A Maryland Senate committee approved emergency legislation today to eliminate the state's 10 percent limit on mortgage interest rates but continue the prohibition on points.
The bill, designed to heal the state's ailing housing industry, is expected to spark heated debate Friday when state senators are scheduled to put the bill in its final form.
"There will be an attempt to reinstate points on the bill," said Sen. Harry J. McGuirk (D-Baltimore), chairman of the Senate Economic Matters Committee. The committee voted 6 to 3 today in favor of the bill and continuing the prohibition on points because, "they felt that they were extending a great deal by removing the ceiling, and that by removing points," McGuirk aid.
A point is surcharge equal to one percent of the mortgage and is paid to the lender at the time of settlement.
Emergency legislation becomes effective immediately after signing by the governor rather than during the next fiscal year, which begins on July 1, but it requires a three-fifths majority of both houses, a feat some legislators feel is unlikely.
The state's current 10 percent usury ceiling was raised from 8 percent during the 1974 crunch and the new ceiling subsequently was extended for two years.
Although delighted that the committee proposed lifting the ceiling, Maryland bankers and housing industry representatives said they will push to lift as well the prohibition on points.
"The (housing) market has got to be made available for everybody. We think (using) points is a way to help," said Lee Straight, executive vice president of the State of Maryland Institute of Home Builders Inc.
Opponents of the bill could postpone final decision on its form until Monday, McGuirk said. If the bill's form is decided Friday, however, the bill could be voted on by the Senate as early as Thrsday, McGuirk said, adding that he expects the bill to pass.
If approved by the Senate, it then will be sent to the House for consideration. Public hearings on several mortgage-rate bills in the House are scheduled for Thursday.
Straight said if legislation is approved, "it will take three to six months to get the banks moving."
William K. Weaver, executive vice president of the Maryland Bankers Association, said today that if the bill is approved soon, interest rates in the state are expected to float to between 10.25 and 10.75 percent with 5 or 10 percent down. "Now I don't know any bank asking for less than 30 percent down," Weaver said.