Maine Bureau of Consumer Credit Protection Interpretation Causes High-Cost Lending Risk for Mortgage Lenders.

?? ?? ?? The updated definition of "Conventional Mortgage Rate" in Maine has created significant High-Cost loan risk due to conflicting TILA-RESPA Integrated Disclosures (TRID) timing requirements for mortgage lenders.

On September 3, 2024, the STATE OF MAINE DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION, BUREAU OF CONSUMER CREDIT PROTECTION issued an INTERPRETIVE LETTER RE: “CONVENTIONAL MORTGAGE RATE DEFINITION IN 9-A M.R.S. § 8-506(1)(D). With this interpretive letter, Maine has put mortgage lenders in a very precarious position when it comes to complying with Maine High-Cost Mortgage Law under the Maine Consumer Credit Code (Title 9-A M.R.S., Article 8-A).

The Maine Consumer Credit Code (Title 9-A M.R.S.) references the term “conventional mortgage rate” (CMR) within the Maine Truth in Lending Act (9-A M.R.S. Article 8-A). This term is critical for determining whether specific discount points qualify as “bona fide discount points” and can therefore be excluded from a mortgage loan’s points and fees calculation. It is also used to define a "conventional prepayment penalty." According to 9-A M.R.S. § 8-506(1)(D), the "conventional mortgage rate" is defined as:

“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 (Fed CMR), as of the applicable time set forth in 12 Code of Federal Regulations, Section 1026.32(a)(1)(i).”

The Maine Bureau of Consumer Credit Protection (BCCP) will use the Freddie Mac PMMS rate as a substitute for the discontinued Fed CMR in interpretation and enforcement of 9-A M.R.S. Article 8-A. ??Of note: the appropriate date for determination of “the most recently published annual yield on conventional mortgages” will be the weekly rate published by Freddie Mac for the week immediately prior to closing of the loan.??

?? Impact on High-Cost Threshold Testing

Bona fide Discount Points and Conventional Prepayment determinations, as relevant elements to ME High-Cost threshold testing, are now determined by the PMMS . The updated reliance on the PMMS ensures lenders are using the correct benchmark to determine if and what portion of discount points are excludable as bona-fide, and impact the definition of a conventional prepayment penalty impacting allowable High-Cost thresholds. BUT the relevant PMMS for these determinations are based upon the most recently published annual yield on conventional mortgages” will be the weekly rate published by Freddie Mac for the week immediately prior to closing of the loan. Misalignment with this guidance could inadvertently push loans into high-cost status

??? ??TRID Timing Challenges

TRID dictates that lenders must issue and borrowers must be in receipt of a Closing Disclosure (CD) three business days prior to loan consummation. If the consummation date falls in the calendar week following the CD issuance date (whereby presuming that the determinative High-Cost calculations are conducted concurrently or prior to drawing the CD), the PMMS rate used for Maine High-Cost threshold calculation based on the final CD data may not align with the applicable rate required for compliance, which is based on the weekly rate published by FHLMC the week immediately prior to closing (loan consummation, aka signing date). This misalignment could lead to a loan being a High-Cost loan if the PMMS materially adjusts from the prior week.

?????? What Lenders Should Do

Evaluate TRID Workflows: Review processes to ensure that Freddie Mac’s PMMS rate is correctly applied to the CD and compliance testing, especially when closing dates span different calendar weeks.

Coordinate Closings Proactively: Schedule consummation dates to align with PMMS updates to minimize redisclosure risks and ensure compliance with BCCP requirements. This would lead to a very small window of available closing dates (aka signing dates).

Stay Informed: Monitor Freddie Mac PMMS updates weekly and adjust internal systems and practices accordingly.

?????? The potential for inadvertent Maine High-Cost Home Loans is VERY high if this process is not managed appropriately ??????

Have questions about navigating these timing challenges? Let’s connect.