75th OREGON LEGISLATIVE ASSEMBLY--2009 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 786
A-Engrossed
House Bill 2188
Ordered by the House March 27
Including House Amendments dated March 27
Ordered printed by the Speaker pursuant to House Rule 12.00A (5).
Presession filed (at the request of Governor Theodore R.
Kulongoski for Department of Consumer and Business Services)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure.
Prohibits mortgage banker, mortgage broker or loan originator
from making, negotiating or offering to make or negotiate
negative amortization loan without evaluating and verifying
borrower's ability to repay loan.
Requires mortgage banker, mortgage broker or loan originator
that advertises or solicits business and conducts transaction
substantially in language other than English to provide borrower
with certain materials in language in which parties conduct
transaction.
Provides that court may not award attorney fees to mortgage
banker or mortgage broker that prevails as defendant in action
brought in connection with residential mortgage transaction if
person who commenced action did so in good faith and provided
defendant with certain notices before commencing action. Extends
time limit for commencing action by 20 days for person who
complies with these requirements.
A BILL FOR AN ACT
Relating to mortgage transactions; creating new provisions; and
amending ORS 59.925.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + Sections 2 and 3 of this 2009 Act are added to
and made a part of ORS 59.840 to 59.980. + }
SECTION 2. { + (1)(a) As used in this section, 'negative
amortization loan' means a mortgage loan or mortgage banking loan
that is structured in such a way that a borrower in any period
may make a scheduled loan payment that is insufficient to pay
accruing interest.
(b) 'Negative amortization loan' does not include:
(A) A loan commonly known as a bridge loan, the terms of which
specify that:
(i) The maturity period for the loan is less than 18 months;
and
(ii) The borrower may pay only interest until a time when the
entire unpaid loan balance is due and payable.
(B) A mortgage loan in which:
(i) The principal amount is not more than $50,000; and
(ii) The combined loan to value ratio between all mortgage
loans that are secured by the same property and the value of the
securing property is not more than 50 percent.
(C) A loan commonly known as a reverse mortgage, the terms of
which specify that the loan:
(i) Is a non-recourse loan secured by real property;
(ii) Provides cash advances to the borrower based on the equity
or value in the borrower's owner-occupied principal residence;
(iii) Requires no payment of principal or interest until the
entire loan becomes due and payable; and
(iv) Is made by a mortgage lender licensed in this state or
licensed under the laws of the United States.
(D) A loan commonly known as a home equity line of credit, in
which:
(i) The amounts borrowed and the interest and other charges are
debited to an account that is secured by an interest in real
estate;
(ii) Interest on the account is computed periodically;
(iii) The borrower has the right to pay in full at any time
without penalty or to pay in installments that are specified in
the loan agreement; and
(iv) The lender agrees to permit a borrower from time to time
to borrow money, with the maximum limit on the amount of each
borrowing established by the loan agreement.
(2) A mortgage banker, mortgage broker or loan originator may
not negotiate or make, or offer to negotiate or make, a negative
amortization loan without regard to the borrower's repayment
ability at the time the loan is made, including the borrower's
current and reasonably expected income, employment, assets other
than the collateral, current obligations and mortgage related
obligations. The mortgage banker, mortgage broker or loan
originator shall verify the income and assets of the borrower
that the mortgage banker, mortgage broker or loan originator
relies on to evaluate the borrower's repayment ability. The
mortgage banker, mortgage broker or loan originator shall
evaluate the borrower's repayment ability and verify the
borrower's income and assets in a manner consistent with the
requirements of 12 C.F.R. 226.34, as promulgated on the effective
date of this 2009 Act.
(3) A negative amortization loan may not contain a prepayment
penalty beyond the first 24 months after the date on which the
loan is made.
(4) A creditor may not collect a prepayment penalty on an
existing negative amortization loan in return for or as a
consequence of refinancing or providing funds to refinance the
negative amortization loan. + }
SECTION 3. { + (1) A mortgage banker, a mortgage broker or a
loan originator shall provide in writing the materials identified
in subsection (2) of this section to a borrower if the mortgage
banker, mortgage broker or loan originator:
(a) Communicates or causes to be communicated an advertisement
in a language other than English or otherwise solicits business
in a language other than English; and
(b) Offers to negotiate or make, or negotiates or makes, a
residential mortgage transaction in the course of which a
substantial portion of the communication with the borrower that
is related to the transaction takes place in a language other
than English.
