COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION



FISCAL NOTE



L.R. NO.: 3160-01

BILL NO.: SB 786

SUBJECT: Mortgages

TYPE: Original

DATE: February 17, 2000




FISCAL SUMMARY



ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
None $0 $0 $0
Total Estimated

Net Effect on All

State Funds

$0 $0 $0



ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
None $0 $0 $0
Total Estimated

Net Effect on All

Federal Funds

$0 $0 $0



ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
Local Government $0 $0 $0

Numbers within parentheses: ( ) indicate costs or losses.

This fiscal note contains 3 pages.

FISCAL ANALYSIS



ASSUMPTION



Officials of the Department of Economic Development - Divisions of Finance and Credit Unions and the Department of Insurance assume the proposal would have no fiscal impact on their agencies.





FISCAL IMPACT - State Government
FY 2001 FY 2002 FY 2003
$0 $0 $0




FISCAL IMPACT - Local Government
FY 2001 FY 2002 FY 2003
$0 $0 $0


FISCAL IMPACT - Small Business



Lenders that are small businesses could be fiscally impacted by this proposal.



DESCRIPTION



The proposal places certain restrictions and limitations on lenders with regards to high-cost home loans. It places restrictions on certain "predatory" lending practices. Under this act, high cost home loans are home loans, other than an open ended credit plan or reverse mortgage transaction, which have interest rates and corresponding fees that exceed a certain level. The proposal prohibits certain "predatory" lending practices with regards to high-cost loans. This act prohibits:



1) Lenders from charging prepayment fees;



2) The practice of negative amortization;



3) Flipping;



4) Making a loan when the lender knows the borrower will default;



5) Credit insurance packing; and



DESCRIPTION (continued)



6) Charging for services not actually provided.



In addition to prohibiting certain practices, this act also limits how the lender may structure the repayment of the loan. The act also prohibits increasing the interest rate after default and prohibits the lender from charging fees to modify the loan or to defer payments. This act also prohibits lenders from making investments backed by high-cost home loans.



The proposal has an effective date of January 1, 2001.



This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.



SOURCES OF INFORMATION



Department of Economic Development - Divisions of Finance and Credit Unions

Department of Insurance









Jeanne Jarrett, CPA

Director

February 17, 2000