Within the ask for Public Comment, OCCR identified the growth, or at the very least the perception of a development, that lenders had been increasing charges and points to an even just underneath the limit that will qualify that loan as an even more heavily managed high-rate, high-fee “Section 32” loan. We asked commenters to inform us whether this perception had been a reality, and when what exactly might be done about any of it.
Our conclusion is fee-padding is occurring in Maine, and also as one good way to deal with the training our company is suggesting (see proposed bill connected as Appendix #1, area 2) that the limit of “points and fees” that produces part 32 therapy, be lowered from 8% of that loan quantity, to 5%.
We base this proposition in the presumption that the method of getting loans in this range (between 5% points and costs, and 8% points and charges) is, in financial terms, “elastic, ” such that developing a fresh, reduced degree will perhaps not end up in an unwillingness regarding the element of loan providers to really make the great majority of these loans that currently fall into the range between 5% points-and-fees, and 8%. This means, we believe loan providers making loans with points and charges totaling 6%, 7% and even 8%, will reduce costs on a lot of those loans to 5%.
We additionally get this proposition because of the knowledge that other states that are nearbysuch as for instance Massachusetts and Connecticut) curently have founded the reduced 5% limit inside their state statutes.