What is House Bill 157?

In 2006, the Ohio State Senate passed the Ohio Homebuyers Protection Bill, aimed at protecting consumers from predatory lending practices. As a result of SB-185, home-lending transactions aimed to become more consumer-friendly since lenders were required to increase their disclosure of transactions in order to assist homebuyers with making more informed decisions when purchasing a home. The bill sought to reduce the number of unnecessary foreclosures that occur when lenders engage in deceptive practices and consumers are poorly informed of their fiduciary responsibilities.
Practices that were been banned as a result of SB-185 included:

• Convincing homebuyers to enter an agreement they knowingly cannot pay
• Refinancing a mortgage where the new loan does not have a recognizable benefit considering the terms of the old and new loan and the consumer’s financial circumstances
• Mortgage brokers taking advantage of the consumer’s inability to protect his or her interests due to known physical or mental conditions or illiteracy
• Failing to inform the consumer that he or she is not required to close the loan simply due to prior estimates or a signed application
• Charging more than one late fee for one loan payment
• Mortgage brokers claiming to represent an affiliation or sponsorship they do not represent
• Recommending or encouraging a consumer to default on a mortgage or loan credit agreement

Despite the positive changes offered by Senate Bill 185, title companies felt that they needed more time to prepare themselves for the annual review required by the bill. As a result, many political action committees lobbied for extensions on the review period, a proposal that eventually became House Bill 157. HB-157 aims to prevent the same infractions as SB-185; however, it extends the deadline for completing the review by several months, and better outlines the practices that title companies will have to complete in order to have a proper independent annual review.

HB-157 states that all title companies must have their independent annual review completed by December 31, 2008 by a Certified Public Accountant. The bill also states that the review period for the independent annual review begins August 31, 2008 and encompasses the year previous to this date. Although the guidelines for performing the review are still under discussion, the review will most likely use the month of August 2008 and one additional month from the previous year as its randomly selected sample.

What Does This Mean?

House Bill 157 plans to use more front-end requirements to improve lending practices through stricter enforcement, increased customer disclosure and changing current licensing requirements. The bill stipulates that both mortgage brokers and certain lenders hold proper licenses and requires that they participate in continuing education to maintain their licenses.

All brokers and title companies must have their escrow accounts audited annually beginning in 2008.