FEATURE ARTICLE

 

Senate Bill 162 and How It Affects You

A sweeping new law introduced in July, Senate Bill 162, will strengthen Ohio’s Mortgage Loan Law, Mortgage Brokers/Loan Officers Law, Consumer Credit Mortgage Loan Law, and Consumer Sales Practices Act in an attempt to protect homebuyers.  The new law also provides greater penalties for violations against the elderly and handicapped.

Mortgage Loan Law:

The Mortgage Loan Law currently prohibits “false, misleading, or deceptive” advertising.  The new bill imposes additional disclosure requirements to give consumers more information about loans and lenders. 

 

Mortgage Brokers/Loan Officers Law:

Although recently amended, the legislature eliminated many of the current law’s exemptions which left consumers vulnerable to unscrupulous lenders.  In addition, the bill imposes stronger duties on brokers to act on behalf of a buyer.  Mortgage brokers now must: 1) comply with customers’ reasonable instructions; 2) act with reasonable care, skill, and diligence on behalf of buyers; and 3) attempt to secure a loan with terms that are advantageous to the buyer. 

 

Consumer Credit Mortgage Loan Law:

Current law requires certain disclosures and prohibits certain practices in “covered loan” transactions.  S.B. 162 expands the scope of “covered loans” to include residential mortgages, open-end credit loans, and other loans.  It expands the list of prohibited practices to address limits on or prohibitions against certain borrower paid fees and prepayment penalties. 

Some of the more stringent requirements in S.B. 162 prohibit lenders from:

• Refinancing with new loans that fail to provide tangible net benefits to the consumer;

• Refinancing or consolidating a zero- or low-interest mortgage provided by a nonprofit or government program, unless a HUD counselor certifies that doing so is in the consumer’s best interest;

• Recommending that a consumer default on a mortgage;

• “Pyramiding” late charges;

• Limiting or prohibiting consumer access to courts; or

• Recovering attorneys’ fees incurred in collecting late payments, unless a lawsuit is actually filed.

 

Consumer Sales Practices Act:

The Consumer Sales Practices Act, Ohio’s broadest and most potent consumer protection law, has historically not been applicable to many consumer loan transactions.  S.B. 162 will expand the Act to include transactions between financial institutions and their customers in loan servicing and escrow accounts and debt collection activities.

  

The Bottom Line:

Whether you are a provider or consumer of mortgage loans, S.B. 162 will affect you.   For more information, contact the author at the link below or any Buckingham, Doolittle & Burroughs real estate lawyer.  

 

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Brent D. Rosenthal is a Shareholder and a member of the Real Estate & Construction and Business Practice Groups.  He can be reached at brosenthal@bdblaw.com or 614.227.4266.  Mr. Rosenthal was assisted in writing this article by Erin Wojno, an Associate member of the Real Estate & Construction Practice Group.  She can be reached at ewojno@bdblaw.com or 614.221.1346.