Senate committee advances bill to align Kentucky mortgage fee rules with federal points-and-fees standard

A Kentucky Senate committee voted to advance Senate Bill 157, a measure to change how the state counts lender fees and discount points on mortgage loans so that loans meeting the federal qualified mortgage (QM) points-and-fees standard would be exempt from Kentuckyaps on "total net income." Supporters said the change will make it easier for buyers to use discount points to lower mortgage rates.

Supporters told the committee SB157 would amend the Kentucky mortgage loan companies and broker statute, which currently limits total net income generated by a lender and its affiliates to the greater of $2,000 or 4% of the loan amount for first and second mortgages. Michael Stidham, director of regulatory affairs for Rocket Mortgage, testified that Kentuckyalculations differ from the federal QM points-and-fees threshold adopted in 2021 and that the bill would align state practice with federal standards while preserving a 4% cap for loans not meeting federal criteria.

"This bill
ligns Kentucky with the majority of states that rely on the federal standards," Stidham said, urging lawmakers that bona fide discount points allow consumers to reduce their monthly mortgage payment by paying funds up front.

A committee member who introduced the public-policy framing (identified in the transcript as Jason House) said the change operates on the back end of transactions and "does not impact the borrower cost at all," noting the statutory change affects how fees are counted rather than the amount a borrower pays monthly.

Committee members asked for concrete examples during questioning. Rocket Mortgage gave a ballpark illustration: on a $250,000 loan, two discount points equals roughly $5,000, which can lower the interest rate and monthly payment; typical buy-downs range from a quarter-point to a half-point depending on market spreads and loan size.

The committee moved the bill and recorded a roll call; multiple senators recorded "Aye," and the chair announced SB157 passed the committee with favorable expression and will go to the floor for further consideration.

What remains: The statute change would exempt loans that meet the federal QM points-and-fees standard from Kentuckyee caps; loans that do not meet that federal standard would remain subject to the state% cap. The bill does not specify changes to borrower payment obligations, supporters said; procedural next steps include floor consideration and any additional technical amendments requested by members or agencies.