CHAPTER 4. ADDITIONAL PROHIBITIONS FOR HIGH COST HOME LOANS
IC 24-9-4
Chapter 4. Additional Prohibitions for High Cost Home Loans
IC 24-9-4-1
Limitations and prohibited practices
Sec. 1. The following additional limitations and prohibited
practices apply to a high cost home loan:
(1) A creditor making a high cost home loan may not directly or
indirectly finance any points and fees.
(2) This subdivision does not apply to a high cost home loan
described in IC 24-9-3-6(b). Prepayment fees or penalties may
not be included in the loan documents for a high cost home loan
or charged to the borrower if the fees or penalties exceed in
total two percent (2%) of the high cost home loan amount
prepaid during the first twenty-four (24) months after the high
cost home loan closing.
(3) This subdivision does not apply to a high cost home loan
described in IC 24-9-3-6(b). A prepayment penalty may not be
contracted for after the second year following the high cost
home loan closing.
(4) This subdivision does not apply to a high cost home loan
described in IC 24-9-3-6(b). A creditor may not include a
prepayment penalty fee in a high cost home loan unless the
creditor offers the borrower the option of choosing a loan
product without a prepayment fee. The terms of the offer must
be made in writing and must be initialed by the borrower. The
document containing the offer must be clearly labeled in large
bold type and must include the following disclosure:
"LOAN PRODUCT CHOICE
I was provided with an offer to accept a product both with
and without a prepayment penalty provision. I have chosen
to accept the product with a prepayment penalty.".
(5) A creditor shall not sell or otherwise assign a high cost
home loan without furnishing the following statement to the
purchaser or assignee:
"NOTICE: This is a loan subject to special rules under
IC 24-9. Purchasers or assignees may be liable for all claims
and defenses with respect to the loan that the borrower could
assert against the lender.".
(6) A mortgage or deed of trust that secures a high cost home
loan at the time the mortgage or deed of trust is recorded must
prominently display the following on the face of the instrument:
"This instrument secures a high cost home loan as defined in
IC 24-9-2-8.".
(7) A creditor making a high cost home loan may not finance,
directly or indirectly, any life or health insurance.
As added by P.L.73-2004, SEC.33. Amended by P.L.52-2009, SEC.9.
IC 24-9-4-2
Points and fees charged in certain refinance transactions; evasive
division of home loans prohibited
Sec. 2. A creditor may not knowingly or intentionally:
(1) refinance a high cost home loan by charging points and fees
on the part of the proceeds of the new high cost home loan that
is used to refinance the existing high cost loan within four (4)
years of the origination of the existing high cost home loan; or
(2) divide a home loan transaction into multiple transactions
with the effect of evading this article. Where multiple
transactions are involved, the total points and fees charged in all
transactions shall be considered when determining whether the
protections of this section apply.
As added by P.L.73-2004, SEC.33.
IC 24-9-4-3
Balloon payments
Sec. 3. Notwithstanding IC 24-4.5-3-402, a high cost home loan
agreement may not require a scheduled payment that is more than
twice as large as the average of earlier scheduled monthly payments
under the high cost home loan agreement unless the payment
becomes due and payable at least one hundred twenty (120) months
after the date of the high cost home loan. This prohibition does not
apply if:
(1) the payment schedule is adjusted to account for the seasonal
or irregular income of the borrower; or
(2) the loan is a bridge loan connected with or related to the
acquisition or construction of a dwelling intended to become the
borrower's principal dwelling.
As added by P.L.73-2004, SEC.33.
IC 24-9-4-4
Payment terms; collection of interest due
Sec. 4. (a) Except as provided in subsection (b), a high cost home
loan may not include payment terms under which the outstanding
principal balance will increase at any time over the course of the high
cost home loan because the regular periodic payments do not cover
the full amount of interest due.
(b) This section does not apply to a temporary forbearance that is
requested by a borrower regarding a high cost home loan.
As added by P.L.73-2004, SEC.33.
IC 24-9-4-5
Acceleration after default
Sec. 5. A high cost home loan may not contain a provision that
increases the interest rate after default. However, this section does
not apply to interest rate changes in a variable rate loan otherwise
consistent with the provisions of the high cost home loan documents
if the change in the interest rate is not triggered by the event of
default or the acceleration of the indebtedness.
As added by P.L.73-2004, SEC.33.
IC 24-9-4-6
Consolidated periodic payments paid from loan proceeds
Sec. 6. A high cost home loan may not include terms under which
more than two (2) periodic payments required under the high cost
home loan are consolidated and paid in advance from the high cost
home loan proceeds provided to the borrower.
As added by P.L.73-2004, SEC.33.
IC 24-9-4-7
Counseling agency contact information
Sec. 7. A creditor may not make a high cost home loan without
first providing the borrower information to facilitate contact with a
nonprofit counseling agency certified by:
(1) the United States Department of Housing and Urban
Development; or
(2) the Indiana housing and community development authority
under IC 5-20-1-4(g);
at the same time as the good faith estimates are provided to the
borrower in accordance with the requirements of the federal Real
Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) as
amended.
As added by P.L.73-2004, SEC.33. Amended by P.L.1-2006,
SEC.415.
IC 24-9-4-8
Repayment ability; commercially reasonable practices to
determine debt to income ratio
Sec. 8. (a) A creditor may not make a high cost home loan without
regard to repayment ability.
