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 cancellationsuspension agreement or contract.
(b) Insurance premiums, debt cancellation fees, or suspension feescalculated and paid on a monthly basis are not considered to befinanced 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 replaceor consolidate a zero (0) interest rate or other subsidized low rateloan made by a governmental or nonprofit lender with a high costhome loan within the first ten (10) years of the subsidized low rateloan unless the current holder of the loan consents in writing to therefinancing.
(b) For purposes of this section, a "subsidized low rate loan" is aloan that carries a current interest rate of at least two (2) percentagepoints below the current yield on treasury securities with acomparable maturity. If the loan's current interest rate is either adiscounted introductory rate or a rate that automatically steps up overtime, the fully indexed rate or the fully stepped up rate, asappropriate, should be used instead of the current rate to determinewhether a loan is a subsidized low rate loan.
(c) Each mortgage or deed of trust securing a zero (0) interest rateor 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 othersubsidized low rate loan subject to IC 24-9-3-2.".
(d) A creditor may reasonably rely on the presence or absence ofthe statement described in subsection (c) on the face of an instrumentexecuted after January 1, 2005, as conclusive proof of the existenceor nonexistence of a zero (0) interest rate or other subsidized low rateloan.
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 anexisting loan or other debt before and in connection with the closing
or planned closing of a home loan that refinances all or part of theexisting 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 inregard to a home loan as posted on the same business day as thepayment was received by the creditor, servicer, or creditor's agent, orat the address provided to the borrower by the creditor, servicer, orcreditor'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 provisionthat permits the creditor, in the creditor's sole discretion, toaccelerate the indebtedness without material cause.
(b) This section does not prohibit acceleration of a home loan ingood faith due to the borrower's failure to abide by the material termsof the loan.
As added by P.L.73-2004, SEC.33.
IC 24-9-3-6
Payoff balance; written release upon prepayment; fee notpermitted; prepayment prohibited for adjustable rate home loans;short sales
Sec. 6. (a) A creditor may not charge a fee for informing ortransmitting to a person the balance due to pay off a home loan or toprovide a written release upon prepayment. A creditor must providea payoff balance not later than ten (10) calendar days after therequest is received by the creditor. For purposes of this subsection,"fee" does not include actual charges incurred by a creditor forexpress or priority delivery of home loan documents to the borrowerif such delivery is requested by the borrower.
(b) This subsection applies to a home loan, or the refinancing orconsolidation 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) ormore times during the term of the home loan.
A creditor in a transaction to which this subsection applies may notcontract for and may not charge the borrower a prepayment fee orpenalty.
(c) This subsection applies to a home loan with respect to whichany installment or minimum payment due is delinquent for at leastsixty (60) days. The creditor, servicer, or the creditor's agent shallacknowledge a written offer made in connection with a proposedshort sale not later than ten (10) business days after the date of theoffer if the offer complies with the requirements for a qualifiedwritten request set forth in 12 U.S.C. 2605(e)(1)(B). The creditor,
servicer, or creditor's agent is required to acknowledge a writtenoffer made in connection with a proposed short sale from a thirdparty acting on behalf of the debtor only if the debtor has providedwritten authorization for the creditor, servicer, or creditor's agent todo so. Not later than thirty (30) business days after receipt of an offerunder this subsection, the creditor, servicer, or creditor's agent shallrespond to the offer with an acceptance or a rejection of the offer. Asused in this subsection, "short sale" means a transaction in which theproperty that is the subject of a home loan is sold for an amount thatis less than the amount of the borrower's outstanding obligation onthe home loan. A creditor, a servicer, or a creditor's agent that failsto respond to an offer within the time prescribed by this subsectionis liable in accordance with 12 U.S.C. 2605(f) in any action broughtunder 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; prohibitedacts; land contracts; written notice of encumbrances
Sec. 7. (a) As used in this section, "mortgage transaction" includesthe following:
(1) A home loan subject to this article.
(2) To the extent allowed under federal law, a loan described inIC 24-9-1-1 that is secured by a mortgage or deed of trust onreal estate in Indiana on which there is located or will belocated 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 theborrower's principal dwelling.
(3) A first lien mortgage transaction (as defined inIC 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 amortgage, deed of trust, or land contract that constitutes a lienis 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 bythe debtor primarily for personal, family, or householdpurposes.
(5) A consumer credit loan subject to IC 24-4.5-3 in which amortgage, deed of trust, or land contract that constitutes a lienis 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 bythe debtor primarily for personal, family, or householdpurposes.
(6) A loan in which a mortgage, deed of trust, or land contractthat 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 beused by the borrower primarily for personal, family, orhousehold purposes; and
(C) that is classified as residential for property tax purposes.
The term includes a loan that is secured by land in Indiana uponwhich there is a dwelling that is purchased by or through theborrower for investment or other business purposes.
(7) A reverse mortgage transaction that is secured by real estatein Indiana on which there is located a structure that is occupiedby a borrower as the borrower's principal dwelling.
(b) As used in this section, "real estate transaction" means the saleor 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 theintent of evading a provision of this article.
(2) Structure a home loan transaction as an open-end loan withthe intent of evading the provisions of this article if the homeloan would be a high cost home loan if the home loan had beenstructured as a closed-end loan.
(3) Engage in a deceptive act in connection with a mortgagetransaction or a real estate transaction.
(4) Engage in, or solicit to engage in, a real estate transaction ora mortgage transaction without a permit or license required bylaw.
(5) With respect to a real estate transaction or a mortgagetransaction, represent that:
(A) the transaction has:
(i) certain terms or conditions; or
(ii) the sponsorship or approval of a particular person orentity;
that it does not have and that the person knows or reasonablyshould know it does not have; or
(B) the real estate or property that is the subject of thetransaction has any improvements, appurtenances, uses,characteristics, or associated benefits that it does not haveand that the person knows or reasonably should know it doesnot have.
(6) Maintain or offer to maintain an account for the receipt offunds for the payment of real estate taxes and insurance unlessthe person is any of the following:
(A) Any of the following that is chartered under the laws ofa 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 ina 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 aseller in a real estate transaction described in subsection (d).
(d) This subsection applies to a real estate transaction thatinvolves a land contract between the seller and the buyer in thetransaction. If the real estate that is the subject of the transaction issubject to any encumbrance, including any tax lien, foreclosureaction, legal judgment, or other encumbrance affecting the title to thereal 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 theencumbrance is created before or at the time the land contractis executed; or
(2) not later than ten (10) business days after the encumbranceis created, if the encumbrance is created after the land contractis 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), or7(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 anyapplicant with respect to any aspect of a credit transaction on thebasis of race, color, religion, national origin, sex, marital status, orage, if the applicant has the ability to contract.
As added by P.L.73-2004, SEC.33.