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Indiana Legislature approves mortgage certification program

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On The Beat Industry News In Brief

Brace yourself for a marketing blitz from banks touting the strength of their mortgages. In its last week, the General Assembly approved legislation allowing the Indiana Department of Financial Institutions to offer a five-star mortgage certification program.

The new program was originally proposed by State Rep. Ed DeLaney, D-Indianapolis, in a bill the Indiana House of Representatives unanimously approved. It then stalled in the Senate’s Committee on Insurance and Financial Institutions.

Late in the legislative process, the five-star mortgage idea was added to House Bill 1336, which overhauls the state’s $308 million Public Deposit Insurance Fund for the first time since 1937, as IBJ reported last week. Both the House and Senate approved HB 1336 in conference committee. It now awaits Gov. Mitch Daniels’ endorsement. He is expected to sign off.

“This will serve as an educational tool, letting first-time homebuyers know the risks of borrowing to buy a home and how they might avoid them,” DeLaney said in a statement.

Starting June 30, banks and mortgage brokers will be able to advertise their mortgages as five-star state-certified if they join the voluntary IDFI program and adhere to its requirements for mortgage terms, including:

• 10-percent down payments or, in the case of a refinancing, 10-percent equity

• a fixed interest rate

• provision of escrow accounts for payment of taxes and insurance

• terms that don’t exceed 30 years

• no prepayment penalty or fee.

Under the new law, banks that offer five-star mortgages must give any would-be borrowers they reject written statements of the reasons they don’t qualify. According to the bill’s fiscal impact statement, Indiana’s Legislative Services Agency expects the program to generate new revenue for the state via certification fees for banks involved in the program and civil penalties IDFI can levy against lenders who violate its terms.
 

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  • The 2 Mortgage Guys
    It keeps getting tougher and tougher. The good news is, most of the bad lenders got out of the industry because the testing wasn't easy and took quite a bit of time and studying. The mortgage menu has shrunken significantly and it's much harder to get files through underwriting guidelines so hopefully the world will have a lot less crooks in it. At least, in the mortgage industry that is!

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