Current through Register Vol. 54, No. 12, March 23, 2024
(a)
Advertising. A licensee may not engage in false or misleading
advertising.
(b)
Disclosures to applicant. On a form prescribed by the
Department, a licensee who takes an application shall disclose the following to
the applicant:
(1) If the lender providing
the loan will escrow the applicable property taxes and hazard
insurance.
(2) If the licensee is a
lender with the ability to directly lock-in a loan interest rate.
(3) Whether the loan contains a variable
interest rate or balloon payment feature.
(4) Whether the loan includes a prepayment
penalty.
(5) Whether the loan has a
negative amortization feature.
(c)
Timing and issuance of disclosure
form. A licensee issuing the disclosure form required by subsection
(b) shall sign and date the disclosure form and deliver or place in the mail
the disclosure form within 3 business days after the application is received or
prepared by the licensee.
(d)
Required redisclosures. A licensee who has issued the
disclosure form required by subsection (b) shall issue an updated disclosure
form at the time the licensee knows or reasonably should know that the initial
disclosure form is inaccurate.
(e)
Applicant acknowledgment and retention of disclosure form. A
licensee shall require an applicant to sign and date the disclosure form
required by subsections (b) and (d) within 10 business days after delivery or
mailing and retain the original executed disclosure form in the applicant's
loan file.
(f)
Duplication. A licensee broker taking an application is not
required to provide the disclosure form required by subsections (b) and (d) if
the lender making the loan elects to provide the required disclosure form in
accordance with this section.
(g)
Evaluation of applicant ability to repay.
(1) A licensee may not offer a loan without
having reasonably determined, based on the documents and information provided
under this subsection, that the applicant will have the ability to repay the
loan in accordance with the loan terms and conditions by final maturity at the
fully indexed rate, assuming a fully amortized repayment schedule.
(2) In performing an analysis to determine
whether an applicant will have the ability to repay an offered loan, a licensee
shall consider, verify and document:
(i) The
income of the applicant.
(ii) The
fixed expenses of the applicant.
(3) When performing the income verification
required by paragraph (2), a licensee is only required to verify the income
that the applicant chooses to rely upon to repay the offered loan.
(4) In performing an evaluation of an
applicant's ability to repay, a licensee may consider and document supplemental
information provided by the applicant in addition to income that demonstrates
that the applicant has the ability to repay the offered loan, provided that the
supplemental information is reasonably related to an applicant's ability to
repay.
(5) A licensee may not
primarily rely upon the sale or refinancing of an applicant's collateral in
determining an applicant's ability to repay an offered loan.
(6) All records, worksheets and supporting
documentation used in the licensee's ability to repay analysis shall be
maintained in the applicant's loan file.
(7) In determining an applicant's ability to
repay an offered loan under this subsection, a licensee may not ignore facts or
circumstances that it knows or reasonably should know which would indicate that
an applicant does not have the ability to repay the offered loan.
(8) An applicant may be presumed to have the
ability to repay an offered loan if the offered loan has one of the following
characteristics:
(i) Is insured by the Federal
Housing Administration.
(ii) Is
guaranteed by the United States Department of Veterans Affairs.
(iii) Is originated or approved for purchase
by the Pennsylvania Housing Finance Agency.
(iv) Is the subject of a written finding by a
United States Department of Housing and Urban Development approved counseling
agency that there is a reasonable expectation that the borrower will be able to
repay the offered loan.
(9) For an offered loan with a balloon
payment, a licensee:
(i) May consider the sale
or refinance of the applicant's collateral when evaluating an applicant's
ability to make the balloon payment.
(ii) Shall base the fully amortized payment
schedule on the full term the borrower chooses when calculating the
amortization period for a loan containing a borrower option for an extended
amortization period.
(iii) Shall
consider the due date of the balloon payment and if there is a reasonable
expectation the applicant will have sufficient equity in the property to make
the balloon payment through a sale or refinance of the residence.
(h)
Reverse
mortgages. A licensee offering or making a reverse mortgage to an
applicant is not required to comply with subsections (b), (g), (i) and
(j)(3).
