Pennsylvania Code › Title 10 - BANKING AND SECURITIES › Part II - Bureau of Banks › Chapter 13 - LOANS › REAL ESTATE LOANS › Section 13.33 - Protective provisions with respect to certain renegotiable rate or rollover mortgage loans

Current through Register Vol. 54, No. 28, July 13, 2024
(a)
Applicability.
Mortgage loan documents containing provisions
				  for rollover or renegotiation of the mortgage which pertain to loans secured by
				  a lien on real property located within this Commonwealth containing not more
				  than two residential units or on which not more than two residential units are
				  to be constructed, including residential condominium units, shall be subject to
				  the provisions of this section.
(b)
Description.
The renegotiable rate or rollover mortgage loan
				  shall be issued for a term of 3, 4 or 5 years, secured by a long-term mortgage
				  of up to 30 years and automatically renewable at equal intervals except as
				  provided in subsection (c)(1). During each term the loan shall be repayable in
				  equal monthly installments of principal and interest in an amount at least
				  sufficient to amortize a loan with the same principal balance at the then
				  effective interest rate over the remaining term of the long-term mortgage. At
				  renewal, no change other than in the interest rate may be made in the terms or
				  conditions of the initial loan, except as provided in subsection (c)(1).
				  Prepayment in full or on part of the loan balance secured by the mortgage may
				  be made without penalty at any time on those loans which meet the definition of
				  a "residential mortgage" in section 101 of the act of January 30, 1974 (P. L.
				  13, No. 6) (41 P. S. §
											101).
(c)
Interest rate changes at renewal.
Interest rate changes at renewal shall include the following:
(1) The interest rate offered at renewal
				  shall reflect the movement, in reference to the date of the original loan, of
				  the contract interest rate on the purchase of previously occupied homes in the
				  most recent monthly national average mortgage rate index of the Federal Home
				  Loan Bank Board for major lenders; provided that the lender may alter the
				  initial term of loans originated within a 6-month period so that they mature on
				  the same date, 3, 4 or 5 years after the end of that period, in which case the
				  interest rate offered at renewal shall reflect the movement of the index from
				  the end of that period, that is, as though all loans in the group had
				  originated at the end of the period.
(2) The maximum rate increase or decrease at
				  each renewal shall be .5% per year multiplied by the number of years in each
				  loan term, with a maximum increase or decrease of 5% over the life of the
				  mortgage. Lenders may offer a borrower a renegotiable rate or rollover mortgage
				  loan with maximum annual and total interest rate decreases smaller than the
				  maximum set out in this paragraph; provided, however, that the maximum annual
				  and total interest rate increases offered may not exceed the maximum annual and
				  total decreases set out in the loan contract.
(3) Interest rate decreases from the previous
				  loan term shall be mandatory. Interest rate increases shall be optional with
				  the lender, but the lender may obligate itself to a third party to take the
				  maximum increase permitted by this subsection.