New Mexico recently enacted Senate Bill 365 which amends part of the state’s prohibitions and requirements related to adjustable-rate home loans under the New Mexico Home Loan Protection Act (N.M. Stat. Ann. §58-21A-4).
For adjustable rate home loans, excluding home equity lines of credit, creditors may not originate a loan where the interest rate and payment changes more frequently than once every six months, instead of the previous maximum which allowed for an annual adjustment. Also, a subsequent period rate increase may not exceed one percent every six months, reduced from two percent.
The updates will align New Mexico statutes with the current transition away from LIBOR-indexed rates which reset once per year to SOFR-indexed rates which reset every six months. Without the changes in Senate Bill 365, the New Mexico statutes limit the availability of adjustable rate mortgages by prohibiting state-chartered mortgage lenders from originating adjustable rate loans that reset more than once annually.
The changes become effective on June 18, 2021.
There is no change to the requirement that initial interest rates for adjustable rate home loans may not increase by more than two percent for loans with initial periods less than five years and six percent for loan with initial periods of five years or more. Additionally, the lifetime rate cap remains at six percent over the initial rate.
DocMagic will be implementing new audits which will provide a warning for New Mexico properties when an adjustable rate loan exceeds the maximums allowed for subsequent rate adjustments or the maximum lifetime interest rate cap.
