Pennsylvania Code › Title 10 - BANKING AND SECURITIES › Part III - Savings Association Bureau › Chapter 31 - INVESTMENT OPERATIONS › Section 31.6 - Renegotiable rate mortgage loans

Current through Register Vol. 54, No. 28, July 13, 2024
(a)
Authorization.
A savings association may make, purchase or
				participate in a renegotiable rate mortgage loan program under the authority
				contained in sections 701(a)(22), 901 and 915 of the Savings Association Code
				of 1967 (7 P. S. §§
										6020-101(a)(22),
				6020-141 and
				6020-155) if the loan complies
				with the provisions of 12
				CFR 545.6-2(a) -as set
				forth at 45 FR 24111 (April 9, 1980) except where adherence to such rules and
				regulations is inconsistent with Pennsylvania law, especially section 915(g)(7)
				of the Savings Association Code of 1967 (7 P. S. §
										6020-155(g)(7)).
(b)
Description.
For
				purposes of this section, a renegotiable rate mortgage loan is a loan issued
				for a term of three, four, or five 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). The loan must be repayable in equal monthly installments
				of principal and interest during the loan term, in an amount at least
				sufficient to amortize a loan with the same principal and at the same interest
				rate over the remaining term of the mortgage. At renewal, no change other than
				in the interest rate may be made in the terms or conditions of the initial
				loan. 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 defined as residential
				mortgages in the act of January 30, 1974 (P. L. 13, No. 6) (41 P. S. §
										101).
(c)
Interest-rate changes at
				renewal.
(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 Federal Home Loan Bank Board's most recent
				monthly National average mortgage rate index for all major lenders; provided
				that an association may alter the initial terms 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 shall be 0.5% per year multiplied by the number of years
				in the loan term, with a maximum increase or decrease of 5.0% over the life of
				the mortgage. Associations may offer a borrower a renegotiable rate mortgage
				loan with maximum annual and total interest rate decreases smaller than the
				maximum set out in this paragraph; provided, however, that in such a case the
				maximum annual and total interest rate increases offered shall not exceed the
				maximum annual and total decreases set out in the loan contract.
(3) Interest rate decreases from the previous
				loan term are mandatory. Interest rate increases are optional with association,
				but the association may obligate itself to a third party to take the maximum
				increase permitted by this subsection.