New York Codes, Rules and Regulations › Title 3 - BANKING › Chapter I - GENERAL REGULATIONS OF THE SUPERINTENDENT › Part 41 - Restrictions And Limitations On High Cost Home Loans › Section 41.2 - Limitations

Current through Register Vol. 46, No. 28, July 10, 2024
A high cost home loan shall be subject to the following
				  limitations.
(a) No call provision. No
				high cost home loan may contain a call provision that permits the lender, in
				its sole discretion, to accelerate the indebtedness. This prohibition does not
				apply when repayment of the loan has been accelerated in good faith, due either
				to a bona fide default or other failure of the borrower to abide by the
				material terms of the loan, or pursuant to a due-on-sale provision, or pursuant
				to some other provision of the loan agreement unrelated to the payment schedule
				such as bankruptcy or receivership.
(b) No balloon payment. No high cost home
				loan may contain a scheduled final payment that is more than twice as large as
				the average of earlier scheduled monthly payments unless such balloon payment
				becomes due and payable at least 15 years after the loan's origination. This
				prohibition does not apply when the payment schedule is adjusted to account for
				the seasonal or irregular income of the borrower or if the purpose of the loan
				is a bridge loan connected with the acquisition or construction of a dwelling
				intended to become the borrower's principal dwelling. This subdivision shall
				not apply to open-end high cost home loans.
(c) No negative amortization. Notwithstanding
				any statute or regulation to the contrary, no high cost home loan may contain a
				payment schedule with regular periodic payments that cause the principal
				balance to increase. This shall not prohibit negative amortization as a
				consequence of a temporary forbearance sought by the borrower. This subdivision
				shall not apply to open-end high cost home loans.
(d) No increased interest rate. No high cost
				home loan may contain a provision that increases the interest rate after
				default. This provision does not apply to periodic interest rate changes in a
				variable rate loan otherwise consistent with the provisions of the loan
				agreement, provided the change in the interest rate is not occasioned by the
				event of default or the acceleration of the indebtedness.
(e) No oppressive mandatory arbitration
				clause. No high cost home loan may be subject to a mandatory arbitration clause
				that is oppressive, unfair, unconscionable, or substantially in derogation of
				the rights of consumers. Arbitration clauses that comply with the standards set
				forth in the Statement of Principles of the National Consumer Dispute Advisory
				Committee, as such statement is on file at the New York State Banking
				Department, shall be presumed not to violate this subdivision. The Statement of
				Principles may be viewed at the New York State Department of Banking located at
				the New York City office of the New York State Banking Department located at
				the address stated in Supervisory Policy G1 of this Title or through internet
				access at http:// www.banking.state.ny.us/41.htm.
(f) No advance payments. No high cost home
				loan may include terms under which more than two periodic payments required
				under the loan are consolidated and paid in advance from the loan proceeds
				provided to the borrower.