16a-3-308a. Loans secured by mortgages on consumer's principal residence; negative amortization and balloon payments prohibited.
16a-3-308a
16a-3-308a. Loans secured by mortgages on consumer's
principal residence; negative amortization and balloon payments
prohibited.
(1) A loan subject to this section may not provide for the
negative amortization of principal or a balloon payment. A loan payment is not
a balloon payment if the amount of the payment is less than twice the amount of
any other payment.
(2) Subsection (1) applies to a consumer loan which is secured by a first
mortgage or a second mortgage on the consumer's principal residence and with
respect to which (a) the loan-to-value ratio exceeds 100% at the time the loan
is
made or (b) the annual percentage rate exceeds the code mortgage rate.
Notwithstanding the foregoing, subsection (1) does not apply to a loan
pursuant to open end credit; a purchase-money loan incurred to acquire or
construct the consumer's principal residence; or a reverse mortgage
transaction.
(3) The creditor must disburse the proceeds of a consumer loan secured by a
first
mortgage or a second mortgage upon the satisfaction of all conditions to the
disbursement and the expiration of all applicable rescission, cooling-off or
other waiting periods required by law, unless the parties otherwise agree in
writing.
(4) No person shall record a mortgage if moneys are not available for
disbursal to the mortgagor upon the expiration of all applicable
rescission,
cooling-off or other waiting periods required by law unless, before that
recording, the person informs the mortgagor in writing of a definite date by
which payment shall be made and obtains the mortgagor's written permission for
the delay.
(5) This section shall be supplemental to and a part of the
uniform consumer
credit code.
History: L. 1999, ch. 107, § 3;
L. 2005, ch. 144, § 15;
L. 2006, ch. 67, § 1; July 1.