(a) No lending without cautionary notice.--A lender may not make a covered loan unless the lender or a mortgage broker has given the following notice, or substantially similar notice, in writing to the obligor not later than the time the notice is required under the notice provision contained in 12 CFR 226.31(c) (relating to general rules) as amended from time to time:NOTICE TO BORROWER
If you obtain this loan, the lender will have a mortgage on your home. You could lose your home and any money you put into it if you do not meet your obligations under the loan.
Mortgage loan rates and closing costs and fees vary based on many factors, including your particular credit and financial circumstances, your employment history, the loan-to-value requested and the type of property that will secure your loan. The loan rate and fees could also vary based on which lender or broker you select. As an obligor, you should shop around and compare loan rates and fees.
You should also consider consulting a qualified independent credit counselor or other experienced financial advisor regarding the rate, fees and provisions of this mortgage loan before you proceed. A list of qualified counselors is available by contacting the Pennsylvania Housing Finance Agency.
You are not required to complete this loan agreement merely because you have received these disclosures or have signed a loan application.
Remember, property taxes and homeowner's insurance are your responsibility. Not all lenders provide escrow services for these payments. You should ask your lender about these services.
Also, your payments on existing debts contribute to your credit ratings. You should not accept any advice to ignore your regular payments to your existing creditors.
Provision of a consumer information pamphlet or other publication prepared by the Office of Consumer Protection of the Office of Attorney General regarding covered loans shall be deemed to constitute a substantially similar notice.
(b) No lending without due regard to repayment ability.--A lender shall not engage in a pattern or practice of making covered loans based on the consumer's collateral without regard to the consumer's repayment ability, including, but not limited to, the consumer's current and expected income, current obligations as disclosed to the lender by the loan application and the consumer's credit report, employment status and other financial resources other than the obligor's equity in the dwelling which secures repayment of the loan. An obligor shall be presumed to be able to make the scheduled payments to repay the obligation if, at the time the loan is consummated, the obligor's scheduled monthly payments as disclosed to the lender by the loan application and the consumer's credit report do not exceed 50% of the obligor's monthly gross income. For purposes of determining median income, the income of all obligors shall be considered. The requirements of this subsection shall apply only to obligors whose income, as reported on the loan application, is no greater than 120% of the median family income. No presumption shall arise that an obligor is not able to make the scheduled payments if the obligor's scheduled monthly payments exceed 50% of the obligor's monthly gross income as determined pursuant to this subsection.(c) Refinancing of existing covered loan with a new covered loan.--A lender may not charge any points in connection with a covered loan if the proceeds of the covered loan are used to refinance an existing covered loan held by the lender and the last financing was within one year of the current refinancing; provided, however, this provision shall not prohibit a lender from charging points in connection with any additional proceeds paid to or for the account of the obligor, other than charges or costs attributable to the covered loan, in connection with the refinancing. For purposes of this subsection, additional proceeds shall be defined as the amount over and above the current principal balance of the existing covered loan; provided, however, in the event the lender refunds all the points on the covered loan being refinanced, the additional proceeds shall be the principal balance of the new covered loan.(d) No refinancing of certain low-rate loans.--A lender shall not replace or consolidate a zero interest rate or low-rate loan made by a governmental or nonprofit lender with a covered loan within the first ten years of the zero interest or low-rate loan unless the current holder of the loan consents in writing to the financing. For purposes of this subsection, a low-rate loan shall be defined as a loan that carries a current interest rate two percentage points or more below the current yield on United States Treasury securities with a comparable maturity.(e) Restrictions on covered loan proceeds to pay home improvement contracts.--A lender shall not pay a contractor under a home improvement contract from the proceeds of a covered loan other than by an instrument payable to the obligor or jointly to the obligor and the contractor or, at the election of the obligor, through a third-party escrow agent in accordance with terms established in a written agreement signed by the obligor, the lender and the contractor prior to the disbursement of funds to the contractor.(f) Restrictions on single premium credit insurance.--A lender shall not sell any individual or group credit life, accident and health or unemployment insurance product on a prepaid single premium basis in conjunction with a covered loan unless the following conditions are met:(1) After the expiration of 18 months from the date of enactment of this chapter and for an additional six-month period that may be necessary in order to secure any necessary approvals for a monthly premium credit insurance product by the Insurance Department, if a lender offers any individual or group credit life, accident and health and unemployment insurance products purchased on a prepaid single premium basis in conjunction with a covered loan, the lender shall offer the obligor the option of purchasing all such insurance on a monthly premium basis.(2) A lender shall not sell credit life, accident and health or unemployment insurance products in conjunction with a covered loan other than where the insurance premiums are calculated, earned and paid on a monthly or other regular periodic basis without providing a separate disclosure with a copy acknowledged by the insured no later than the time of closing in a form substantially similar to the following:INSURANCE NOTICE TO BORROWER(S)
You have elected to purchase credit life, accident and health and/or unemployment insurance in conjunction with this mortgage loan. The cost of this insurance is being prepaid and financed at the interest rate provided for in the loan.
This insurance is NOT required as a condition of closing this loan and has been included with the loan at your request.
At any time you have the right to cancel any or all such policies purchased in conjunction with this loan. You may cancel your policy or policies by signing and returning a copy of this notice to your lender or you may contact your lender directly.
If you cancel your insurance within 30 days of the date of your loan, then you will receive either a full refund or a credit against your loan account. If you cancel your insurance at any other time, you will receive either a refund or credit against your loan account of any unearned premium.
YOU MUST CANCEL WITHIN 30 DAYS OF THE DATE OF THE LOAN TO RECEIVE A FULL REFUND.
CREDIT INSURANCE CANCELLATION
I (we) request that the lender cancel the _____ insurance that I (we) purchased in conjunction with my (our) mortgage loan dated _____.
Date
Borrower
ACKNOWLEDGMENT OF RECEIPT
I (we) acknowledge receipt of the above notice.
Date
Borrower
(3) If an obligor elects to cancel, within 30 days of the date of the covered loan, any individual or group credit life, accident and health or unemployment insurance product purchased on prepaid single premium basis in conjunction with a covered loan, the lender or the insurance company who sold the insurance or the insurance company providing the product shall give the obligor either a full premium refund or a full premium credit against the unpaid loan balance. If the obligor elects to cancel any individual or group credit insurance purchased in conjunction with a covered loan at any other time, the refund or credit shall be computed as provided or permitted by State law. The lender or insurance company shall decide whether the return of premium shall be by means of credit to the account or by refund to the obligor. This subsection shall not apply to credit life, accident, health and unemployment insurance sold by the lender for which the obligor chooses the primary beneficiary.
1989, Dec. 22, P.L. 687, No. 90, § 512, added 2001, June 25, P.L. 621, No. 55, § 8, effective in 1 year.