§8-506. Enhanced restrictions on certain creditors






In addition to the compliance requirements of section 8-504, subsection 1, unless
otherwise required by rules adopted pursuant to section 8-504, subsection 2, a creditor
shall comply with the following enhanced restrictions. [2011, c. 427, Pt. A, §15 (NEW).]








1. Definitions.  
The following definitions apply to the enhanced restrictions set forth in this section.






A. "Administrator" has the same meaning as set forth in section 1-301. [2011, c. 427, Pt. A, §15 (NEW).]










B. "Bona fide discount points" means an amount knowingly paid by a borrower for the express
purpose of reducing, and that 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. [2011, c. 427, Pt. A, §15 (NEW).]










C. "Borrower" means any natural person obligated to repay a loan, including a coborrower,
cosigner or guarantor. [2011, c. 427, Pt. A, §15 (NEW).]










D. "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 1026.32(a)(1)(i). [2013, c. 464, §6 (AMD).]










E. "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. [2011, c. 427, Pt. A, §15 (NEW).]










F. "Creditor" has the same meaning as set forth in section 1-301, subsection 17. For
purposes of this section, "creditor" also includes an entity defined as a lender as
set forth in 12 Code of Federal Regulations, Section 1024.2, including a mortgage broker. [2013, c. 464, §7 (AMD).]










G. "Excluded points and fees" means, in connection with a residential mortgage loan,
all 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. [2011, c. 427, Pt. A, §15 (NEW).]










H. "High-cost mortgage loan" means a residential mortgage loan in which the terms of
the loan meet or exceed one or more of the following thresholds:



(1) Rate threshold, which, for a residential mortgage loan, is the point at which
the annual percentage rate equals or exceeds the rate set forth in 12 Code of Federal
Regulations, Section 1026.32(a)(1)(i) 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 1026.2; and




(2) The total points and fees threshold, which is:


(a) 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. [2013, c. 464, §8 (AMD).]













I. "Higher-priced mortgage loan" has the same meaning as set forth in the Federal Truth
in Lending Act and its implementing regulation, Regulation Z, 12 Code of Federal Regulations,
Section 1026.35(a). "Higher-priced mortgage loan" also includes a residential mortgage loan that is
a nontraditional mortgage as 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 "higher-priced
mortgage loan" does not include a mortgage that does not allow a borrower to defer
repayment of principal or interest. [2013, c. 464, §8 (AMD).]










J. "Mortgage broker" has the same meaning as set forth in 12 Code of Federal Regulations, Section 1024.2, except as otherwise provided in this Article. [2013, c. 464, §8 (AMD).]










K. "Points and fees" has the same meaning as set forth in 12 Code of Federal Regulations,
Section 1026.32(b)(1). In addition, "points and fees" includes:



(1) The maximum prepayment fees and penalties that may be charged or collected under
the terms of the loan documents;




(2) All prepayment fees and 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; and




(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.



For open-end loans, 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. [2013, c. 464, §8 (AMD).]










L. "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 12 Code of Federal Regulations, Section 1024.2;



(3) The loan is not a reverse mortgage transaction or a loan made primarily for business,
agricultural or commercial purposes;




(4) The loan is not a construction loan; and



(5) The loan is secured by the borrower's principal dwelling. [2013, c. 464, §8 (AMD).]











M. "Servicing" has the same meaning as set forth in 12 Code of Federal Regulations, Section 1024.2 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. [2013, c. 464, §8 (AMD).]










N. "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. [2011, c. 427, Pt. A, §15 (NEW).]







[
2013, c. 464, §§6-8 (AMD)
.]








2. High-cost mortgage loans; restrictions.  
A high-cost mortgage loan is subject to the provisions applying to certain closed-end
home mortgages covered by Regulation Z, 12 Code of Federal Regulations, Section 1026.32 and the following restrictions.





A. In connection with a high-cost mortgage loan, a creditor may not directly or indirectly
finance any points or fees. [2011, c. 427, Pt. A, §15 (NEW).]










B. In addition to the limitation on balloon payments found in Regulation Z, 12 Code of
Federal Regulations, Section 1026.32, a high-cost mortgage loan 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 income of
the borrower. [2013, c. 464, §9 (AMD).]










