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VETOES

residential real property under Section 12-103(b) of the
Commercial Law Article. These include requirements that a lender
allow the borrower the choice of either changing the amount of
periodic payments or extending or reducing the length of the
obligation term. The Economic Matters and Finance Committee
files do not reveal any legislative intent to extend these other
provisions of Section 12-118 to loans secured by residential real
property. The written testimony of the sponsor before the
Committees and floor statements on the bill only focus on the
laudable purpose of fuller disclosure.

The Federal National Mortgage Association ("Fannie Mae") has
written me that certain of these substantive requirements
directly conflict with underwriting guidelines of the
Association. Counsel to Fannie Mae has indicated to my office
that acceptance by the Association of first mortgages originated
in Maryland under the terms of Senate Bill 129 would be
problematic at best. Fannie Mae is a significant purchaser of
residential first mortgages and it is my understanding that its
underwriting guidelines are generally followed in the industry.

To the extent that first mortgage lenders cannot deliver
conforming mortgages to the secondary market because of conflicts
between State law and secondary market guidelines, lenders will
seek to lend under alternate legal authority such as the Federal
Alternative Mortgage Transaction Authority Parity Act, Title 12,
Subtitle 10 of the Commercial Law Article or engage in other
types of loans. The result could be fewer consumer protections
to the public since many of the provisions of Title 12 Subtitle 1
of the Commercial Law Article would not apply to these
alternative type first mortgage loans. It is also possible that
even less first mortgage financing would be available to Maryland
homebuyers. These uncertainties as to the bill's effect are most
troubling and make me reluctant to sign it into law.

In balancing the competing factors involved in this bill,
and in making my decision, I have directed the Department of
Licensing and Regulation to work with the sponsor to draft
corrective legislation for the 1987 Session. In the meantime, my
office and the Department will work with representatives of the
Maryland Mortgage Bankers Association, Inc. and the Mortgage
Bankers Association of Metropolitan Washington, Inc. to achieve
voluntary compliance with the bill's disclosure provisions.

Therefore, I have decided to veto Senate Bill 129.

Sincerely,
Harry Hughes
Governor

Senate Bill No. 129
AN ACT concerning

Adjustable Rate Mortgages - Disclosures