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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 www.buckleykolar.com/documents/KYHB552.pdf.
For more information, visit www.lrc.ky.gov.