(1) PREPAYMENT PENALTIES.—
(a) A high-cost home loan may not contain terms that require a borrower to pay a prepayment penalty for paying all or part of the loan principal before the date on which the payment is due.
(b) Notwithstanding paragraph (a), a lender making a high-cost home loan may include in the loan contract a prepayment fee or penalty, for up to the first 36 months after the date of consummation of the loan, if:
1. The borrower has also been offered a choice of another product without a prepayment penalty.
2. The borrower has been given, at least 3 business days prior to the loan consummation, a written disclosure of the terms of the prepayment fee or penalty by the lender, including the benefit the borrower will receive for accepting the prepayment fee or penalty through either a reduced interest rate on the loan or reduced points or fees.
(2) DEFAULT INTEREST RATE.—A high-cost home loan may not provide for a higher interest rate after default on the loan. However, this prohibition does not apply to interest rate changes in a variable rate loan otherwise consistent with the provisions of the loan documents, provided the change in interest rate is not triggered by a default or the acceleration of the interest rate.
(3) BALLOON PAYMENTS.—A high-cost home loan having a term of less than 10 years may not contain terms under which the aggregate amount of the regular periodic payments would not fully amortize the outstanding principal balance. However, this prohibition does not apply when the payment schedule is adjusted to account for the seasonal or irregular income of the borrower or if the loan is a bridge loan.
(4) NEGATIVE AMORTIZATION.—A high-cost home loan may not contain terms under which the outstanding principal balance will increase at any time over the course of the loan because the regular periodic payments do not cover the full amount of the interest due.
(5) PREPAID PAYMENTS.—A high-cost home loan may not include terms under which more than two periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower.
(6) EXTENDING CREDIT WITHOUT REGARD TO THE PAYMENT ABILITY OF THE BORROWER.—A lender making a high-cost home loan shall not engage in any pattern or practice of extending high-cost home loans to borrowers based upon the borrowers’ collateral without regard to the borrowers’ ability to repay the loan, including the borrowers’ current and expected income, current obligations, and employment.
(7) PAYMENTS TO A HOME CONTRACTOR.—A lender shall not make any payments to a contractor under a home improvement contract from amounts of a high-cost home loan other than:
(a) In the form of an instrument that is payable to the borrower or jointly to the borrower and the contractor; or
(b) At the election of the borrower by a third-party escrow agent in accordance with terms established in a written agreement signed by the borrower, the lender, and the contractor prior to the date of payment.
(8) DUE-ON-DEMAND CLAUSE.—A high-cost home loan may not contain a provision that permits the lender, in its sole discretion, to call or accelerate the indebtedness. This provision does not prohibit acceleration of the loan due to the borrower’s failure to abide by the terms of the loan, or due to fraud or material misrepresentation by the consumer in connection with the loan.
(9) REFINANCING WITHIN AN 18-MONTH PERIOD.—
(a) A lender, its affiliate, or an assignee shall not refinance any high-cost home loan to the same borrower within the first 18 months of the loan when the refinancing does not have a reasonable benefit to the borrower considering all of the circumstances, including, but not limited to, the terms of both the new and refinanced loans, the cost of the new loan, and the borrower’s circumstances.
(b) A lender or assignee shall not engage in acts or practices to evade this requirement, including a pattern or practice of arranging for the refinancing of the lender’s or assignee’s own loans by affiliated or unaffiliated lenders or modifying a loan agreement, whether or not the existing loan is satisfied and replaced by the new loan, and charging a fee.
(10) OPEN-ENDED LOANS.—A lender shall not make any loan as an open-ended loan in order to evade the provisions of this act unless such open-ended loans meet the definition in 12 C.F.R. s. 226.2(a)(20).
(11) RECOMMENDATION OF DEFAULT.—A lender shall not recommend or encourage default 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.
(12) PROHIBITED DOOR-TO-DOOR LOANS.—A high-cost home loan may not be made as a direct result of a potential or future lender or its representative offering or selling a high-cost home loan at the residence of a potential borrower without a prearranged appointment with the potential borrower or the expressed invitation of the potential borrower. This subsection does not apply to mail solicitations that may be received by the potential borrower.
(13) LATE PAYMENT FEES.—A lender may not charge a late payment fee for a high-cost home loan except as provided in this subsection:
(a) A late payment fee may not be in excess of 5 percent of the amount of the payment past due.
(b) A late payment fee may only be assessed for a payment past due for 15 days or more.
(c) A late payment fee may not be charged more than once with respect to a single late payment. If a late payment fee is deducted from a payment made on the loan and such deduction causes a subsequent default on a subsequent payment, no late payment fee may be imposed for such default. If a late payment fee has been imposed once with respect to a particular late payment, no such fee shall be imposed with respect to any future payment which would have been timely and sufficient, but for the previous default.
(14) MODIFICATION OR DEFERRAL FEES.—A lender may not charge a borrower any fees or other charges to modify, renew, extend, or amend a high-cost home loan or to defer any payment due under the terms of a high-cost home loan on a minimum of one modification, renewal, extension, or deferral per each 12 months of the length of the loan.