Bill Summary – FastDemocracy

SB 155
                       Department of Legislative Services
                               Maryland General Assembly
                                     2020 Session
                            FISCAL AND POLICY NOTE
                               Third Reader - Revised
Senate Bill 155                  (Senator Augustine, et al.)
Finance                                                                    Economic Matters
                    Consumer Protection - Mobile Home Purchasers
This bill establishes several requirements related to manufactured home financing.
Specifically, the bill (1) codifies the federal definition of “dwelling” and establishes a State
definition of “mobile home”; (2) imposes a duty of good faith and fair dealing on
mobile home retailers; and (3) generally requires a foreclosure notice to be provided at
least 30 days before a lender or credit grantor repossesses a mobile home.
                                     Fiscal Summary
State Effect: The bill is not anticipated to materially affect State finances or operations.
Enforcement can be handled with existing resources.
Local Effect: The bill is not anticipated to materially affect local government finances or
operations.
Small Business Effect: Minimal.
                                          Analysis
Bill Summary: The bill incorporates the federal definition of “dwelling” within the
Maryland Mortgage Lender Law (MMLL) to mean a residential structure or
“mobile home” that contains one to four family housing units or individual units of
condominiums or cooperatives. The bill defines “mobile home” as a structure (including
the plumbing, heating, air conditioning, and electrical systems contained in the structure)
that is:
      transportable in one or more sections;
      eight or more body feet in width and 30 or more body feet in length;
      built on a permanent chassis; and
      permanently attached to land or connected to utility, water, or sewage facilities.
The bill also alters the definition of “mortgage loan originator” to exclude an individual
who is a retailer of mobile homes (or an employee of the retailer) if the retailer (or
employee), as applicable, does not receive (directly or indirectly) compensation or gain for
engaging in mortgage loan origination activities as described in § 11-601(q)(1) of the
Financial Institutions Article that is in excess of compensation or gain received in a
comparable cash transaction.
Mobile Home Retail Sales Requirements
The bill establishes that a mobile home retailer:
      has a duty of good faith and fair dealing in providing financial information to a
       prospective consumer borrower, including providing financial information in a
       manner that is not misleading or deceptive and that discloses all material facts;
      may not steer a consumer borrower to financing products that offer less favorable
       terms; and
      must provide a written disclosure statement to a consumer borrower on a form
       prescribed by the Office of the Commissioner of Financial Regulation (OCFR).
The written statement required by the bill must include (1) a disclosure that describes any
corporate affiliation between the mobile home retailer and a financing source about which
the mobile home retailer provides information to the consumer borrower; (2) a disclosure
that the consumer borrower may obtain financing from any lender (and is not required to
obtain financing from a lender suggested by the retailer); and (3) information regarding the
rights of a consumer borrower and the procedure for filing a complaint with the
commissioner.
If a mobile home retailer fails to comply with the bill’s requirements, the validity of an
otherwise valid financing transaction is not affected. OCFR may enforce these
requirements by exercising any of its investigative and enforcement powers delineated in
§§ 2-113 through 2-116 of the Financial Institutions Article.
Repossession of Mobile Homes
The bill further establishes that, at least 30 days before a lender or credit grantor repossesses
a mobile home that is primarily for personal, family, or household use, the lender or credit
grantor must serve a written notice on the borrower of the lender or credit grantor’s
SB 155/ Page 2
intention to repossess the mobile home. However, this notice is not required if the
mobile home is vacant and abandoned (based on a determination by the lender or
credit grantor that specified criteria have been met) or if the borrower voluntarily
surrenders the mobile home to the lender or credit grantor. Any notice given less than
30 days before repossession must be accompanied by a certification demonstrating that the
mobile home is vacant and abandoned (or that the mobile home has been surrendered).
Current Law/Background: The bill is a result of recommendations made by the
Maryland Financial Consumer Protection Commission (MFCPC) related to mobile home
financing.
Under MMLL, a “dwelling” has the meaning stated in 15 U.S.C. § 1602(w), which defines
“dwelling” as a residential structure or mobile home which contains one to four family
housing units, or individual units of condominiums or cooperatives. However, a “dwelling”
does not include a residential structure or mobile home unless the residential structure or
mobile home (or at least one unit contained within) is owner-occupied.
