N.Y. Comp. Codes R. & Regs. tit. 3 § 41.5

Current through Register Vol. 46, No. 51, December 18, 2024

Section 41.5 - Unfair and deceptive acts or practices

The following acts shall be prima facie evidence that the lender does not possess the requisite character and fitness required to be licensed or registered by the New York State Banking Department:

(a) the making of high cost home loans that demonstrate a pattern and practice of violating any provision of this Part. The provisions of this section shall apply to any lender that seeks to avoid its application by any device, subterfuge or pretense whatsoever, which shall include but not be limited to splitting or dividing any loan transaction into separate parts for the purpose of evading the provisions of this Part and section 6-l of the Banking Law;

(b) engaging in unfair, deceptive or unconscionable practices in the course of advertising, brokering or making high cost home loans to residents of this State. Such practices include, but are not limited to, the following:

(1) brokering or making a high cost home loan which includes points, fees or other finance charges that, considering the loan transaction as a whole (including the creditworthiness of the borrower, the terms of the loan, the value of the collateral, and the owner's equity in the collateral), so significantly exceed the usual and customary charges incurred by mortgage consumers generally in this State for such points, fees or other finance charges as to be unconscionable;

(2) brokering or making high cost home loans in which the broker or lender charges and retains fees in any manner or form:

(i) for services that are not actually performed;

(ii) for which the fees bear no reasonable relationship to the value of the services actually performed; or

(iii) which are otherwise unconscionable;

(3) brokering or making high cost home loans with repayment terms that so exceed the borrower's financial capacity to repay as to be unconscionable. A loan that complies with section 41.3(b) of this Part shall be presumed not to violate this paragraph. Evidence that the repayment terms exceed the borrower's reasonable capacity to repay may be rebutted by:

(i) a showing that the lender reasonably believed at the time the loan was consummated that the borrower and any obligor had the capacity to repay the loan based upon consideration of their current and expected income, current obligations, employment status, and other financial resources, excluding the owner's equity in the dwelling that secures repayment of the loan and including any other collateral securing repayment of the loan; or

(ii) a showing that other compelling circumstances existed that justified the making of the loan notwithstanding the borrower's apparent lack of capacity to repay the loan based upon the factors stated in subparagraph (i) of this paragraph;

(4) "flipping" high cost home loans; that is, brokering or making a high cost home loan to a borrower that refinances an existing mortgage loan when, considering all the circumstances of the refinancing, such refinancing does not have a tangible net benefit to the borrower. A lender shall be considered by the superintendent to have provided a tangible net benefit to the borrower if a high cost home loan meets the following criteria: the borrower receives a monetary benefit, such as receipt of additional proceeds, a reduction of the outstanding mortgage debt, a lowering of the annual percentage rate, and/or a lowering of the monthly payments of principal and interest, taking into consideration the totality of the circumstances, including, but not limited to, the amount of the monetary benefit, the loan product and the borrower's repayment ability, current and expected income and current obligations; provided, however, that if the monthly payment of principal and interest and/or the mortgage debt increases, a commensurate monetary benefit shall ensue to the borrower;

(5) "packing" high cost home loans; that is, the practice of selling credit life, accident and health, disability, property, or unemployment insurance products, any other life or health insurance product, debt cancellation or suspension agreement products, or unrelated goods or services in conjunction with a high cost home loan without the informed consent of the borrower under circumstances where:

(i) the broker or lender solicits the sale of such products, goods or services; and

(ii) the broker or lender receives direct or indirect compensation for the sale of such products, goods or services;

provided, however, it shall not constitute the practice of "packing" if the broker or lender, at least 10 business days before the loan is closed whether or not funds are then disbursed, 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: the cost of such products or other goods and services; the fact that such products, goods, or services, as offered to the borrower by the broker or lender, will be either prepaid or calculated, earned, and paid on a monthly or other regular, periodic basis; and that the purchase of such products, goods or services is not required to obtain the mortgage loan. In addition, the written disclosure shall contain a signed and dated acknowledgment by the borrower(s) that the oral disclosure was made and a signed and dated acknowledgment by the broker or lender that the oral disclosure was made;

(6) recommending or encouraging default or further default by a borrower 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; or

(7) 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:

(i) a borrower's aggregate number of monthly debt payments; and

(ii) the aggregate amount paid by a borrower over the term of the high cost mortgage loan.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 41.5