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 prohibitedpractices apply to a high cost home loan:
(1) A creditor making a high cost home loan may not directly orindirectly finance any points and fees.
(2) This subdivision does not apply to a high cost home loandescribed in IC 24-9-3-6(b). Prepayment fees or penalties maynot be included in the loan documents for a high cost home loanor charged to the borrower if the fees or penalties exceed intotal two percent (2%) of the high cost home loan amountprepaid during the first twenty-four (24) months after the highcost home loan closing.
(3) This subdivision does not apply to a high cost home loandescribed in IC 24-9-3-6(b). A prepayment penalty may not becontracted for after the second year following the high costhome loan closing.
(4) This subdivision does not apply to a high cost home loandescribed in IC 24-9-3-6(b). A creditor may not include aprepayment penalty fee in a high cost home loan unless thecreditor offers the borrower the option of choosing a loanproduct without a prepayment fee. The terms of the offer mustbe made in writing and must be initialed by the borrower. Thedocument containing the offer must be clearly labeled in largebold type and must include the following disclosure:
"LOAN PRODUCT CHOICE
I was provided with an offer to accept a product both withand without a prepayment penalty provision. I have chosento accept the product with a prepayment penalty.".
(5) A creditor shall not sell or otherwise assign a high costhome loan without furnishing the following statement to thepurchaser or assignee:
"NOTICE: This is a loan subject to special rules underIC 24-9. Purchasers or assignees may be liable for all claimsand defenses with respect to the loan that the borrower couldassert against the lender.".
(6) A mortgage or deed of trust that secures a high cost homeloan at the time the mortgage or deed of trust is recorded mustprominently display the following on the face of the instrument:
"This instrument secures a high cost home loan as defined inIC 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 feeson the part of the proceeds of the new high cost home loan thatis 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 transactionswith the effect of evading this article. Where multipletransactions are involved, the total points and fees charged in alltransactions shall be considered when determining whether theprotections 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 loanagreement may not require a scheduled payment that is more thantwice as large as the average of earlier scheduled monthly paymentsunder the high cost home loan agreement unless the paymentbecomes due and payable at least one hundred twenty (120) monthsafter the date of the high cost home loan. This prohibition does notapply if:
(1) the payment schedule is adjusted to account for the seasonalor irregular income of the borrower; or
(2) the loan is a bridge loan connected with or related to theacquisition or construction of a dwelling intended to become theborrower'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 homeloan may not include payment terms under which the outstandingprincipal balance will increase at any time over the course of the highcost home loan because the regular periodic payments do not coverthe full amount of interest due.
(b) This section does not apply to a temporary forbearance that isrequested 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 thatincreases the interest rate after default. However, this section doesnot apply to interest rate changes in a variable rate loan otherwiseconsistent with the provisions of the high cost home loan documentsif the change in the interest rate is not triggered by the event ofdefault 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 whichmore than two (2) periodic payments required under the high costhome loan are consolidated and paid in advance from the high costhome 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 withoutfirst providing the borrower information to facilitate contact with anonprofit counseling agency certified by:
(1) the United States Department of Housing and UrbanDevelopment; or
(2) the Indiana housing and community development authorityunder IC 5-20-1-4(g);
at the same time as the good faith estimates are provided to theborrower in accordance with the requirements of the federal RealEstate Settlement Procedures Act (12 U.S.C. 2601 et seq.) asamended.
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 todetermine debt to income ratio
Sec. 8. (a) A creditor may not make a high cost home loan withoutregard to repayment ability.
(b) If a creditor presents evidence that the creditor followedcommercially reasonable practices in determining the borrower's debtto income ratio, there is a rebuttable presumption that the creditormade the high cost home loan with due regard to repayment ability.For purposes of this section, there is a rebuttable presumption thatthe borrower's statement of income provided to the creditor is trueand 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 form26-6393.
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 homeimprovement contract from the proceeds of a high cost home loan
unless:
(1) the creditor is presented with a signed and dated completioncertificate showing that the home improvements have beencompleted; and
(2) the instrument is payable to the borrower or jointly to theborrower and the contractor or, at the election of the borrower,through a third party escrow agent under a written agreementsigned by the borrower, the creditor, and the contractor beforethe disbursement.
As added by P.L.73-2004, SEC.33.
IC 24-9-4-10
Modification, renewal, extension, amendment, or deferral of loanterms; fees and charges prohibited
Sec. 10. A creditor may not charge a borrower any fees or othercharges to modify, renew, extend, or amend a high cost home loan orto 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 thecreditor has given the following notice, in writing, to the borrowernot later than the time that notice is required under 12 CFR226.31(c):
"NOTICE TO BORROWER
YOU SHOULD BE AWARE THAT YOU MIGHT BE ABLETO OBTAIN A LOAN AT A LOWER COST. YOU SHOULDCOMPARE LOAN RATES, COSTS, AND FEES.MORTGAGE LOAN RATES AND CLOSING COSTS ANDFEES VARY BASED ON MANY FACTORS, INCLUDINGYOUR PARTICULAR CREDIT AND FINANCIALCIRCUMSTANCES, YOUR EMPLOYMENT HISTORY,THE LOAN-TO-VALUE REQUESTED, AND THE TYPE OFPROPERTY THAT WILL SECURE YOUR LOAN. THELOAN RATE, COSTS, AND FEES COULD ALSO VARYBASED ON WHICH CREDITOR OR BROKER YOUSELECT.
IF YOU ACCEPT THE TERMS OF THIS LOAN, THECREDITOR WILL HAVE A MORTGAGE LIEN ON YOURHOME. YOU COULD LOSE YOUR HOME AND ANYMONEY YOU HAVE PAID IF YOU DO NOT MEET YOURPAYMENT OBLIGATIONS UNDER THE LOAN.
YOU SHOULD CONSULT AN ATTORNEY AND AQUALIFIED INDEPENDENT CREDIT COUNSELOR OROTHER EXPERIENCED FINANCIAL ADVISERREGARDING THE RATE, FEES, AND PROVISIONS OFTHIS MORTGAGE LOAN BEFORE YOU PROCEED. ALIST OF QUALIFIED COUNSELORS IS AVAILABLEFROM THE INDIANA HOUSING AND COMMUNITY
DEVELOPMENT AUTHORITY.
YOU ARE NOT REQUIRED TO COMPLETE THIS LOANAGREEMENT MERELY BECAUSE YOU HAVERECEIVED THIS DISCLOSURE OR HAVE SIGNED ALOAN APPLICATION. REMEMBER, PROPERTY TAXESAND HOMEOWNER'S INSURANCE ARE YOURRESPONSIBILITY. NOT ALL CREDITORS PROVIDEESCROW SERVICES FOR THESE PAYMENTS. YOUSHOULD ASK YOUR CREDITOR ABOUT THESESERVICES.
ALSO, YOUR PAYMENTS ON EXISTING DEBTSCONTRIBUTE TO YOUR CREDIT RATINGS. YOUSHOULD NOT ACCEPT ANY ADVICE TO IGNORE YOURREGULAR PAYMENTS TO YOUR EXISTINGCREDITORS.".
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 voidprovisions
Sec. 12. Without regard to whether a borrower is actingindividually or on behalf of others similarly situated, a provision ofa 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 ordefense 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 whichthe borrower may otherwise bring a claim or defense; or
(3) limits in any way any claim or defense the borrower mayhave;
is unconscionable and void.
As added by P.L.73-2004, SEC.33.