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 41.5 - Unfair and deceptive acts or practices

Current through Register Vol. 46, No. 28, July 10, 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.