The Maine Bureau of Financial Institutions and the Bureau of Consumer Credit Protection have issued duplicate regulations concerning “alternative mortgage transactions,” which are basically loans subject to Article IX of the Maine Consumer Credit Code (Me. Rev. Stat. Ann. tit. 9-A, §§ 9-101 through 9-408) which have an interest rate that may be adjusted or renegotiated – which can include fixed-rate mortgages under which the interest rate may change due to a feature of the loan.
Under the official definition, loans with one or more of the following features may be considered “alternative mortgage transactions”: (a) deferred payments; (b) a step rate; (c) an adjustable interest rate; (d) a balloon payment; (e) a buydown; or (f) is a construction-to-permanent loan.
These regulations are set forth in 02-29 Code Me. R. ch 119 and 02-30 Code Me. R. ch. 250. Section 5 of both of these chapters require a supervised lender or a financial institution (properly defined, of course) to provide a disclosure in connection with an alternative mortgage transaction which includes “the terms prescribed by Section 4” of such chapters (excluding Subsection [A]) , as well as any other additional information under 12 CFR § 226.19.
The clause “the terms prescribed by Section 4” is a bit ambiguous. It could mean the actual legal terms of Section 4 (in which case, providing a copy of Section 4 to borrowers would satisfy the disclosure requirement), or it could mean the terms of the loan which are restricted under Section 4 (in which case, the disclosures would need to disclose such terms of the loan).
We have been providing Cx15798, 15799, and 15800, which are duplicates of Section 4, under the understanding that the clause refers to the legal terms. We have recently received clarification from the Bureau of Financial Institutions that the clause actually means the terms of the loan, rather than the legal terms.
This being the case, we will be revising our disclosures accordingly. According to our research, the ARM Disclosures required under Regulation Z (e.g. our Cx13457) disclose all the relevant terms of the loan and are satisfactory for complying with the disclosure requirement in regards to adjustable-rate mortgages. We will, however, be providing new disclosures for fixed-rate balloon, buydown, and construction-to-permanent loans. These documents will be as follows:
1. ME Alternative Mortgage Transaction Disclosure – Construction (Cx17637);
2. ME Alternative Mortgage Transaction Disclosure – Buydown (Cx17638); and
3. ME Alternative Mortgage Transaction Disclosure – Balloon (Cx17670; this disclosure will only print for a loan with an amortization schedule of 30 years or less).
We will not, at this time, be supplying similar disclosures for deferred payment and step-rate loans, since these are not available for Maine Housing through our software. Cx15798, 15799, and 15800 will be configured to print “upon request” for the near future, in order to help clients transition from these to the newer versions. Eventually, they will be retired. We will also be updating our State Disclosure Matrix to include references to these new disclosures in the next edition (this August).
These new documents will begin printing in Initial Disclosure packages on July 19, 2013. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
July 12, 2013
Update: New Cx17637, 17638, and 17670 began printing yesterday evening. Cx15798, 15799, and 15800 are now available to print upon request.