It is an unfair act or practice for a lender not subject to
209 CMR 32.00: Truth
in Lending to engage in any of the following in a high cost home
loan:
(1)
Financing of
Points, Fees or Charges. Requiring a borrower to directly or
indirectly finance any portion of the points and/or fees or, in any case,
directly or indirectly finance points and fees payable to the lender or charges
payable to third parties (other than appraisal fees, credit report fees,
mortgage recording tax, fire and miscellaneous property insurance, voluntary
credit, disability, unemployment and/or life insurance, title report and title
insurance charges), in an amount that exceeds 5% of the total loan amount or
$800, whichever is greater.
(2)
Packing High Cost Home Loans. That is, the practice of
selling credit life, accident and health, disability or unemployment insurance
products or unrelated goods or services in conjunction with a high cost home
loan without the informed consent of the borrower under circumstances where:
(a) the lender solicits the sale of such
insurance, goods or services;
(b)
the lender receives direct or indirect compensation for the sale of such
insurance, goods or services; and
(c) the charges for such insurance, goods or
services are prepaid with the proceeds of the loan and financed as part of the
principal amount of the loan.
Provided, however, it shall not constitute the practice of
"packing" if the lender, at least three business days before the loan is
closed, 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:
1. the cost of the credit
insurance or other goods and services;
2. the fact that the insurance, goods, or
services will be prepaid and financed at the interest rate provided for in the
loan; and
3. that the purchase of
such insurance, goods or services is not required to obtain the mortgage loan;
provided further, that
4. insurance
premiums shall not be considered financed as part of the loan transaction if
insurance premiums are calculated, earned and paid on a monthly or other
regular, periodic basis.
In addition, the written disclosure shall contain a signed and
dated acknowledgment by the obligor(s) that the oral disclosure was made and a
signed and dated acknowledgment by the lender that the oral disclosure was
made. In addition to the disclosures required under 209 CMR 40.07(2) a creditor
shall comply with the requirements of
209 CMR 52.02(1) and
(3) as well as
209 CMR
52.03: Readability of the Required
Disclosures for credit life insurance or credit accident and health
insurance.
(3)
Encouraging
Default. Recommending or encouraging default or further default by
a borrower on an existing loan or other debt, prior to the closing of a high
cost home loan that refinances all or any portion of such existing loan or
debt.
(4)
Advertising. 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:
(a) a
borrower's aggregate number of monthly debt payments; and
(b) the aggregate amount paid by a borrower
over the term of the high cost mortgage loan.
(5)
Unconscionable Rates and
Terms.
(a) Making a high cost
home loan with rates or fees that violate
940 CMR
8.06:
Prohibited Practices,
if applicable, or otherwise charge interest rates or fees in a high cost loan
transaction that significantly deviate from industry standards or that are
otherwise unconscionable.
(b) It
shall be the lender's burden to demonstrate that interest rates or fees charged
are based upon generally accepted credit worthiness, sound underwriting and
other risk related standards or otherwise conform to 209 CMR
40.07(5)(a).
(6)
Unreasonable Charges. Making high cost home loans in
which the lender charges and retains fees paid by the borrower:
(a) for services that are not actually
performed; or
(b) for which the
fees bear no reasonable relationship to the value of the services actually
performed; or
(c) which are
otherwise unconscionable.
(7)
Oppressive Mandatory
Arbitration Clause or Waiver of Participation in Class Action
Suits. Requiring a borrower, without regard to whether a borrower
is acting individually or on behalf of others similarly situated, to assert any
claim or defense in a forum that:
(a) is less
convenient, more costly, or more dilatory for the resolution of a dispute than
a judicial forum established in the Commonwealth where the borrower may
otherwise properly bring a claim or defense; or
(b) limits in any way any claim or defense
the borrower may have.
(8)
Failure to Report for Credit
Histories. Failing to report both the favorable and unfavorable
payment history of the borrower to a nationally recognized consumer credit
bureau at least annually if the lender regularly reports information to a
credit bureau.
(9)
Single-premium Credit Insurance. Notwithstanding the
provisions of 209 CMR
40.07(2), making a high cost home loan which contains
single-premium credit insurance, including credit life, debt cancellation, and
debt suspension.
(10)
Modification or Deferral Fees. Making a high cost home
loan with any fees to modify, renew, extend, or amend a high cost home loan or
defer any payment due under a high cost home loan.
