(a) A
lender may make a junior mortgage loan (as such term is defined in section
80.1 of this Part) on
the terms and conditions listed in subdivisions (b) and (c) of this section,
provided that the borrower occupies the property at the time the loan is made
and provided that the proceeds of the loan are used or are to be used by the
borrower to finance the purchase of replacement residential property, as such
use is ascertained by the lender prior to processing of the application by
means of a copy of a contract executed by the loan applicant for the purchase
of the replacement property and by any additional means that the lender may
require.
(b) A bridge loan, as
defined in subdivision (a) of this section, may be made by a lender for a
maximum term of one year. A bridge loan may be made, at the option of the
lender, without any required repayment of either principal or interest during
the term of the loan, provided that no compounding of interest occurs. In
addition, the period for the loan may be divided into two terms, in which
event, prior to commencement of the additional term, the borrower may be
required to pay off any interest accumulated over the first term.
(c) All bridge loans shall be offered under
the following terms and conditions:
(1) The
loan shall be due and payable upon the closing of the borrower's sale of the
property securing the loan.
(2) The
loan may be prepaid by the borrower at any time, without penalty.
(3) The notification provisions of section
80.5 of this Part
shall apply to the loan throughout its duration.
(4) The disclosure provisions of section
80.4 of this Part
shall apply, except that the alternative disclosures for balloon-payment loans
contained in section
80.4(b)
shall be stated as:
(i) In the case where the
lender is offering a single-term loan, or where the lender will offer an
extension of the loan, which extension was not provided for at the commencement
of the loan:
THE TERM OF THE LOAN IS [MONTHS] [ONE YEAR]. AS A RESULT, YOU
WILL BE REQUIRED TO REPAY THE ENTIRE PRINCIPAL BALANCE AND ANY ACCRUED INTEREST
THEN OWING [MONTHS] [ONE YEAR] FROM THE DATE ON WHICH THE LOAN IS MADE.
THE LENDER HAS NO OBLIGATION TO REFINANCE THIS LOAN AT THE
END OF ITS TERM. THEREFORE, YOU MAY BE REQUIRED TO REPAY THE LOAN OUT OF ASSETS
YOU OWN OR YOU MAY HAVE TO FIND ANOTHER LENDER WILLING TO REFINANCE THE
LOAN.
(ii) In the case
where the lender is offering a loan divided into two terms:
THE TERM OF THE LOAN IS MONTHS. AT MATURITY, MONTHS FROM THE
DATE ON WHICH THE LOAN IS MADE, AND IN THE EVENT A REFINANCING IS REQUIRED, THE
LOAN WILL BE EXTENDED AT [AN INTEREST RATE TO BE DETERMINED AT THE SOLE
DISCRETION OF THE LENDER] [THE SAME RATE] [THE SAME RATE TO BE DETERMINED BY
MOVEMENT IN INDEX]. SUCH INTEREST RATE MAY BE HIGHER THAN THE INTEREST RATE TO
BE PAID ON THIS LOAN.
In cases where the lender will extend the loan for a second
term at the same rate of interest, the last sentence of the above disclosure
shall be omitted.
(5) Whether the loan is offered for one term
or two terms, fees and points may be taken only once at the inception of the
loan, and the borrower may not be charged more than three points at that time.
For purposes of this section:
(i) Permissible
fees are limited to a property appraisal fee and to the fees and expenses for
obtaining a credit history of the applicant. Any amount collected in excess of
the actual cost of the credit report fee and property appraisal fee must be
returned at or prior to closing.
(ii) A point is one percent of the principal
amount of the loan, which may be charged only at the time of closing of the
bridge loan.
(6) The
loan shall be at a fixed rate of interest within each term of the
loan.