(i)
Material
changes and ability to repay. If there is a material change after a
licensee has performed the ability to repay calculation required by subsection
(g), a licensee shall immediately:
(1) Send a
notice to the applicant disclosing the material change and that the material
change may affect the applicant's ability to repay the offered loan, if the
licensee is a broker.
(2) Perform
another ability to repay analysis in accordance with subsection (g), if the
licensee is a lender.
(j)
Loan transaction prohibitions. A licensee may not:
(1) Advise or imply to an applicant that the
applicant's income is not relevant to the loan transaction.
(2) Recommend or imply that an applicant
default on any existing contract or financial obligation.
(3) Advise or induce an applicant to
refinance an existing loan or otherwise enter into a new financial obligation
without performing the ability to repay analysis required by subsection
(g).
(4) Offer to the applicant a
covered loan without advising the applicant that the applicant qualifies for a
loan other than a covered loan, if an applicant qualifies for a loan offered by
the licensee.
(5) Advise or imply
that an applicant should ignore any required disclosures or suggest that a
document or the execution of any document is unimportant or of no
consequence.
(6) Direct, encourage,
permit or otherwise be involved with the improper execution of any document,
including:
(i) Requesting or allowing an
applicant to sign documents that contain blank spaces where material
information regarding the loan transaction is required.
(ii) Permitting the execution of documents
where signatures are required to be witnessed without the witnesses being
physically present.
(iii)
Permitting someone other than the required signatory to execute a document
unless otherwise authorized by law.
(7) Knowingly submit or permit or encourage
an applicant or third party to submit, false or misleading information, or
information that the licensee reasonably should know is false or misleading, to
any party to a loan transaction.
(8) Improperly influence, or attempt to
improperly influence:
(i) An appraiser by
committing any act or omission that is intended to:
(A) Compromise the independent judgment of an
appraiser.
(B) Ensure that an
appraisal matches a requested or target value.
(ii) Any other entity related to the mortgage
loan business, such as notaries, title companies, real estate agents, builders
and sellers of properties.
(9) Obtain hazard insurance required for a
loan for an applicant at loan consummation without providing the applicant with
the opportunity to secure or provide evidence of the applicant's own hazard
insurance.
(10) Pay compensation to
or receive compensation from, contract with, or employ any person engaged in
the mortgage loan business who is not licensed or otherwise exempt from
licensure.
(k)
Loan funding.
(1) A licensee
lender may not refuse or fail to fund a consummated loan, other than when an
applicant rescinds the loan in accordance with
12 CFR
226.15 or
226.23 (relating to the right of
rescission), as applicable except as provided in paragraph (4).
(2) A licensee lender shall fund a
consummated loan in a reasonable time period after consummation of the loan or
in accordance with any commitment or agreement with the applicant; provided
that, if an applicant has a right of rescission under
12 CFR
226.15 or
226.23, a licensee lender is not
required to fund a consummated loan in accordance with this subsection until
after the applicable rescission period has ended.
(3) A licensee shall disburse loan funds to
third parties in accordance with any commitment or agreement with the
applicant.
(4) Any postclosing
underwriting or quality control review conducted by a licensee lender after the
consummation of a loan may not delay the funding of a loan or result in a
failure or refusal to fund the loan in accordance with this subsection unless
the applicant has committed fraud against the licensee, which may be raised as
an affirmative defense in any proceeding brought by the Department based upon a
violation of this subsection.
(5)
Nothing in this subsection relieves or limits the liability of a licensee
against a claim of a borrower based upon a licensee's refusal or failure to
fund a loan based upon an allegation of consumer fraud.
(l)
Licensee responsibility to
provide documents. Upon request, a licensee shall provide to an
applicant or authorized representative of an applicant, unless prohibited by
Federal or State law, copies or originals of the documents associated with a
loan that an applicant has paid for or signed, such as loan applications,
appraisals, surveys, loan documents, disclosures and any fee agreement executed
by the applicant and the licensee, to the extent the documents are in the
licensee's possession.
(m)
Payoff statement or statement of mortgage reinstatement. A
licensee lender that holds or services a loan shall provide a borrower with
payoff statements or statements of mortgage reinstatement, as applicable, for
the borrower's loan within 7 business days of receipt of a written request by a
borrower or a person authorized by the borrower.