C. A creditor may not make a high-cost mortgage loan 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
or the Department of Professional and Financial Regulation, Bureau of Consumer Credit
Protection that the borrower has received counseling on the advisability of the loan
transaction. [2011, c. 427, Pt. A, §15 (NEW).]










D. A prepayment fee or penalty may not be included in the loan documents or charged under
the terms of a high-cost mortgage loan. [2011, c. 427, Pt. A, §15 (NEW).]







[
2013, c. 464, §9 (AMD)
.]








3. High-cost mortgage loans; assignee liability.  
The following provisions apply to a claim made by a borrower against a purchaser or
assignee of a high-cost mortgage loan.





A. Any person who purchases or is otherwise assigned a high-cost mortgage loan is subject
to all affirmative claims and any defenses with respect to the loan that the borrower
may 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 the purchaser or assignee's purchase or acceptance
of assignment of any high-cost mortgage loan;




(2) Requires by contract that a seller or assignor of residential high-cost mortgage
loans to the purchaser or assignee represent and warrant to the purchaser or assignee
that neither the seller or assignor will sell or assign any high-cost mortgage loans
to the purchaser or assignee, nor that 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-cost
mortgage loan. For purposes of this subparagraph, reasonable due diligence must provide
for sampling and may not require loan-by-loan review. [2011, c. 427, Pt. A, §15 (NEW).]











B. Notwithstanding paragraph A, liability pursuant to this subsection may not accrue
to a purchaser or assignee of a high-cost mortgage loan as a result of an alleged
violation by a creditor of subsection 5. [2011, c. 427, Pt. A, §15 (NEW).]







[
2011, c. 427, Pt. A, §15 (NEW)
.]








4. Ability to repay.  
A creditor may not extend a high-cost mortgage loan or a higher-priced mortgage loan
to a consumer based on the value of the consumer's collateral without regard to the
consumer's repayment ability as of consummation, including the consumer's current
and reasonably expected income, employment, assets other than the collateral, credit
history, debt-to-income ratio, current obligations and mortgage-related obligations.





A. For purposes of this subsection, mortgage-related obligations are expected property
taxes, premiums for mortgage-related insurance required by the creditor, such as insurance
against loss of or damage to property or against liability arising out of the ownership
or use of the property or insurance protecting the creditor against the consumer's
default or other credit loss, and similar expenses. [2011, c. 427, Pt. A, §15 (NEW).]










B. Under this subsection, a creditor must verify the consumer's repayment ability as
follows.



(1) A creditor must verify amounts of income or assets that it relies on to determine
repayment ability, including expected income or assets, by the consumer's federal
Internal Revenue Service Form W-2, tax returns, payroll receipts, financial institution
records or other 3rd-party documents that provide reasonably reliable evidence of
the consumer's income or assets. For the purposes of this subparagraph, "reasonably
reliable evidence of the consumer's income or assets" includes, but is not limited
to, statements from investment advisors, broker-dealers and others in a fiduciary
relationship with the consumer as long as the statements reflect the consumer's actual
income and not estimated, projected or anticipated income or a range of earnings for
a consumer's type or class of employment.




(2) A creditor must verify the consumer's current obligations. [2011, c. 427, Pt. A, §15 (NEW).]











C. A creditor is presumed to have complied with this subsection with respect to a transaction
if the creditor:



(1) Verifies the consumer's repayment ability as provided in paragraph B;



(2) Determines the consumer's repayment ability using the largest payment of principal
and interest scheduled in the first 7 years following consummation and taking into
account current obligations and mortgage-related obligations; and




(3) Assesses the consumer's repayment ability taking into account at least one of
the following:



(a) The ratio of total debt obligations to income; and




(b) The income the consumer will have after paying debt obligations. [2011, c. 427, Pt. A, §15 (NEW).]













D. Notwithstanding paragraph C, no presumption of compliance is available for a transaction
for which:



(1) The regular periodic payments for the first 7 years would cause the principal
balance to increase; or




(2) The term of the loan is less than 7 years and the regular periodic payments when
aggregated do not fully amortize the outstanding principal balance. [2011, c. 427, Pt. A, §15 (NEW).]











