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F I S C A L I M P A C T R E P O R T

SPONSOR Robinson

DATE TYPED 02/18/05 HB

SHORT TITLE Home Loan Protection Act Exemptions

SB 913

ANALYST Kehoe

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

NFI

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Mortgage Finance Authority (MFA)

SUMMARY

Synopsis of Bill

Senate Bill 913 proposes to enact a new section of the Home Loan Protection Act to exempt cer-

tain types of home mortgage loans from provisions of the Act.

Significant Issues

Senate Bill 913 exempts the following types of home loans from the Home Loan Protection Act:

•

loans acquired by a national or state-chartered bank, savings association or credit union;

•

loans that can be purchased by the federal national mortgage association, the federal

home loan mortgage association or the federal home loan bank;

•

loans insured by the United States Department of Housing and Urban Development;

•

loans guaranteed by the United States Department of Veterans Affairs;

•

loans made or guaranteed by the United States Department of Agriculture Rural Housing

Service; or

Senate Bill 913 -- Page 2

•

loans with a principal that exceeds the conforming loan size limit for a single-family

dwelling as established by the Federal National Mortgage Association.

The proposed exemptions proposed in Senate Bill 913 represent the majority of mortgage loans

originated in New Mexico every year. If enacted, it appears the provisions of the Home Loan

Protection Act would apply only to non-conforming loans that do not exceed the conforming

loan limit, commonly known as “jumbo” loans, and are not acquired by a national or state-

chartered bank, savings association, or credit union.

OTHER SUBSTANTIVE ISSUES

According to the New Mexico Mortgage Finance authority, “supporters of the Home Loan Pro-

tection Act (HLPA) contend it provides comprehensive consumer protection that controls sub-

prime lending practices that victimize low-income, minority and elderly borrowers. While sub-

prime loans have a legitimate place in the lending market, HLPA supporters argue that too often

these loans contain abusive loan products and exorbitant fees financed into the loan that already

has higher interest rates. HLPA opponents point to research similar to that conducted by Robert

E. Litan, Director of the Brookings Institution’s Economic Studies Program. Litan states that

while the motivation behind added legislation aimed at predatory lending is understandable and

commendable, virtually all of the practices complained of are already against federal law. Fur-

thermore, federal law contains numerous disclosure requirements relating to mortgage loans gen-

erally, and especially high-cost loans. Litan warns that additional statutory measures at the state

and local level at this point run a significant risk of unintentionally cutting off the flow of funds

to creditworthy borrowers.”

LMK/lg