2023 California Code › Civil Code - CIV › DIVISION 3 - OBLIGATIONS › PART 4 - OBLIGATIONS ARISING FROM PARTICULAR TRANSACTIONS › TITLE 4 - LOAN › CHAPTER 7.5 - Mortgage Loans › Section 1920.

1920. Any mortgage instrument that is made pursuant to the provisions of this chapter shall meet the following requirements:
(a) Standards for the adjustment of interest rates or monthly payments shall consider factors which can reasonably be deemed to affect the ability of borrowers to meet their mortgage obligations.
(b) No change in interest provided for in any provision for a variable interest rate contained in a security document, or evidence of debt issued in connection therewith, shall be valid unless the provision is set forth in the security document, and in any evidence of debt issued in connection therewith, and the document or documents contain the following provisions:
(1) A statement attached to the security document and to any evidence of debt issued in connection therewith printed or written in a size equal to at least 10-point bold type, consisting of language authorized by the secretary or the secretary’s designee notifying the borrower that the mortgage may provide for changes in interest, principal loan balance, payment, or the loan term.
(2) Before the due date of the first monthly installment following each change in the interest rate, notice shall be mailed to the borrower of the following:
(A) The base index.
(B) The most recently published index at the date of the change in the rate.
(C) The interest rate in effect as a result of the change.
(D) Any change in the monthly installment.
(E) The amount of the unpaid principal balance.
(F) If the interest scheduled to be paid on the due date exceeds the amount of the installment, a statement to that effect and the amount of the excess, and the address and telephone number of the office of the lender to which inquiries may be made.
(c) The borrower is permitted to prepay the loan in whole or in part without a prepayment charge at any time, and no fee or other charge may be required by the lender of the borrower as a result of any change in the interest rate, the payment, the outstanding principal loan balance, or the loan term.
(d) Changes in the rate of interest on the loan shall reflect the movement of an index, which shall be authorized by the secretary or the secretary’s designee.
(e) To the extent that any monthly installment is less than the amount of interest accrued during the month with respect to which the installment is payable, the borrower shall be notified of such instance in a form and manner prescribed by the secretary or the secretary’s designee. Such notice shall include, but not be limited to, the amount of interest exceeding the monthly installment, and any borrower options under these circumstances.
(f) The lender shall provide to the borrower, prior to the execution by the borrower of any mortgage payment instrument authorized pursuant to this chapter, full and complete disclosure, as specified by the secretary or the secretary’s designee, of the nature and effect of the mortgage payment instrument, and all costs or savings attributed to the mortgage instrument.
(Amended by Stats. 1997, Ch. 232, Sec. 24. Effective January 1, 1998.)