(2) A mortgage banker, mortgage broker or loan originator that
takes an action described in subsection (1) of this section shall
provide the following materials to the borrower in English and in
the language other than English in which a substantial portion of
the communication that is related to the transaction takes place:
(a) A good faith estimate required under the Real Estate
Settlement Procedures Act, 12 U.S.C. 2601 et seq., and under
Regulation X, 24 C.F.R. part 3500, as enacted or promulgated on
January 1, 2010;
(b) The disclosures related to the transaction that are
required under the Truth in Lending Act, 15 U.S.C. 1601 et seq.,
and under Regulation Z, 12 C.F.R. part 226, as enacted or
promulgated on the effective date of this 2009 Act; and
(c) A statement notifying the borrower that loan documents
associated with the transaction will be in English and advising
the borrower to obtain appropriate assistance with any necessary
translations.
(3) The Director of the Department of Consumer and Business
Services shall develop and distribute translated versions of the
materials identified in subsection (2) of this section in the
three languages other than English that are most commonly spoken
in this state. + }
SECTION 4. ORS 59.925 is amended to read:
59.925. (1) As used in this section, 'mortgage banker
transaction' and 'mortgage broker transaction' mean a transaction
in which a person, in order to engage in the transaction, is
required to be licensed as a mortgage banker or a mortgage broker
under ORS 59.840 to 59.980.
(2) A mortgage banker or mortgage broker is liable as provided
in subsection (3) of this section to any person who suffers any
ascertainable loss of money or property, real or personal, in a
mortgage banker transaction or a mortgage broker transaction if
the mortgage banker or mortgage broker:
(a) Transacts business as a mortgage banker or mortgage broker
in violation of any provision of ORS 59.840 to 59.980; or
(b) Transacts business as a mortgage banker or mortgage broker
by means of an untrue statement of a material fact or an omission
to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they
are made, not misleading, and who does not sustain the burden of
proof that the person did not know, and in the exercise of
reasonable care could not have known, of the untruth or omission.
(3) The person suffering ascertainable loss may recover damages
in an amount equal to the ascertainable loss.
(4) A person whose sole function in connection with a
transaction is to provide ministerial functions of escrow,
custody or deposit services in accordance with applicable law is
liable only if the person participates or materially aids in the
transaction and the plaintiff sustains the burden of proof that
the person knew of the existence of the facts on which liability
is based or that the person's failure to know of the existence of
such facts was the result of the person's recklessness or gross
negligence.
(5) Except as otherwise provided in this subsection { + and
subsection (10) of this section + }, an action or suit may not be
commenced under this section more than three years after the
transaction. An action under this section for a violation under
subsection (2)(b) of this section or ORS 59.930 may be commenced
within three years after the transaction or two years after the
person bringing the action discovered or should have discovered
the facts on which the action is based, whichever is later, but
in no event more than five years after the date of the
transaction. Failure to commence an action on a timely basis is
an affirmative defense.
(6) A person has a right of action under the bond or
irrevocable letter of credit provided in ORS 59.850 if the
person:
(a) Signs a mortgage banking loan or mortgage loan application;
and
(b) Has a right of action against a mortgage banker or mortgage
broker under this section.
(7) Subsection (4) of this section does not limit the liability
of any person:
(a) For conduct other than in the circumstances described in
subsection (4) of this section; or
(b) Under any other law.
(8) Except as provided in subsection (9) of this section, the
court may award reasonable attorney fees to the prevailing party
in an action under this section.
(9) { + (a) + } The court may not award attorney fees to a
prevailing defendant under the provisions of subsection (8) of
this section if the action under this section is maintained as a
class action pursuant to ORCP 32.
{ + (b) The court may not award attorney fees to a mortgage
banker or mortgage broker that prevails as a defendant in an
action brought under this section in connection with a
residential mortgage transaction if:
(A) Before commencing a court action against the mortgage
banker or mortgage broker, the person who alleges that the person
has suffered an ascertainable loss sends, before the expiration
of the applicable time limit set forth in subsection (5) of this
section, a notice by registered mail, return receipt requested,
that:
(i) Includes the name and mailing address of the person or the
person's legal representative, if any;
(ii) States that the person might bring a court action under
this section against the mortgage banker or mortgage broker;
(iii) Describes the grounds on which the person might base the
court action; and
(iv) Sets forth the action the person believes the mortgage
banker or mortgage broker must take to remedy each ascertainable
loss the person alleges; and
(B) The person alleging an ascertainable loss did not bring the
action in bad faith or solely for the purpose of harassment.
(10) If the person bringing an action under this section
complies with the requirements of subsection (9)(b) of this
section, the time specified in subsection (5) of this section
within which a person may commence the action is extended by 20
days. + }
SECTION 5. { + (1) Sections 2 and 3 of this 2009 Act apply to
transactions that occur on or after the effective date of this
2009 Act.
(2) The amendments to ORS 59.925 by section 4 of this 2009 Act
apply to court actions commenced on or after the effective date
of this 2009 Act. + }
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