At least 10 days before a lender repossesses any goods, the lender may (but is not required
to) serve a written notice on the borrower of the lender’s intention to repossess the goods.
Similarly, at least 10 days before a credit grantor repossesses any tangible personal
property, the credit grantor may serve a written notice on the consumer borrower of the
intention to repossess the tangible personal property.
According to the 2018 MFCPC report, the U.S. Congress included a provision in the
Economic Growth, Regulatory Relief, and Consumer Protection Act (which was enacted
May 24, 2018) specifying that retailers of manufactured houses meeting certain requirements
are not considered mortgage loan originators for purposes of the Truth in Lending Act
(TILA).
TILA, enacted in 1968, is a federal law promoting transparency and protecting consumers
taking out consumer loans. Its regulation is implemented through Regulation Z, which in
part prohibits a loan originator from steering a consumer toward a loan that provides the
loan originator with greater compensation than other transactions the loan originator
offered or could have offered to the consumer.
MFCPC made several recommendations related to manufactured housing in its
2018 report.
      First, the commission recommended that, if a retailer of a manufactured home
       provides information regarding financing the purchase of the home, the retailer
       (1) must do so in a fair and honest manner in compliance with the
       Maryland Consumer Protection Act and (2) may not otherwise steer a consumer to
       product offerings with less favorable terms. In addition, the commission
SB 155/ Page 3
       recommended that the retailer provide a statement, in plain English, describing any
       financial relationship or affiliation between the retailer and the lender about whose
       products the retailer provides information.
      Second, the commission recommended amending the definition of “dwelling” under
       Maryland law to ensure that manufactured home brokers, lenders, and originators
       are subject to the mortgage lending laws in the State.
      Third, the commission recommended that retailers of manufactured homes who
       provide information to consumers regarding financing options be required to
       provide a written disclosure to consumers on a form prescribed by OCFR at the time
       the retailer provides financing information. The commission recommended that the
       disclosure include information regarding borrower rights and the procedure for
       filing a complaint with OCFR if a consumer is harmed or has been steered to an
       inappropriate product.
      Fourth, the commission recommended increasing the notice requirement for an
       action of replevin or an action to repossess a manufactured home that is not vacant
       or has not been surrendered to 30 days (consistent with federal law) or to 45 days.
                                Additional Information
Prior Introductions: None.
Designated Cross File: HB 93 (Delegates C. Jackson and D.E. Davis) - Economic
Matters.
Information Source(s): Judiciary (Administrative Office of the Courts); Maryland
Department of Labor; Congress.gov; Consumer Financial Protection Bureau; Department
of Legislative Services
Fiscal Note History:      First Reader - February 4, 2020
rh/mcr                    Third Reader - March 15, 2020
                                 Revised - Amendment(s) - March 15, 2020
Analysis by: Eric F. Pierce                            Direct Inquiries to:
                                                       (410) 946-5510
                                                       (301) 970-5510
SB 155/ Page 4
Statutes affected: 
Text - First - Consumer Protection - Mobile Home Purchasers: 12-101 Commercial Law, 12-115 Commercial Law, 12-901 Commercial Law, 12-921 Commercial Law, 12-1001 Commercial Law, 12-1021 Commercial Law, 14-4201 Commercial Law, 14-4202 Commercial Law, 14-4203 Commercial Law, 14-4204 Commercial Law, 14-4205 Commercial Law, 11-501 Financial Institutions, 11-601 Financial Institutions, 11-610 Financial Institutions
Text - Third - Consumer Protection - Mobile Home Purchasers: 12-101 Commercial Law, 12-115 Commercial Law, 12-901 Commercial Law, 12-921 Commercial Law, 12-1001 Commercial Law, 12-1021 Commercial Law, 14-4201 Commercial Law, 14-4202 Commercial Law, 14-4203 Commercial Law, 14-4204 Commercial Law, 14-4205 Commercial Law, 11-501 Financial Institutions, 11-601 Financial Institutions, 11-610 Financial Institutions