CHAPTER 3. PROHIBITED LENDING PRACTICES GENERALLY
IC 24-9-3
Chapter 3. Prohibited Lending Practices Generally
IC 24-9-3-1
Financing of certain premiums, penalties, and fees prohibited
Sec. 1. (a) A creditor making a home loan may not finance,
directly or indirectly, any:
(1) credit life insurance;
(2) credit disability insurance;
(3) credit unemployment insurance;
(4) credit property insurance; or
(5) payments directly or indirectly for any cancellation
suspension agreement or contract.
(b) Insurance premiums, debt cancellation fees, or suspension fees
calculated and paid on a monthly basis are not considered to be
financed by the creditor for purposes of this chapter.
As added by P.L.73-2004, SEC.33.
IC 24-9-3-2
Subsidized low rate loans
Sec. 2. (a) A creditor may not knowingly or intentionally replace
or consolidate a zero (0) interest rate or other subsidized low rate
loan made by a governmental or nonprofit lender with a high cost
home loan within the first ten (10) years of the subsidized low rate
loan unless the current holder of the loan consents in writing to the
refinancing.
(b) For purposes of this section, a "subsidized low rate loan" is a
loan that carries a current interest rate of at least two (2) percentage
points below the current yield on treasury securities with a
comparable maturity. If the loan's current interest rate is either a
discounted introductory rate or a rate that automatically steps up over
time, the fully indexed rate or the fully stepped up rate, as
appropriate, should be used instead of the current rate to determine
whether a loan is a subsidized low rate loan.
(c) Each mortgage or deed of trust securing a zero (0) interest rate
or other subsidized low rate loan executed after January 1, 2005,
must prominently display the following on the face of the instrument:
"This instrument secures a zero (0) interest rate or other
subsidized low rate loan subject to IC 24-9-3-2.".
(d) A creditor may reasonably rely on the presence or absence of
the statement described in subsection (c) on the face of an instrument
executed after January 1, 2005, as conclusive proof of the existence
or nonexistence of a zero (0) interest rate or other subsidized low rate
loan.
As added by P.L.73-2004, SEC.33.
IC 24-9-3-3
Default on existing loan
Sec. 3. A creditor may not recommend or encourage default on an
existing loan or other debt before and in connection with the closing
or planned closing of a home loan that refinances all or part of the
existing loan or debt.
As added by P.L.73-2004, SEC.33.
IC 24-9-3-4
Date of payment
Sec. 4. A creditor shall treat each payment made by a borrower in
regard to a home loan as posted on the same business day as the
payment was received by the creditor, servicer, or creditor's agent, or
at the address provided to the borrower by the creditor, servicer, or
creditor's agent for making payments.
As added by P.L.73-2004, SEC.33.
IC 24-9-3-5
Loan acceleration
Sec. 5. (a) A home loan agreement may not contain a provision
that permits the creditor, in the creditor's sole discretion, to
accelerate the indebtedness without material cause.
(b) This section does not prohibit acceleration of a home loan in
good faith due to the borrower's failure to abide by the material terms
of the loan.
As added by P.L.73-2004, SEC.33.
IC 24-9-3-6
Payoff balance; written release upon prepayment; fee not
permitted; prepayment prohibited for adjustable rate home loans;
short sales
Sec. 6. (a) A creditor may not charge a fee for informing or
transmitting to a person the balance due to pay off a home loan or to
provide a written release upon prepayment. A creditor must provide
a payoff balance not later than ten (10) calendar days after the
request is received by the creditor. For purposes of this subsection,
"fee" does not include actual charges incurred by a creditor for
express or priority delivery of home loan documents to the borrower
if such delivery is requested by the borrower.
(b) This subsection applies to a home loan, or the refinancing or
consolidation of a home loan, that:
(1) is closed after June 30, 2009; and
(2) has an interest rate that is subject to change at one (1) or
more times during the term of the home loan.
A creditor in a transaction to which this subsection applies may not
contract for and may not charge the borrower a prepayment fee or
penalty.
(c) This subsection applies to a home loan with respect to which
any installment or minimum payment due is delinquent for at least
sixty (60) days. The creditor, servicer, or the creditor's agent shall
acknowledge a written offer made in connection with a proposed
short sale not later than ten (10) business days after the date of the
offer if the offer complies with the requirements for a qualified
written request set forth in 12 U.S.C. 2605(e)(1)(B). The creditor,
servicer, or creditor's agent is required to acknowledge a written
offer made in connection with a proposed short sale from a third
party acting on behalf of the debtor only if the debtor has provided
written authorization for the creditor, servicer, or creditor's agent to
do so. Not later than thirty (30) business days after receipt of an offer
under this subsection, the creditor, servicer, or creditor's agent shall
respond to the offer with an acceptance or a rejection of the offer. As
used in this subsection, "short sale" means a transaction in which the
property that is the subject of a home loan is sold for an amount that
is less than the amount of the borrower's outstanding obligation on
the home loan. A creditor, a servicer, or a creditor's agent that fails
to respond to an offer within the time prescribed by this subsection
is liable in accordance with 12 U.S.C. 2605(f) in any action brought
under that section.
As added by P.L.73-2004, SEC.33. Amended by P.L.145-2008,
SEC.29; P.L.52-2009, SEC.6.
