N.Y. Comp. Codes R. & Regs. tit. 3 § 41.2

Current through Register Vol. 46, No. 51, December 18, 2024

Section 41.2 - Limitations

A high cost home loan shall be subject to the following limitations.

(a) No call provision. No high cost home loan may contain a call provision that permits the lender, in its sole discretion, to accelerate the indebtedness. This prohibition does not apply when repayment of the loan has been accelerated in good faith, due either to a bona fide default or other failure of the borrower to abide by the material terms of the loan, or pursuant to a due-on-sale provision, or pursuant to some other provision of the loan agreement unrelated to the payment schedule such as bankruptcy or receivership.

(b) No balloon payment. No high cost home loan may contain a scheduled final payment that is more than twice as large as the average of earlier scheduled monthly payments unless such balloon payment becomes due and payable at least 15 years after the loan's origination. This prohibition does not apply when the payment schedule is adjusted to account for the seasonal or irregular income of the borrower or if the purpose of the loan is a bridge loan connected with the acquisition or construction of a dwelling intended to become the borrower's principal dwelling. This subdivision shall not apply to open-end high cost home loans.

(c) No negative amortization. Notwithstanding any statute or regulation to the contrary, no high cost home loan may contain a payment schedule with regular periodic payments that cause the principal balance to increase. This shall not prohibit negative amortization as a consequence of a temporary forbearance sought by the borrower. This subdivision shall not apply to open-end high cost home loans.

(d) No increased interest rate. No high cost home loan may contain a provision that increases the interest rate after default. This provision does not apply to periodic interest rate changes in a variable rate loan otherwise consistent with the provisions of the loan agreement, provided the change in the interest rate is not occasioned by the event of default or the acceleration of the indebtedness.

(e) No oppressive mandatory arbitration clause. No high cost home loan may be subject to a mandatory arbitration clause that is oppressive, unfair, unconscionable, or substantially in derogation of the rights of consumers. Arbitration clauses that comply with the standards set forth in the Statement of Principles of the National Consumer Dispute Advisory Committee, as such statement is on file at the New York State Banking Department, shall be presumed not to violate this subdivision. The Statement of Principles may be viewed at the New York State Department of Banking located at the New York City office of the New York State Banking Department located at the address stated in Supervisory Policy G1 of this Title or through internet access at http:// www.banking.state.ny.us/41.htm.

(f) No advance payments. No high cost home loan may include terms under which more than two periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 41.2