E. This subsection does not apply to a temporary or so-called "bridge" loan with a term
of 12 months or less, such as a loan to purchase a new dwelling when the consumer
plans to sell a current dwelling within 12 months. [2011, c. 427, Pt. A, §15 (NEW).]







[
2011, c. 427, Pt. A, §15 (NEW)
.]








5. Flipping.  
A creditor or a mortgage broker may not knowingly or intentionally engage in the act
or practice of flipping a residential mortgage loan when making a high-cost mortgage
loan or higher-priced mortgage loan. The administrator may adopt rules defining with
reasonable specificity the requirements for compliance with this subsection. Rules
adopted pursuant to this subsection are routine technical rules pursuant to Title
5, chapter 375, subchapter 2-A. For the purposes of this subsection, "flipping a
residential mortgage loan" means the making of a residential mortgage loan to a borrower
that refinances an existing residential mortgage loan when the new loan does not have
reasonable, tangible net benefit to the borrower considering all the circumstances,
including, but not limited to, the terms of both the new and refinanced loans, the
cost of the new loan and the borrower's circumstances.


[
2011, c. 427, Pt. A, §15 (NEW)
.]








6. Special liability.  
This subsection applies to any violation of this section in connection with the origination,
brokering or servicing of a residential mortgage loan. This subsection does not apply
to a purchaser or assignee of a residential mortgage loan except as permitted in subsection
3.





A. Any person who has been found in violation of this section with regard to residential
mortgage loans may be liable to the borrower for the following:



(1) Actual damages, including consequential and incidental damages. The borrower
may not be required to demonstrate reliance in order to receive actual damages;




(2) Punitive damages for violations of subsections 2 and 5, when the violation was
malicious or reckless;




(3) Costs, including reasonable attorney's fees; and



(4) Statutory damages as follows:


(a) For violations described in subsection 2, statutory damages equal to 2 times
the finance charge paid under the loan and forfeiture of the remaining interest under
the loan; and





(b) For any other violations of this section, statutory damages in the amount of
$5,000 per violation. [2011, c. 427, Pt. A, §15 (NEW).]













B. A borrower may be granted injunctive, declaratory and other equitable relief that
the court determines appropriate in an action to enforce compliance with this section. [2011, c. 427, Pt. A, §15 (NEW).]










C. 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 paragraph may
not be construed to limit recoupment rights available to the borrower under any other
law. [2011, c. 427, Pt. A, §15 (NEW).]










D. The remedies provided in this subsection are not intended to be the exclusive remedies
available to a borrower, nor must the borrower exhaust any administrative remedies
provided under this subsection or any other applicable law before proceeding under
this subsection. [2011, c. 427, Pt. A, §15 (NEW).]










E. Any person who knowingly violates a provision of this section is guilty of a Class
E crime. [2011, c. 427, Pt. A, §15 (NEW).]










F. A creditor in a residential mortgage loan who, when acting in good faith, fails to
comply with any provision of this section related to residential mortgage loans is
deemed not to have violated this section if the creditor establishes that either:



(1) 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




(2) 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, the borrower is notified 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. [2011, c. 427, Pt. A, §15 (NEW).]











G. The remedies provided in this subsection are cumulative. [2011, c. 427, Pt. A, §15 (NEW).]










H. 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. [2011, c. 427, Pt. A, §15 (NEW).]










I. Without regard to whether a borrower is acting individually or on behalf of 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. [2011, c. 427, Pt. A, §15 (NEW).]










J. It is a violation of this section for any person to attempt in bad faith to avoid
the application of this section 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 this section when the loan would have been a
high-cost mortgage loan 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. [2011, c. 427, Pt. A, §15 (NEW).]







[
2011, c. 427, Pt. A, §15 (NEW)
.]








7. Exemption for supervised financial organizations and the Maine State Housing Authority.
 
This section does not apply to any supervised financial organization as defined in
section 1-301, subsection 38-A or to the Maine State Housing Authority.


[
2011, c. 427, Pt. A, §15 (NEW)
.]





SECTION HISTORY

2011, c. 427, Pt. A, §15 (NEW).
2013, c. 464, §§6-9 (AMD).