Within the request Public Comment, OCCR identified the growth, or at least the perception of a development, that loan providers had been increasing costs and points to an even just underneath the threshold that could qualify a loan as an even more heavily controlled high-rate, high-fee “Section 32” loan. We asked commenters to inform us whether this perception ended up being a real possibility, if what exactly might be done about this.
Our conclusion is the fact that fee-padding is happening in Maine, and also as one good way to deal with the training we have been suggesting (see proposed bill connected as Appendix no. 1, area 2) that the limit of “points and fees” that produces part 32 therapy, be lowered from 8% of that loan quantity, to 5%.
We base this proposal from the presumption that the availability of loans in this range (between 5% points and costs, and 8% points and costs) is, in financial terms, “elastic, ” such that developing a brand new, lower degree will likely not end up in an unwillingness regarding the element of loan providers to really make the majority that is vast of loans that currently fall when you look at the range between 5% points-and-fees, and 8%. To phrase it differently, we think that loan providers making loans with points and charges totaling 6%, 7% and even 8%, will reduce charges on a lot of those loans to 5%.
We additionally get this proposition with all the knowledge that other nearby states (such as for instance Massachusetts and Connecticut) curently have founded the low 5% limit within their state statutes. This modification normally in line with proposals advanced level by Coastal Enterprises, Inc. (CEI), and also by AARP in its model home loan legislation work.
We believe that this proposition, along with stricter enforcement associated with the requirement that the GFE accurately reveal all charges within 3 times of application, should reduce any “padding” of charges. (See more conversation of the proposal in Issue #16’s opinions, below, on whether loan broker payment or home loan finance costs ought to be “capped”. )