§ 34-25.2-6 - Limitations and prohibited practices regarding high-cost home loans.
SECTION 34-25.2-6
§ 34-25.2-6 Limitations and prohibitedpractices regarding high-cost home loans. – A high-cost home loan shall be subject to the following additional limitationsand prohibited practices:
(a) In connection with a high-cost home loan, no creditorshall directly or indirectly finance any points or fees which total is greaterthan five percent (5%) of the total loan amount of eight hundred dollars ($800)whichever is greater.
(b) No prepayment fees or penalties shall be included in theloan documents for a high-cost home loan.
(c) No high-cost home loan may contain a scheduled paymentthat is more than twice as large as the average of earlier scheduled payments.This provision does not apply when the payment schedule is adjusted to theseasonal or irregular income of the borrower.
(d) No high-cost home loan may include payment terms underwhich the outstanding principal balance or accrued interest will increase atany time over the course of the loan because the regularly scheduled periodicpayments do not cover the full amount of interest due.
(e) No high-cost home loan may contain a provision thatincreases the interest rate after default. This provision does not apply tointerest rate changes in a variable rate loan otherwise consistent with theprovisions of the loan documents, provided the change in the interest rate isnot triggered by the event of default or the acceleration of the indebtedness.
(f) No high-cost home loan may include terms under which morethan two (2) periodic payments required under the loan are consolidated andpaid in advance from the loan proceeds provided to the borrower.
(g) A creditor may not make a high-cost home loan withoutfirst receiving certification from a counselor with a third-party nonprofitorganization approved by the United States Department of Housing and UrbanDevelopment that the borrower has received counseling on the advisability ofthe loan transaction.
(h) A high-cost home loan shall not be extended to a borrowerunless a reasonable creditor would believe at the time the loan is closed thatone or more of the borrowers will be able to make the scheduled paymentsassociated with the loan based upon a consideration of his or her current andexpected income, current obligations, employment status, and other financialresources, other than the borrower's equity in the collateral that secures therepayment of the loan. There is a rebuttable presumption that the borrower isable to make the scheduled payments to repay the obligation if, at the time theloan is consummated, said borrower's total monthly debts, including amountsunder the loan, do not exceed fifty percent (50%) of said borrower's monthlygross income as verified by tax returns, payroll receipts, and otherthird-party income verification.
(i) A creditor may not pay a contractor under ahome-improvement contract from the proceeds of a high-cost home loan, unless:
(1) the creditor is presented with a signed and datedcompletion certificate showing that the home improvements have been completed;and
(2) the instrument is payable to the borrower or jointly tothe borrower and the contractor, or, at the election of the borrower, through athird-party escrow agent in accordance with terms established in a writtenagreement signed by the borrower, the creditor, and the contractor prior to thedisbursement.
(j) A creditor may not charge a borrower any fees or othercharges to modify, renew, extend, or amend a high-cost home loan or to deferany payment due under the terms of a high-cost home loan.
(k) A creditor shall not make available a high-cost home loanthat provides for a late payment fee except as follows:
(1) The late payment fee shall not be in excess of threepercent (3%) of the amount of the payment past due.
(2) The late payment fee shall only be assessed for a paymentpast due for fifteen (15) days or more or ten (10) days or more in cases ofbi-weekly mortgage payment arrangement.
(3) The late payment fee shall not be imposed more than oncewith respect to a single late payment. If a late payment fee is deducted from apayment made on the loan, and the deduction causes a subsequent default on asubsequent payment, no late payment fee may be imposed for the default.
(4) A creditor shall treat each payment as posted on the samebusiness day as it was received.
(l) All high-cost home loan documents that create a debt orpledge property as collateral shall contain the following notice on the firstpage in a conspicuous manner: "Notice: This a high-cost home loan subject tospecial rules under state law. Purchasers or assignees of this high-cost homeloan may be liable for all claims and defenses by the borrower with respect tothe home loan."