J. MILLARD TAWES, Governor                     1441

specifying certain regulations as to such transactions and setting
out certain maximum fees to be charged by such persons in such
transactions, and setting out certain definitions, and generally deal-
ing with secondary mortgage transactions and the regulation of
persons in this business.

May 5, 1966.

Honorable Marvin Mandel
Speaker of the House of Delegates
State House
Annapolis, Maryland

Dear Mr. Speaker:

In accordance with the provisions of Article 2, Section 17 of
the Maryland Constitution, I have today vetoed House Bill 259.

Although this Bill purports to regulate the field of secondary
mortgage lending, I am advised by the State Banking Department, as
well as others in this field, that the Bill falls far short of carrying
out a proper and equitable regulation of the second mortgage in-
dustry. In addition, I am advised that the Bill as now drawn would
also obviate the effectiveness of the provisions of our present State
Industrial Finance Law.

There are listed below fourteen deficiencies in the Bill which the
State Bank Commissioner has called to my attention.

1.   The license fee is not nearly sufficient to provide revenue to
cover operating expenses.

2.   There is no provision for a finding of needs and conven-
ience so far as licensing is required.

3.   There is no requirement for regular examinations.

4.   The rate of interest taken in connection with other charges
permitted could provide for a very high yield to the lender.

5.   There is no provision requiring the mortgagor to show proof
that the funds to be borrowed are not available from the existing
mortgagee.

6.   There is no limit to the amount of any such loan.

7.   There is no prohibition against the lender conducting the
so-called "Flipping."

8.   There is no prohibition against a balloon payment at the
end of the contract.

9.   No receipts are required to be given to mortgagor for pay-
ments made.

10.   There is no criminal penalty for violations.

11.   The lender is not required to release the mortgage upon pay-
ment in full by the mortgagor.

12.   There is no requirement for Annual Reports to be furnished
the Department by the Licensees.