Current through Register Vol. 46, No. 12, March 20, 2024
The following acts shall be prima facie evidence that the
lender does not possess the requisite character and fitness required to be
licensed or registered by the New York State Banking Department:
(a) the making of high cost home loans that
demonstrate a pattern and practice of violating any provision of this Part. The
provisions of this section shall apply to any lender that seeks to avoid its
application by any device, subterfuge or pretense whatsoever, which shall
include but not be limited to splitting or dividing any loan transaction into
separate parts for the purpose of evading the provisions of this Part and
section
6-l of the Banking Law;
(b) engaging in unfair, deceptive or
unconscionable practices in the course of advertising, brokering or making high
cost home loans to residents of this State. Such practices include, but are not
limited to, the following:
(1) brokering or
making a high cost home loan which includes points, fees or other finance
charges that, considering the loan transaction as a whole (including the
creditworthiness of the borrower, the terms of the loan, the value of the
collateral, and the owner's equity in the collateral), so significantly exceed
the usual and customary charges incurred by mortgage consumers generally in
this State for such points, fees or other finance charges as to be
unconscionable;
(2) brokering or
making high cost home loans in which the broker or lender charges and retains
fees in any manner or form:
(i) for services
that are not actually performed;
(ii) for which the fees bear no reasonable
relationship to the value of the services actually performed; or
(iii) which are otherwise
unconscionable;
(3)
brokering or making high cost home loans with repayment terms that so exceed
the borrower's financial capacity to repay as to be unconscionable. A loan that
complies with section
41.3(b)
of this Part shall be presumed not to violate this paragraph. Evidence that the
repayment terms exceed the borrower's reasonable capacity to repay may be
rebutted by:
(i) a showing that the lender
reasonably believed at the time the loan was consummated that the borrower and
any obligor had the capacity to repay the loan based upon consideration of
their current and expected income, current obligations, employment status, and
other financial resources, excluding the owner's equity in the dwelling that
secures repayment of the loan and including any other collateral securing
repayment of the loan; or
(ii) a
showing that other compelling circumstances existed that justified the making
of the loan notwithstanding the borrower's apparent lack of capacity to repay
the loan based upon the factors stated in subparagraph (i) of this
paragraph;
(4)
"flipping" high cost home loans; that is, brokering or making a high cost home
loan to a borrower that refinances an existing mortgage loan when, considering
all the circumstances of the refinancing, such refinancing does not have a
tangible net benefit to the borrower. A lender shall be considered by the
superintendent to have provided a tangible net benefit to the borrower if a
high cost home loan meets the following criteria: the borrower receives a
monetary benefit, such as receipt of additional proceeds, a reduction of the
outstanding mortgage debt, a lowering of the annual percentage rate, and/or a
lowering of the monthly payments of principal and interest, taking into
consideration the totality of the circumstances, including, but not limited to,
the amount of the monetary benefit, the loan product and the borrower's
repayment ability, current and expected income and current obligations;
provided, however, that if the monthly payment of principal and interest and/or
the mortgage debt increases, a commensurate monetary benefit shall ensue to the
borrower;
(5) "packing" high cost
home loans; that is, the practice of selling credit life, accident and health,
disability, property, or unemployment insurance products, any other life or
health insurance product, debt cancellation or suspension agreement products,
or unrelated goods or services in conjunction with a high cost home loan
without the informed consent of the borrower under circumstances where:
(i) the broker or lender solicits the sale of
such products, goods or services; and
(ii) the broker or lender receives direct or
indirect compensation for the sale of such products, goods or services;
provided, however, it shall not constitute the practice of
"packing" if the broker or lender, at least 10 business days before the loan is
closed whether or not funds are then disbursed, makes a separate oral and a
separate clear and conspicuous written disclosure in at least 12-point type to
the borrower containing the following information: the cost of such products or
other goods and services; the fact that such products, goods, or services, as
offered to the borrower by the broker or lender, will be either prepaid or
calculated, earned, and paid on a monthly or other regular, periodic basis; and
that the purchase of such products, goods or services is not required to obtain
the mortgage loan. In addition, the written disclosure shall contain a signed
and dated acknowledgment by the borrower(s) that the oral disclosure was made
and a signed and dated acknowledgment by the broker or lender that the oral
disclosure was made;
(6) recommending or encouraging default or
further default by a borrower on an existing loan or other debt, prior to and
in connection with the closing or planned closing of a high cost home loan that
refinances all or any portion of such existing loan or debt; or
(7) advertising that refinancing pre-existing
debt with a high cost home loan will reduce a borrower's aggregate monthly debt
payment without also disclosing, if such are likely the case, that the high
cost home loan will increase both:
(i) a
borrower's aggregate number of monthly debt payments; and
(ii) the aggregate amount paid by a borrower
over the term of the high cost mortgage loan.