years after the effective date of the regulations adopted under the 
federal Riegle Community Development and Regulatory Improvement Act of 1994, 
Public Law No. 103-325, Section 155, 108 Stat. 2160, 2197 (1994) and no more often 
than biennially after the first increase or decrease in the number of percentage points 
under this section, the administrator may by rule increase or decrease the number of 
percentage points specified in section 8-103, subsection I-A, paragraph P FF if the 
administrator determines that the increase or decrease is: 
A. 
Consistent with the consumer protection against abusive lending provided by 
amendments made by the federal Riegle Community Development and Regulatory 
Improvement Act of 1994, Title I, subtitle B, Public Law No. 103-325, 108 Stat. 
2160,2190(1994); and 
B. 
Warranted by the need for credit. 
Sec. 10. 9-A MRSA §8-106-A, next to the last ~, as amended by PL 2007, c. 
273, Pt. C, §5, is further amended to read: 
The dollar amount specified in section 8-103, subsection I-A, paragraph P FF must 
be adjusted annually on January 1 st by the annual percentage change in the Consumer 
Price Index, as reported on June 1 st of the year preceding the adjustment. 
Sec. 11. 9-A MRSA §8-206-D, sub-§I, ~, as enacted by PL 2007, c. 273, Pt. 
A, §20 and affected by §§37 and 41, is amended to read: 
B. A creditor may not knowingly or intentionally engage in the act or practice of 
flipping a residential mortgage loan when making a subprime mortgage loan. The 
administrator shall adopt rules defining with reasonable specificity the requirements 
for compliance with this paragraph. Rules adopted pursuant to this paragraph are 
routine technical rules pursuant to Title 5, chapter 375, subchapter 2-A. 
Sec. 12. 9-A MRSA §8-206-D, sub-§I, ~G, as enacted by PL 2007, c. 273, Pt. 
A, §20 and affected by §§37 and 41, is repealed and the following enacted in its place: 
G. A creditor may not extend a subprime mortgage loan to a borrower unless a 
reasonable creditor would believe at the time the loan is made that the borrower will 
be able to make the scheduled payments associated with the loan. 
(1) The determination of a borrower's reasonable ability to repay a subprime 
mortgage loan must be documented or otherwise evidenced in writing and must 
include, without limitation, a consideration of the following: 
Ca) The borrower's income; 
(b) The borrower's credit history; 
(c) 
The borrower's current obligations, including other secured and 
unsecured debts; 
(d) The borrower's employment status; 
(e) 
The debt-to-income ratio of the borrower's monthly gross income, 
including the borrower's total monthly housing-related payments including 
all principal, interest, taxes and insurance; and 
CD 
The borrower's other available financial resources, excluding the 
borrower's equity in the principal dwelling that secures or would secure the 
subprime mortgage loan. 
(2) The evaluation of the borrower's reasonable ability to repay the subprime 
mortgage loan must include: 
Ca) 
The monthly payment amounts based on, at a minimum, the fully 
indexed rate, assuming a fully amortizing payment schedule; 
(b) The verification of income by: 
(i) Review of a borrower's tax returns, payroll receipts or records of 
accounts from a borrower's financial institution, or reasonable 3rd-party 
verification of those returns, receipts or records; 
(ii) 
Review of reasonable alternatives to the borrower's tax returns, 
payroll receipts or records of accounts from a borrower's financial 
institution, including, but not limited to, statements from investment 
advisors, broker-dealers and others in a fiduciary relationship with the 
borrower as long as the reasonable alternatives reflect the borrower's 
actual income and not estimated, projected, anticipated or a range of 
earnings for a borrower's type or class of employment; and 
ec) For products that permit negative amortization, a repayment analysis 
based upon the initial loan amount plus any balance increase that may accrue 
from the negative amortization provision. 
(3) The administrator may 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. 
Sec. 13. 9-A MRSA §8-208, sub-§1, as corrected by RR 1995, c. 2, § 18, is 
amended to read: 
1. 
Except as otherwise provided in this section, and except for transactions subject 
to section 8-206-E, any creditor who fails to comply with any requirement imposed under 
this Article, including any requirement under section 8-204, with respect to any person is 
liable to that person in an amount equal to the sum of: 
A. 
