Text of Amendment to Part 80 of the General Regulation of Banking Board
Underlined material is new, [bracketed] material is old.
INVESTMENT IN JUNIOR LIEN MORTGAGE LOANS BY COMMERCIAL BANKS,SAVINGS BANKS, CREDIT UNIONS, MORTGAGE BANKERS AND SAVINGS AND LOAN ASSOCIATIONS
(Statutory authority: Banking Law §§ 14, 103, 235, 380, 454 and 590-a)
New Subdivision (d) and of section 1 is added to read as follows:
(d) The term electronically transmitted or electronic media shall mean any transmission via diskette, wire or tape including but not limited to the Intranet (interactive or otherwise), the Internet, any other computer network, electronic mail, or any other similar method of transmission.
New Subdivision (c) of section 2 of Part 80 is added to read as follows:
(c) Electronic disclosures and notifications are permitted as set forth in this Part.
Section 80.4 is amended to read as follows:
§ 80.4 Disclosure. (a) Prior to accepting an application for a loan, a lender must disclose in writing or via electronic media to each loan applicant, in one or more documents, and in plain language, the terms of the type(s) of loan(s) sought by the applicant. The disclosure statement provided to an applicant shall include at least such of the following information as is relevant to the type of loan being offered:
(1) the term to maturity;
(2) the initial interest rate, if known, or the manner in which the initial interest rate will be established;
(3) the amount of the initial payment, if known, and an explanation of the lender's amortization schedule for the loan, including how the lender determines both the amount of each payment and the proportion of each payment which will be credited to interest;
(4) a full explanation of how the interest rate, the payment, the loan balance, or the term to maturity may be adjusted (including identification of the index/indices to be used and how index values may be obtained by the borrower), and how the adjustment of one may affect the others including disclosure of the intervals at which the lender may change the rate on the loan, the time(s) or date(s) at which the lender calculates the rate with respect to the index/indices, and any conditions or events on which the changes in rate are contingent;
(5) the fact that the borrower will receive notification in writing or via electronic media from the lender of increases in the rate or changes in the term of payment, and what information will be contained in each notice of an adjustment and, in the case of a nonamortizing or partially amortizing loan, in the notice of maturity, and how far in advance of an adjustment or maturity each notice will be provided;
(6) where a valid prepayment penalty will be provided for in the loan contract, a description of such penalty;
(7) if the loan contract will provide for escrow payments, a statement of that fact and an explanation of the purpose of requiring escrow payments and how the amount of such payments is established;
(8) a hypothetical example, illustrative of the type of credit being offered, of the effect or the combination of effects that an increase in the rate on the loan may have on the amount of the monthly payment, or the number of monthly payments or the amount of the final payment; and
(9) the history of the movements in the index chosen for the loan, including the highest and lowest interest rates reached by the index, and the dates at which these levels were reached, for each of the three calendar years preceding the year in which the loan is made, provided further that if a loan is made after August 31st of any calendar year, the disclosures shall include the high and low figures for the index's performance through June 30th of that year and such disclosure may be used as the disclosure of the high and low in index performance for the calendar year next preceding the calendar year in which the loan is made for any loan made prior to March 1st of a calendar year.
If an application is accepted by telephone, the lender shall mail [or], deliver or transmit by electronic media the required disclosure statement within three (3) business days.
(b) In the case of a balloon-payment mortgage loan, the disclosure required to be given pursuant to subdivision (a) of this section shall include the following notice, or a notice to like effect, as applicable, which notice may be given in writing or via electronic media and which shall also be included in the loan contract:
THE TERM OF THE LOAN IS _____ YEARS. AS A RESULT, YOU WILL BE REQUIRED TO REPAY THE ENTIRE PRINCIPAL BALANCE AND ANY ACCRUED INTEREST THEN OWING ____ YEARS FROM THE DATE ON WHICH THE LOAN IS MADE.
THE LENDER HAS NO OBLIGATION TO REFINANCE THIS LOAN AT THE END OF ITS TERM. THEREFORE, YOU MAY BE REQUIRED TO REPAY THE LOAN OUT OF ASSETS YOU OWN OR YOU MAY HAVE TO FIND ANOTHER LENDER WILLING TO REFINANCE THE LOAN.
ASSUMING THIS LENDER OR ANOTHER LENDER REFINANCES THIS LOAN AT MATURITY, YOU WILL PROBABLY BE CHARGED INTEREST AT MARKET RATES PREVAILING AT THAT TIME AND SUCH RATES MAY BE HIGHER THAN THE INTEREST RATE ON THIS LOAN. YOU MAY ALSO HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW MORTGAGE LOAN.
