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

SPONSOR Lundstrom

ORIGINAL DATE

LAST UPDATED

1/23/08

HB 21

SHORT TITLE

Home Loan Protection Act

SB

ANALYST C. Sanchez

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Amends the Home Loan Protection Act – Chapter 58, Article 21A-2 NMSA 1978

SOURCES OF INFORMATION

LFC Files

Responses Received From

Regulation and Licensing Department (RLD)

SUMMARY

Synopsis of Bill

This bill amends and updates the Home Loan Protection Act. The Bill recognizes several new

forms of abusive home lending practices that have recently emerged both locally and nationally.

These new forms of abusive lending practices have resulted in unacceptable rates of home

mortgage delinquencies and foreclosures that displace borrowers and their families. The bill

adds new definitions for “adjustable rate home loan" and “variable interest rate". The bill

identifies and includes new abusive and predatory lending practices in section 58-21A-4 of the

Home Loan Protection Act to include the following: (1) making loans without proper

documentation; (2) making a home loan without documentation and considering the borrower’s

income, credit history and assessed ability to repay the home loan according to its terms over the

entire term of the loan; (3) making a home loan primarily based upon the foreclosure or

liquidation value of the borrowers collateral home; (4) making a home loan where the monthly

payment amount including principal, interest, taxes and insurance along with all other borrower

scheduled monthly debt payments exceeds fifty (50) percent of the borrowers gross income; (5)

making a loan where the borrower is required to pay only interest in the outstanding principle of

the home loan or where the required payments over the stated term of the loan are not sufficient

to completely amortize the loan within it’s term; (6) making an adjustable rate home Loan where

the interest rate and payment may change more frequently than annually during the term of the

House Bill 21 – Page

2

loan, making a adjustable rate home loan where the interest rate for the initial or subsequent

periods may be increased for the next period so that the payments of principal and interest will

increase by more than one and one half (1.5%); and (7) making an adjustable rate home loan

where the caps on payment increases are different from the caps on interest rates so that the

required payments may be less than that is necessary to reduce principal and amortize the loan

within its term regardless of interest rate adjustment and making a home loan requiring a

borrower to pay a penalty or premium if the borrower at any time during the term of the loan

makes principal payments or pays the balance of the loan prior to the stated end of the loan term.

SIGNIFICANT ISSUES

This bill will strengthen the Home Loan Protection Act by providing additional protection for

consumer home loan borrowers against abusive and predatory home loan lending practices which

will result in fewer delinquencies, foreclosures and loss of homes.

ADMINISTRATIVE IMPLICATIONS

The Director, Financial Institutions Division, Regulation and Licensing Department will be

required to promulgate additional new rules for implementing the amendments to the Home

Loan Protection Act.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Mortgage Lenders will not be prohibited from the specific abusive and predatory loan forms and

practices, which would be prohibited under the proposed Act.

POSSIBLE QUESTIONS

Are the guidelines set forth by the bill clear enough to protect uneducated consumers.

CS/nt