IC 24-9-3-7
Mortgage transactions and real estate transactions; prohibited
acts; land contracts; written notice of encumbrances
Sec. 7. (a) As used in this section, "mortgage transaction" includes
the following:
(1) A home loan subject to this article.
(2) To the extent allowed under federal law, a loan described in
IC 24-9-1-1 that is secured by a mortgage or deed of trust on
real estate in Indiana on which there is located or will be
located a structure or structures:
(A) designed primarily for occupancy of one (1) to four (4)
families; and
(B) that is or will be occupied by a borrower as the
borrower's principal dwelling.
(3) A first lien mortgage transaction (as defined in
IC 24-4.4-1-301) subject to IC 24-4.4.
(4) A consumer credit sale subject to IC 24-4.5-2 in which a
mortgage, deed of trust, or land contract that constitutes a lien
is created or retained against land:
(A) that is located in Indiana; and
(B) upon which there is a dwelling that is or will be used by
the debtor primarily for personal, family, or household
purposes.
(5) A consumer credit loan subject to IC 24-4.5-3 in which a
mortgage, deed of trust, or land contract that constitutes a lien
is created or retained against land:
(A) that is located in Indiana; and
(B) upon which there is a dwelling that is or will be used by
the debtor primarily for personal, family, or household
purposes.
(6) A loan in which a mortgage, deed of trust, or land contract
that constitutes a lien is created or retained against land:
(A) that is located in Indiana;
(B) upon which there is a dwelling that is not or will not be
used by the borrower primarily for personal, family, or
household purposes; and
(C) that is classified as residential for property tax purposes.
The term includes a loan that is secured by land in Indiana upon
which there is a dwelling that is purchased by or through the
borrower for investment or other business purposes.
(7) A reverse mortgage transaction that is secured by real estate
in Indiana on which there is located a structure that is occupied
by a borrower as the borrower's principal dwelling.
(b) As used in this section, "real estate transaction" means the sale
or lease of any legal or equitable interest in real estate:
(1) that is located in Indiana;
(2) upon which there is a dwelling; and
(3) that is classified as residential for property tax purposes.
(c) A person may not do any of the following:
(1) Divide a home loan transaction into separate parts with the
intent of evading a provision of this article.
(2) Structure a home loan transaction as an open-end loan with
the intent of evading the provisions of this article if the home
loan would be a high cost home loan if the home loan had been
structured as a closed-end loan.
(3) Engage in a deceptive act in connection with a mortgage
transaction or a real estate transaction.
(4) Engage in, or solicit to engage in, a real estate transaction or
a mortgage transaction without a permit or license required by
law.
(5) With respect to a real estate transaction or a mortgage
transaction, represent that:
(A) the transaction has:
(i) certain terms or conditions; or
(ii) the sponsorship or approval of a particular person or
entity;
that it does not have and that the person knows or reasonably
should know it does not have; or
(B) the real estate or property that is the subject of the
transaction has any improvements, appurtenances, uses,
characteristics, or associated benefits that it does not have
and that the person knows or reasonably should know it does
not have.
(6) Maintain or offer to maintain an account for the receipt of
funds for the payment of real estate taxes and insurance unless
the person is any of the following:
(A) Any of the following that is chartered under the laws of
a state or the United States:
(i) A bank.
(ii) A savings and loan association.
(iii) A credit union.
(iv) A savings bank.
(B) The creditor in a mortgage transaction.
(C) A mortgage servicer acting on behalf of the creditor in
a mortgage transaction.
(D) A closing agent (as defined in IC 27-7-3.7-1).
(7) Fail to provide the notice required under subsection (d),
within the time specified in subsection (d), if the person is a
seller in a real estate transaction described in subsection (d).
(d) This subsection applies to a real estate transaction that
involves a land contract between the seller and the buyer in the
transaction. If the real estate that is the subject of the transaction is
subject to any encumbrance, including any tax lien, foreclosure
action, legal judgment, or other encumbrance affecting the title to the
real estate, the seller must provide written notice by certified mail,
return receipt requested, of the encumbrance to the buyer:
(1) not later than the time the land contract is executed, if the
encumbrance is created before or at the time the land contract
is executed; or
(2) not later than ten (10) business days after the encumbrance
is created, if the encumbrance is created after the land contract
is executed.
As added by P.L.73-2004, SEC.33. Amended by P.L.141-2005,
SEC.5; P.L.52-2009, SEC.7; P.L.105-2009, SEC.8; P.L.114-2010,
SEC.18.
IC 24-9-3-8
Intimidation, coercion, and harassment prohibited
Sec. 8. A person seeking to enforce section 7(c)(3), 7(c)(4), or
7(c)(5) of this chapter may not knowingly or intentionally intimidate,
coerce, or harass another person.
As added by P.L.73-2004, SEC.33. Amended by P.L.52-2009, SEC.8;
P.L.105-2009, SEC.9.
IC 24-9-3-9
Prohibited discrimination
Sec. 9. It is unlawful for a creditor to discriminate against any
applicant with respect to any aspect of a credit transaction on the
basis of race, color, religion, national origin, sex, marital status, or
age, if the applicant has the ability to contract.
As added by P.L.73-2004, SEC.33.