Senate panel clears bill letting investors finance lender fees and narrowing consumer protections to consumer loans

Summary

Senate File 4168 would permit financing of lender fees and prepayment penalties for business‑purpose loans (DSCR loans) while keeping consumer protections in place for personal residential mortgages; supporters said the measure provides optional flexibility for investors, critics warned it may obscure fees.

Senators on the Commerce and Consumer Protection Committee recommended Senate File 4168 for passage after debate about fee caps and consumer protections.

Sen. Duckworth, the sponsor, said the bill removes the 5% cap on financing lender fees only for business‑purpose mortgage loans, including debt‑service‑coverage‑ratio (DSCR) loans used by investors; consumer‑purpose loans would retain current caps and prepayment‑penalty limits. Michael Stidham of Rocket Mortgage testified that the bill "does not increase fees" but allows borrowers who choose a business‑purpose loan the option to finance fees rather than bringing them to the closing table.

Sen. Rasmussen expressed concern that allowing amortization of fees above the cap could obscure costs and make interest‑rate comparisons more difficult for borrowers. Stidham and others clarified that the bill preserves consumer protections for personal residential loans and that DSCR loans prohibit the borrower from occupying the property.

After questions and clarifications about occupancy restrictions and the role of legal aid in drafting amendments, the committee adopted the amendment and recommended the bill be sent to general orders.