Legislation 2010
Summaries of Bills affecting the Banking Division
Act 96 (S.287) Licensing And Regulation Of Loan Servicers
This legislation establishes a licensing and regulatory system for third party loan servicers. A third party loan servicer is a person that collects residential mortgage loan payments on behalf of the owner of the loan. The third party loan servicer collects the monthly loan payments (including principal, interest, tax escrow amounts, and insurance escrow amounts.) The servicer then makes payments of principal and interest to the owner of the loan and makes payments to other third parties, such as tax and insurance, as required by the loan documents. This legislation requires that third party loan servicers will be licensed and regulated in a manner similar to the way the state regulates licensed lenders and mortgage brokers.
Effective date: January 1, 2011.
Act 100 (H. 622) Solicitation by prescreened trigger lead
When a consumer applies for a mortgage loan with a lender, it may "trigger" information about the loan application being sent to another lender. The other lender, typically a lender the consumer has not contacted about the current loan, may call the consumer offering the consumer a mortgage loan. Problems have arisen when the second lender does not make it clear that it is not the same entity as the original lender. This bill provides limitations, disclosure requirements, and remedies for trigger lead solicitation of consumers.
Effective date: July 1, 2010.
Act 115 (S.58) Electronic Payment of Wages
This legislation will permit employers to pay employee wages by making an electronic payment to a payroll card account set up for the employee. This is a voluntary option and would only be used if the employee selects payment of wages to a payroll card account. The employee would access his or her wages through a payroll card that is similar to a debit card. The legislation also includes a number of employee protections regarding the payroll card.
The Department of Labor is the primary regulator under this legislation; however, the legislation authorizes BISHCA to adopt administrative rules regarding the payment of wages by payroll cards. The legislation also requires that BISHCA report to the legislature any problems it identifies with the use of payroll cards.
Effective date: Upon passage – May 21, 2010.
Act 116 (S.138) Credit Card Fees
This legislation establishes limitations on the operation of electronic payments systems used in connection with credit cards, charge cards, debit cards, or stored-value cards.
With respect to transactions involving Vermont merchants, an electronic payment system may not impose a penalty:
(a) if the merchant offers a discount for cash purchases;
(b) if the merchant imposes a minimum amount on purchases by credit card; and
(c) if the merchant accepts the terms of the electronic payment system for some but not all of the merchant’s retail locations.
Violations of the legislation are subject to restitutions, civil penalties, and the remedies provided by the Consumer Fraud Act.
The legislation also prohibits fraudulent use of scanning devices to access personal information without the consent of the consumer. Violations are subject to criminal penalties, and forfeiture of the scanning device or other hardware or software used in the commission of the violation.
On or before December 15, 2011 BISHCA shall examine studies relating to credit card interchange fees, and report to the legislature with its findings and recommendations.
Effective date: January 1, 2011, except that the fraudulent scanning device provision takes effect on passage – May 21, 2010.
Act 131 (H. 498) Maintenance of Private Roads
This legislation was originally introduced to provide a law to allocate the cost of maintaining a private road inthose instances where there is no other agreement to maintain the private road. Fannie Mae will not purchase mortgage loans on property located on a private road unless there is a private road maintenance agreement in place or the state has a statute that defines the property owners responsibility for the maintenance and repair of private roads when there is no other agreement or covenant in place.
The bill as passed by the legislature establishes a summer study committee to study the creation of statutory private road maintenance requirements when there is no formal agreement or covenant between the property owners. The study committee will include two members appointed by the Governor, the VT Bankers Association, the Vermont League of Cities and Towns, and BISHCA.
Effective date: July 1, 2010.
Act 132 (H.590) Mandatory Mediation in Foreclosure
This bill seeks to require mediation and compliance with the federal Home Affordability Modification Program ("HAMP") in all owner occupied one to four unit residential foreclosure actions where the underlying mortgage is subject to the HAMP guidelines. The mediator must be a Vermont licensed attorney that has taken a legal education course on foreclosure prevention and loss mitigation, which course must be approved by the Vermont Bar Association.
Whenever the borrower enters an appearance in a foreclosure action, or if the borrower requests mediation up to four months after the judgment is entered in the foreclosure case (this is typically while the period of redemption is running), the court shall refer the case to mediation.
The mortgagee must serve a notice on the borrower, with the summons and complaint, that informs the borrower of the right to mediation. The bill includes elements that must be in the notice, but leaves it to the Supreme Court to promulgate any required form of notice.
