Bill Summary – FastDemocracy

HB 1213
                      Department of Legislative Services
                              Maryland General Assembly
                                    2021 Session
                           FISCAL AND POLICY NOTE
                              Third Reader - Revised
House Bill 1213                 (Delegate Queen)
Economic Matters                                                                    Finance
    Financial Institutions - Determination of Creditworthiness - Evaluation Rules
                               and Alternative Methods
This bill requires certain financial institutions (specifically, banking institutions, credit
unions, savings and loan associations, community development financial institutions, and
specified credit grantors) to adhere to specified federal regulations when evaluating an
application for a primary residential mortgage loan or an extension of credit, including
consideration of the following verifiable alternative indications of creditworthiness:
(1) history of rent or mortgage payments; (2) history of utility payments; (3) school
attendance; and (4) work attendance. In addition, upon request by the applicant, any entity
subject to the bill’s requirements must consider other verifiable alternative indications of
creditworthiness presented (or made available) to the entity by the applicant.
                                    Fiscal Summary
State Effect: The Office of the Commissioner of Financial Regulation (OCFR) within the
Maryland Department of Labor can handle any changes to supervision and enforcement
activities with existing resources. Revenues are not affected.
Local Effect: None.
Small Business Effect: Meaningful.
                                         Analysis
Current Law: Under the Maryland Mortgage Lending Law, a mortgage lender may not
make a mortgage loan without giving due regard to a borrower’s ability to repay the
mortgage. “Due regard” to a borrower’s ability to repay a mortgage loan includes
(1) consideration of the borrower’s debt-to-income ratio, including existing debts and other
obligations and (2) verification of the borrower’s gross monthly income and assets by
review of third-party written documentation reasonably believed by the lender to be
accurate and complete. Acceptable third-party written documentation includes:
      the borrower’s Internal Revenue Service form W-2;
      a copy of the borrower’s income tax return;
      payroll receipts;
      the records of a financial institution; or
      other third-party documents that provide reasonably reliable evidence of the
       borrower’s income or assets.
There are no comparable requirements for applications for other types of credit extensions.
Federal regulations specify the factors that federally chartered financial institutions can and
cannot consider when evaluating loan applications.
Small Business Effect: Certain small business credit grantors and many of Maryland’s
State-chartered banks and credit unions are affected by the bill’s requirements. OCFR
advises smaller business entities operating in Maryland likely incur administrative costs
associated with meeting the requirements of the bill. In addition, with limited exceptions,
the bill’s requirements do not apply to banks, credit unions, savings and loan associations,
and community development financial institutions chartered by other jurisdictions
(including federally chartered financial institutions, although they are subject to the federal
regulations referenced in the bill). Accordingly, the bill may subject Maryland-chartered
financial institutions to administrative burdens not required of some out-of-state financial
institutions.
Small business owners applying for extensions of credit may benefit from the consideration
of alternative factors in assessing their creditworthiness.
                                 Additional Information
Prior Introductions: None.
Designated Cross File: None.
Information Source(s): Maryland Department of Labor; Department of Legislative
Services
HB 1213/ Page 2
Fiscal Note History:    First Reader - February 23, 2021
rh/mcr                  Third Reader - March 29, 2021
                               Revised - Amendment(s) - March 29, 2021
                               Revised - Clarification - March 29, 2021
Analysis by: Eric F. Pierce                        Direct Inquiries to:
                                                   (410) 946-5510
                                                   (301) 970-5510
HB 1213/ Page 3
Statutes affected: 
Text - First - Financial Institutions - Determination of Creditworthiness - Alternative Methods: 1-101 Financial Institutions, 1-212 Financial Institutions, 8-101 Financial Institutions
Text - Third - Financial Institutions - Determination of Creditworthiness - Evaluation Rules and Alternative Methods: 1-101 Financial Institutions, 1-212 Financial Institutions, 8-101 Financial Institutions