Any actual damage sustained by such person as a result of the failure; 
B. In an individual action: 
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(i) Twice the amount of any finance charge in connection with the transaction; or 
(ii) In the case of a consumer lease, 25% of the total amount of monthly 
payments under the lease. 
Liability under this paragraph may not be less than $100 nor greater than $1,000; 
except that in the case of a credit transaction not under an open-end credit plan that is 
secured by real property or a dwelling, liability under this paragraph may not be less 
than $200 nor greater than $2,000; 
C. 
In the case of any successful action to enforce the foregoing liability or in any 
action in which a person is determined to have a right of recision under section 8-204, 
the costs of the action, together with a reasonable attorney's fee as determined by the 
court; and 
D. 
In the case of a class action, such amount as the court may allow, except that as 
to each member of the class no minimum recovery is applicable, and the total 
recovery for any class action or series of class actions arising out of the same failure 
to comply by the same creditor shall not be more than the lesser of $500,000 or 1 % of 
the net worth of the creditor. In determining the amount of award in any class action, 
the court shall consider, among other relevant factors, the amount of any actual 
damages awarded, the frequency and persistence of failures of compliance by the 
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creditor, the resources of the creditor, the number of persons adversely affected and 
the extent to which the creditor's failure of compliance was intentional. 
Sec. 14. 9-A MRSA §8-209, sub-§4, as amended by PL 2007, c. 273, Pt. C, §§8 
and 9, is repealed. 
Sec. 15. 9-A MRSA §8-209, sub-§4-A is enacted to read: 
4-A. 
Any person who purchases or is otherwise assigned a high-rate, high-fee 
mortgage is subject to all claims and defenses with respect to that mortgage that the 
consumer may assert against the creditor of the mortgage to the extent set forth in section 
8-206-C, subsection 2. 
Sec. 16. 9-A MRSA §8-209, sub-§5, ~A, as enacted by PL 1995, c. 614, Pt. A, 
§ 14, is amended to read: 
A. 
Except as otherwise provided in this Title, any civil action against a creditor for 
a violation of this Title and any proceeding under section 8-108 against a creditor, 
with respect to a consumer credit transaction secured by real property, may be 
maintained against any assignee of that creditor only if: 
(i) The violation for which the action or proceeding is brought is apparent on the 
face of the disclosure statement provided in connection with the transaction 
pursuant to this Title section 8-206, subsection 1; and 
(ii) The assignment to the assignee was voluntary. 
Sec. 17. 9-A MRSA §8-209, sub-§5, ~, as enacted by PL 1995, c. 614, Pt. A, 
§ 14, is amended to read: 
B. 
For the purposes of this subsection, a violation is apparent on the face of the 
disclosure statement if: 
(i) The disclosure can be determined to be incomplete or inaccurate by a 
comparison among the disclosure statement provided pursuant to section 8-206, 
subsection 1, any itemization of the amount financed, the note or any other 
disclosure of disbursement; or 
(ii) The disclosure statement provided pursuant to section 8-206, subsection 
does not use the terms or format required under this Title. 
Sec. 18. Retroactivity. This Act applies retroactively to January 1, 2008. 
Emergency clause. 
In view of the emergency cited in the preamble, this 
legislation takes effect when approved. 
SUMMARY 
Public Law 2007, chapter 273 enacted into law, effective January 1,2008, changes to 
the truth in lending laws of the Maine Consumer Credit Code to protect homeowners 
from predatory lending practices. 
This bill clarifies that law by: 
1. 
Amending definitions in the current law such as "nontraditional mortgage," 
"points and fees" and "residential mortgage loan" and adding other definitions to aid in 
the implementation and enforcement of the law; 
2. Specifying that a subprime mortgage loan is a type of residential mortgage loan; 
3. Specifying what reasonable alternatives may be used by a creditor to verifY a 
borrower's income, requiring the determination to be documented and removing language 
that allowed the creditor to consider and disregard statements submitted by or on behalf 
of the borrower regarding the borrower's income; 
4. Providing an exemption from the general civil liability law for those residential 
mortgage loans that are subject to the penalties imposed specifically for violations of the 
law regarding residential mortgage loans; 
5. 
Specifying that the restriction on flipping a loan only applies to a residential 
mortgage loan when making a subprime mortgage loan; and 
6. Correcting several cross-references.