If the lender guarantees refinancing of the loan for additional terms until the principal balance has been repaid but does not provide for the recalculation of the interest rate at the time of each refinancing according to a prespecified index, the disclosures and the loan contracts shall include the following notice, or a notice to like effect, as applicable, which notice may be given in writing or via electronic media:
THE TERM OF THE LOAN IS _______ YEARS. AT MATURITY, _____YEARS FROM THE DATE ON WHICH THE LOAN IS MADE, AND AT THE TIME OF EACH FURTHER REFINANCING, THE LOAN WILL BE REFINANCED AT AN INTEREST RATE ESTABLISHED BY THE LENDER WITH REFERENCE TO MARKET RATES. SUCH INTEREST RATE(S) MAY BE HIGHER THAN THE INTEREST RATE PAID ON THIS LOAN.
In addition, at the time it commits itself to make the loan, the lender must inform the applicant in writing or via electronic media of the principal balance which will be due at maturity of the loan or the initial term of the loan (assuming all scheduled principal payments, if any, are made in accordance with the loan contract) and the fact that the borrower will receive notice of maturity in writing or, where the borrower has consented in advance, via electronic media from the lender and the time periods within which such notice will be sent.
(c) The lender shall include in the disclosures a statement, in bold face type at least ten point in size, as follows:
YOU SHOULD CHECK WITH YOUR LEGAL ADVISOR AND WITH OTHER MORTGAGE LIEN HOLDERS AS TO WHETHER ANY PRIOR LIENS CONTAIN ACCELERATION CLAUSES WHICH WOULD BE ACTIVATED BY A JUNIOR ENCUMBRANCE.
(d) With regard to the electronic transmission of disclosures, a hard-copy of such disclosure shall be mailed to each applicant who indicates that he or she does not have the computer capacity to down-load and print such disclosure. In those instances in which a hard copy of the disclosure is not mailed to the applicant, the lender must be able to demonstrate that information was obtained as to the applicants computer capacity to down-load and print such disclosure.
Section 80.5 is amended to read as follows:
§ 80.5 Notification. (a) At least 30 but not more than 120 days prior to a payment adjustment and at least 90 but not more than 120 days prior to the expected maturity of a balloon-payment mortgage, a lender shall provide the borrower with notice in writing or, where the borrower has consented in advance, via electronic media of the adjustment or of maturity. However, where the loan contract provides that changes in the interest rate shall occur more frequently than changes in the payment, the lender need not notify the borrower of changes in the rate, nor of changes in the loan balance or term resulting from a rate change, until notice of a payment adjustment is given.
(For purposes of notification, either in writing or, where the borrower has consented in advance, via electronic media, a payment adjustment is considered to occur as of the date of the interest-rate change immediately preceding the due date of the adjusted payment.) In addition, where the loan contract sets out a schedule of payment adjustments, notice need not be given of payment changes made pursuant to that schedule.
(b) In the case of a revolving credit line secured by a junior mortgage, written or, where the borrower has consented in advance, electronic notification of payment changes need only be given at the time the adjusted payment is due.
(c) With regard to the electronic transmission of notices, a hard-copy of such notice shall be mailed to each applicant who indicates that he or she does not have the computer capacity to down-load and print such notice. In those instances in which a hard copy of the notice is not mailed to the applicant, the lender must be able to demonstrate that information was obtained as to the applicants computer capacity to down-load and print such notice.
Subdivision (r) of Section 8 of Part 80 is amended to read as follows:
(r) an application fee and/or processing fee each in an amount reasonably related to the services to be performed on behalf of the applicant, which fee shall not be figured as a percentage of the principal amount of the loan, credit line or amount financed;
Paragraph (5) of subdivision (c) of section 80.11 is amended to read as follows:
(5) Whether the loan is offered for one term or two terms, [processing] fees and points may be taken only once at the inception of the loan, and the borrower may not be charged more than three points at that time. For purposes of this section:
(i) [Processing fees means an amount] Permissible fees are limited to a property appraisal fee and the fees and expenses for obtaining a credit history of the applicant[, in an amount reasonably approximating the actual costs to the lender in obtaining such information]. Any amount collected in excess of the actual cost of the credit report fee and property appraisal fee must be returned at or prior to closing.
(ii) A point is [a charge, in the case of each point, of] one percent of the principal amount of the loan, which may be charged only at the time of closing of the bridge loan.