All parties must participate in the mediation, including: lender or lender's servicing agent, lender's attorney, and the borrower and the borrower's attorney, if any. The participants must have decision-making authority and access to the appropriate information to consider and calculate the available options. The borrower must provide the mediator information about the borrower's income. The participants are required to use the calculations, assumptions, and forms as established by the HAMP guidelines. In addition to HAMP the lender must consider other prevention tools including reinstatement, loan modification, foreclosure, and short sale. The lender is required to provide documentation of its consideration of all of the above HAMP and other foreclosure alternative tools.
The mediator must file a mediation report within seven days of completing the mediation. The report is sent to both parties and to the court.
The court reviews the mediator's report to decide if the lender complied with the all of the foreclosure alternative requirements and considerations set forth above. The court may make such determination on its own or may require a hearing. The court has broad authority to issue sanctions if it finds that the lender did not comply with its obligations in the mediation.
The bill requires that the lender pay the costs of the mediation and the lender cannot transfer the costs to the borrower. The borrower is responsible for the borrower's own costs, including the cost of the borrower's attorney, if any, and travel costs.
The bill only applies to foreclosure actions involving loans that are subject to HAMP.
Effective date: July 1, 2010 and sunsets on the expiration date of the HAMP program.
Act 134 (H. 759) Executive Branch Fees - Banking Division Sections
Mortgage loan originators (Sec. 19) - Imposes a $50 fee when a mortgage loan originator changes its employer and sponsor after the initial employer and sponsor.
Money Servicers (Sec. 20 - 24) - Imposes an initial license fee of $25 per authorized delegate location. Imposes an annual renewal fee of $25 per authorized delegate location not to exceed $3,500 per company. Imposes an annual assessment of $0.0001 per dollar volume of Vermont activity, not to exceed $15,000. Requires licensees to keep BISHCA informed of all locations that provide money services to Vermonters. Clarifies that an authorized delegate of a licensee may not have sub-authorized delegates. Authorized delegates must enter into contracts directly with the licensee.
Simplified Licensing Process for Commercial Licensed Lender (Sec. 24a - 24i) - Creates a simplified licensing process for licensed lenders that only make commercial loans in this state. The simplified process focuses on the identity of the lender and the lender's location, identifying the control persons of the lender, criminal history, actions by other regulatory agencies, and the experience, character and general fitness of the lender.
Effective date: Upon passage - May 29, 2010.
Act 137 (S.278) BISHCA Housekeeping Bill
Independent trust company minimum capital. (Sec. 1) - Amends the minimum capital requirement for independent trust companies regulated by the Department. Last session’s legislation revised the minimum capital requirement for independent trust companies, but did so in a manner which froze the minimum capital amount at the first year’s projected assets under management for the company. This amendment will correct the requirement by setting the minimum based on the company’s current assets under management.
Mortgage broker and sales finance license applications. This amendment clarifies that a licensed lender can also secure a sales finance or mortgage broker license in one application, but must pay the applicable fee to secure each license. Application fees are currently being paid in accordance with the proposed clarification, so there would be no change in fees assessed or collected.
Money transmission service licensees. This amendment clarifies that a money transmission service licensee must secure a license for its “authorized delegates” only if the delegate is located in this state. This is the construction that both the Department and the licensees have been using in administering the licensing program, so the amendment will not change current practice.
Debt adjusters. This amendment clarifies the definition of “debt adjuster”, so that the activities that define the licensee accurately describe the business of a debt adjuster. The bill also re-codifies the debt adjuster statute from Part 3 of title 8, the insurance statutes, to Part 2 of Title 8, the statutes relating to financial institutions and entities other than banks and credit unions.
Vermont agent for mortgage holders or servicers. The bill requires certain holders of mortgages on 1-4 unit residential dwellings to designate a Vermont agent to handle transactions relating to the mortgage. Typically, the original mortgage requires that the borrower carry home insurance to protect both the borrower and the mortgage holder’s collateral. When a claim settlement is made under the insurance policy, the financial institution must approve the payment. Obtaining approval is often difficult when the current mortgage holder is an out of state company. This bill requires mortgage holders, or the agent or other person who services the mortgage, to designate a Vermont agent for insurance claims settlement purposes. Exceptions to the agent designation requirement are included for banks and credit unions located in Vermont, an individual holding a mortgage loan to a family member, and an individual who holds a mortgage loan on the mortgage holder's prior residence.
Effective date: Generally, July 1, 2010. The registered agent requirement for financial institutions will take effect on October 1, 2010.