InfoBytes Blog

State Law Update: Washington Amends Consumer Loan Act and Mortgage Broker Practices Act Regulations

Recently, the Washington State Department of Financial Institutions finalized two rulemakings to amend existing regulations and adopt new regulations under the Consumer Loan Act and the Mortgage Broker Practices Act. The final rules make numerous changes impacting mortgage and other consumer lenders, including with regard to licensing and reporting. For example, the amendments to the Consumer Loan Act regulations (i) add requirements and prohibitions relating to force-placed insurance, (ii) clarify licensing exemptions for consumer lenders and mortgage originators, and (iii) add new provisions addressing the activities of servicers and third party residential mortgage loan modification services. The amendments under the Mortgage Broker Practices Act include some of the changes made under the Consumer Loan Act and, among other things (i) revise the definition of mortgage broker, (ii) require approval from the Department for an individual to work as a designated broker for more than one licensee, and (iii) clarify application of loan originator requirements to inactive licensees. All of the changes take effect on November 1, 2012.

Mortgage Licensing Mortgage Servicing Consumer Lending

State Law Update: Illinois, Michigan, Oregon Enhance Borrower Protections

Illinois Enhances Borrower Protections. On July 25, Illinois enacted SB 1692, which enhances consumer protections related to mortgages and tax refund anticipation loans. The bill amends the state’s High Risk Home Loan Act to (i) update the definition of “high risk home loan” to be consistent with the federal standard, and prohibit prepayment penalties, balloon payments and modification fees for such loans, (ii) revise the definition of “points and fees” and clarify the prohibition on the financing of such fees in connection with high risk loans, and (iii) limit late payment fees to 4% of the amount past due. The bill also amends the state’s Tax Refund Anticipation Loan Disclosure Act to (i) revise certain definitions, (ii) limit the fees that can be charged in connection with tax refund loans and establish other prohibited activities, and (iii) amend the disclosures required for creditors making such loans. These and other changes in the bill are effective January 1, 2013.

Michigan Updates Guidance on Return Check Fees on Installment Sales Contracts. On July 19, the Michigan Office of Financial and Insurance Regulation (OFIR) published a letter to installment seller/sales finance licensees clarifying the regulator’s position on the use of return check fees in installment sales contracts. Previously, the OFIR had taken the position that inclusion of an NSF fee in a vehicle installment sales contract was not permitted because such a fee was not expressly permitted under the state’s Motor Vehicle Sales Finance Act (MVSFA).  However, in its July 19 letter the OFIR clarified that the OFIR considers it a violation of state law for a licensee under the MVSFA to charge a fee for returned checks if the motor vehicle installment sales contract does not specifically provide for the assessment of such a fee. The OFIR states that the MVSFA requires a contract contain all of the terms of the agreement between a buyer and a seller, including any default charges. Although the state Credit Reform Act permits regulated lenders to charge return check fees up to a maximum of $25, because a returned check constitutes a default under the contract, a return check fee is considered a default charge and can only be assessed if disclosed in the agreement.

Oregon Adopts Rules to Implement Foreclosure Avoidance Program. Recently, the Oregon Department of Justice adopted temporary rules to implement the Foreclosure Avoidance Mediation Program established earlier this year. The rules establish (i) the accepted methods of notice required to be provided to the state Attorney General, (ii) the minimum training and qualifications for mediators, (iii) the fees and timing of fee payments, and (iv) the form of mediation notice for use in seeking nonjudicial foreclosure. The rules took effect July 11, 2012, and expire January 6, 2013.

Foreclosure Mortgage Servicing Auto Finance Consumer Lending