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HOPE NOW mortgage servicers provided nearly 503,000 loan workouts for homeowners in Q1 of 2008

Apr 27, 2008

Kentucky Governor signs new mortgage lending lawMortgagePress.comlicensing exemptions, non-profit corporations, HUD, FHA On April 24, the Kentucky Gov. Steve Beshear signed H.B. 552, a comprehensive "emergency" bill imposing new requirements on mortgage lenders and brokers. The bill took effect immediately upon signing. The bill narrows licensing exemptions by: (i) eliminating the five mortgage loan de minimis exemption; (ii) requiring non-profit corporations that engage in mortgage lending to submit exemption claims annually; and (iii) mandating that to qualify for the U.S. Department of Housing and Urban Development (HUD)-approved lender exemption, lenders must, in addition to have funded at least 12 Federal Housing Administration (FHA) loans in Kentucky in the previous year, also have held a mortgage loan company or mortgage loan broker license or registration or HUD approval for the previous five consecutive years. The bill also: (i) requires registration of mortgage loan originators and mortgage loan processors; (ii) requires any person applying for a license, registration, or claim of exemption to pass a written examination prior to issuance of a license, registration, or claim of exemption (to be effective January 1, 2010); (iii) requires Mortgage Brokers to exercise "good faith and fair dealing" and act in the "best interest" of the borrower; (iv) prohibits origination of mortgage loans if "total net income" received (origination fees, discount points, administrative fees and yield spread premiums, but excluding interest and fees paid to unaffiliated third parties) by the mortgage lender or broker, and its affiliates, exceeds the greater of $2,000 or four percent of the total loan amount; (v) prohibits any person from "improperly influencing" real estate appraisals; (vi) prohibits prepayment penalties after the third anniversary of the mortgage or after 60 days prior to the date of the first interest rate reset, whichever is less; (vii) creates new actions for which the executive director of the Kentucky Office of Financial Institutions may suspend or revoke a license or take other action against an applicant, licensee, person, or registrant; (viii) lowers the points fees threshold for high-cost home loans under the Kentucky Fair Lending Act to the greater of six percent of the total loan amount or $3,000; and (ix) requires mortgage lenders to verify the borrower's ability to repay at the maximum margin before making a high-cost home loan, but a safe harbor exists if the loan is approved by the Fannie Mae automated underwriting system. Lastly, the bill creates the Kentucky Residential Mortgage Fraud Act, which bans any fraud, failure to disburse funds and material misstatements made to borrowers or regulators. For a copy of this bill, please visit For more information, visit
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