New Mexico Administrative Code › Title 12 - TRADE, COMMERCE AND BANKING › Chapter 15 - FINANCIAL INSTITUTIONS - GENERAL › Part 6 - HOME LOAN PROTECTION ACT - REASONABLE DUE DILIGENCE STANDARD FOR DETERMINING HIGH-COST HOME LOANS › Section 12.15.6.8 - REASONABLE DUE DILIGENCE

Current through Register Vol. 35, No. 13, July 16, 2024
A.
				Section
				58-21A-11
				of the act provides that a person who purchases or is otherwise assigned a
				high-cost home loan is not subject to an action for certain claims and defenses
				if the person can demonstrate by a preponderance of the evidence that a
				reasonable person exercising reasonable due diligence could not determine that
				the mortgage in question was a high-cost home loan. Due diligence means that
				degree of review that reasonably may be expected from a purchaser or assignee
				given the circumstances surrounding the transaction or the conditions existing
				at the time the review is exercised, including, consideration of the
				purchaser's or assignee's involvement with, or the proximity in time to the
				loan' origination.
B. In each case
				what constitutes reasonable due diligence by a person who purchases or is
				otherwise assigned a high-cost home loan is dependent on the totality of the
				facts and circumstances surrounding that person's loan review, policies and
				practices. The purpose of this rule is to make clear that in the vast majority
				of cases, reasonable due diligence does not require a loan-by-loan
				individualized review. Because the vast majority of home loans purchased or
				assigned in New Mexico are transacted in secondary markets through large loan
				pools or mortgage backed securities, the due diligence conducted need only be
				reasonable, not perfect.
C.
				Purchasers and assignees should have in effect and utilize reasonable
				compliance policies and conduct quality control review of appropriate loan
				documentation, whether by sampling methods or otherwise, to identify and avoid
				the purchase or acceptance of high-cost home loans.
(1) If none of the loans reviewed is a
				high-cost home loan, and if all of the other requirements of Subsection A of
				Section 11 are met, then there shall be a rebuttable presumption that a
				purchaser or assignee has exercised reasonable due diligence.
(2) When a reasonable review discloses one or
				more high-cost home loans, then an upgraded compliance review shall be
				required. The level of an upgraded compliance review may depend upon a number
				of factors, such as prior experience with the seller or assignor, the number of
				high-cost home loans identified during the initial review and the procedures
				used to identify and exclude high-cost home loans from submission for purchase
				or assignment. For example, where, after initial review, one or more high-cost
				home loans are uncovered in a large loan pool, there should be a more extensive
				review of the loan pool to evaluate:
(1) a
				reasonable number of the remaining loans,
(2) the reliability of any representations
				and warranties in place that there are no high-cost home loans in the pool; and
(3) the extent to which there are
				other high cost home loans in the pool. The level of this review depends upon a
				number of factors, including the overall size of the pool, the reliability of
				the loan source, the number of high-cost home loans identified during the
				initial due diligence process, how extensive that initial review process was,
				and the procedures in place by originators to identify high-cost home loans and
				exclude them from the loan pool.