In this analysis of the Economic Stimulus Act of 2008, Stephen F.J. Ornstein, David A. Tallman, and John P. Holahan of Thacher Proffitt & Wood LLP discuss the effect of the recent economic stimulus package on the coverage of several state anti-predatory lending statutes, and conclude that an unintended consequence of the Act is the expansion of the scope of multiple state anti-predatory lending laws.

On Feb. 13, President Bush signed H.R. 5140, the Economic Stimulus Act of 2008, which is designed to ameliorate the effects of an anticipated economic slowdown and, among other provisions, temporarily increases the limitations on the maximum original principal balance of residential mortgages in which Fannie Mae and Freddie Mac may invest.  Many states have enacted anti-predatory lending laws, and several jurisdictions have set ceilings based on some variation of the Fannie Mae or Freddie Mac conforming loan size limit. 

“Thus, any change to the conforming loan limitations affects the scope of those state anti-predatory lending laws,” the authors write.  “However, it is important to note the subtle differences in wording among these ceilings.  For example, some jurisdictions specify that the ceiling is the conforming loan size limit for a single family dwelling. 

“Because Fannie Mae and Freddie Mac have separate ceilings for first and second liens, different ceilings would presumably apply based on the lien position of the loan in these jurisdictions.  Other jurisdictions specify that the applicable ceiling is the first lien conforming loan limit. In these jurisdictions, the first lien conforming loan limit should presumably be used as the ceiling for both first and second lien loans that are subject to the statute.  Finally, note that some jurisdictions specify that the single family loan limit should be used, while others use the loan limit for a comparable dwelling.” 

Subscribers to www.Lexis.com may read much more about the act and its implications by purchasing the entire expert commentary at Thacher Proffitt & Wood LLP on the Effect of the Economic Stimulus Act of 2008.