(b) If a creditor presents evidence that the creditor followed
commercially reasonable practices in determining the borrower's debt
to income ratio, there is a rebuttable presumption that the creditor
made the high cost home loan with due regard to repayment ability.
For purposes of this section, there is a rebuttable presumption that
the borrower's statement of income provided to the creditor is true
and complete.
(c) Commercially reasonable practices include the use of:
(1) the debt to income ratio:
(A) listed in 38 CFR 36.4337(c)(1); and
(B) defined in 38 CFR 36.4337(d); and
(2) the residual income guidelines established under:
(A) 38 CFR 36.4337(e); and
(B) United States Department of Veterans Affairs form
26-6393.
As added by P.L.73-2004, SEC.33.
IC 24-9-4-9
Payments to home improvement contractors
Sec. 9. A creditor may not pay a contractor under a home
improvement contract from the proceeds of a high cost home loan
unless:
(1) the creditor is presented with a signed and dated completion
certificate showing that the home improvements have been
completed; and
(2) the instrument is payable to the borrower or jointly to the
borrower and the contractor or, at the election of the borrower,
through a third party escrow agent under a written agreement
signed by the borrower, the creditor, and the contractor before
the disbursement.
As added by P.L.73-2004, SEC.33.
IC 24-9-4-10
Modification, renewal, extension, amendment, or deferral of loan
terms; fees and charges prohibited
Sec. 10. A creditor may not charge a borrower any fees or other
charges to modify, renew, extend, or amend a high cost home loan or
to defer a payment due under the terms of a high cost home loan.
As added by P.L.73-2004, SEC.33.
IC 24-9-4-11
Notice to borrower
Sec. 11. A creditor may not make a high cost home loan unless the
creditor has given the following notice, in writing, to the borrower
not later than the time that notice is required under 12 CFR
226.31(c):
"NOTICE TO BORROWER
YOU SHOULD BE AWARE THAT YOU MIGHT BE ABLE
TO OBTAIN A LOAN AT A LOWER COST. YOU SHOULD
COMPARE LOAN RATES, COSTS, AND FEES.
MORTGAGE LOAN RATES AND CLOSING COSTS AND
FEES VARY BASED ON MANY FACTORS, INCLUDING
YOUR PARTICULAR CREDIT AND FINANCIAL
CIRCUMSTANCES, YOUR EMPLOYMENT HISTORY,
THE LOAN-TO-VALUE REQUESTED, AND THE TYPE OF
PROPERTY THAT WILL SECURE YOUR LOAN. THE
LOAN RATE, COSTS, AND FEES COULD ALSO VARY
BASED ON WHICH CREDITOR OR BROKER YOU
SELECT.
IF YOU ACCEPT THE TERMS OF THIS LOAN, THE
CREDITOR WILL HAVE A MORTGAGE LIEN ON YOUR
HOME. YOU COULD LOSE YOUR HOME AND ANY
MONEY YOU HAVE PAID IF YOU DO NOT MEET YOUR
PAYMENT OBLIGATIONS UNDER THE LOAN.
YOU SHOULD CONSULT AN ATTORNEY AND A
QUALIFIED INDEPENDENT CREDIT COUNSELOR OR
OTHER EXPERIENCED FINANCIAL ADVISER
REGARDING THE RATE, FEES, AND PROVISIONS OF
THIS MORTGAGE LOAN BEFORE YOU PROCEED. A
LIST OF QUALIFIED COUNSELORS IS AVAILABLE
FROM THE INDIANA HOUSING AND COMMUNITY
DEVELOPMENT AUTHORITY.
YOU ARE NOT REQUIRED TO COMPLETE THIS LOAN
AGREEMENT MERELY BECAUSE YOU HAVE
RECEIVED THIS DISCLOSURE OR HAVE SIGNED A
LOAN APPLICATION. REMEMBER, PROPERTY TAXES
AND HOMEOWNER'S INSURANCE ARE YOUR
RESPONSIBILITY. NOT ALL CREDITORS PROVIDE
ESCROW SERVICES FOR THESE PAYMENTS. YOU
SHOULD ASK YOUR CREDITOR ABOUT THESE
SERVICES.
ALSO, YOUR PAYMENTS ON EXISTING DEBTS
CONTRIBUTE TO YOUR CREDIT RATINGS. YOU
SHOULD NOT ACCEPT ANY ADVICE TO IGNORE YOUR
REGULAR PAYMENTS TO YOUR EXISTING
CREDITORS.".
As added by P.L.73-2004, SEC.33. Amended by P.L.1-2006,
SEC.416.
IC 24-9-4-12
High cost home loan agreements; unconscionable and void
provisions
Sec. 12. Without regard to whether a borrower is acting
individually or on behalf of others similarly situated, a provision of
a high cost home loan agreement that:
(1) requires arbitration of a claim or defense;
(2) allows a party to require a borrower to assert a claim or
defense in a forum that is:
(A) less convenient;
(B) more costly; or
(C) more dilatory;
for the resolution of the dispute than an Indiana court in which
the borrower may otherwise bring a claim or defense; or
(3) limits in any way any claim or defense the borrower may
have;
is unconscionable and void.
As added by P.L.73-2004, SEC.33.