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Section 4995.2 Of Division 1.10. Higher-priced Mortgage Loans From California Financial Code >> Division 1.10.
4995.2
. (a) This division shall apply to any licensed person who in
bad faith attempts to avoid the application of this division by
doing either of the following:
(1) Dividing any loan transaction into separate parts for the purpose and with the intent of evading the provisions of this division.
(2) Any other subterfuge.
(b) Notwithstanding any other provision of law, a licensed person shall not make, or cause to be made, any false, deceptive, or misleading statement or representation in connection with a higher-priced mortgage loan.
(c) A mortgage broker who arranges only higher-priced mortgage loans shall disclose that fact to a borrower, both orally and in writing, at the time of initially engaging in mortgage brokerage services with that borrower.
(d) A mortgage broker who provides mortgage brokerage services shall not steer, counsel, or direct a borrower to accept a loan at a higher cost than that for which the borrower could qualify based upon the loans offered by the persons with whom the broker regularly does business.
(e) (1) A mortgage broker who provides mortgage brokerage services for a borrower shall not receive compensation, including a yield spread premium, fee, commission, or any other compensation, for arranging a higher-priced mortgage loan with a prepayment penalty that exceeds the compensation that the mortgage broker would otherwise receive for arranging that higher-priced mortgage loan without a prepayment penalty.
(2) When providing mortgage brokerage services for a borrower, a mortgage broker shall receive the same compensation for providing those services whether paid by the lender, borrower, or a third party.
(f) No licensed person shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a higher-priced mortgage loan that refinances all or any portion of the existing loan or debt.
(g) A licensed person shall not make a higher-priced mortgage loan that contains a provision for negative amortization. This subdivision shall not preclude a licensed person from entering into a subsequent agreement with a borrower to capitalize payments as a means of permitting a borrower to cure or prevent a delinquency.
(h) A licensed person who makes a higher-priced mortgage loan and who, when acting in good faith, fails to comply with this section, shall not be liable if the licensed person establishes either of the following:
(1) Within 90 days of the loan closing and prior to the institution of any action against the licensed person under this section, the licensed person did all of the following:
(A) Notified the borrower of the compliance failure.
(B) Tendered appropriate restitution.
(C) Offered, at the borrower's option, either to make the higher-priced mortgage loan comply with the requirements of this division or change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a higher-priced mortgage loan subject to the provisions of this division.
(D) Within a reasonable period of time following the borrower's election of remedies, took appropriate action based on the borrower's choice.
(2) (A) The compliance failure was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid those errors, and within 120 days after receipt of a complaint or the discovery of the compliance failure or the licensed person's receipt of written notice of the compliance failure, the licensed person did all of the following:
(i) Notified the borrower of the compliance failure.
(ii) Tendered appropriate restitution.
(iii) Offered, at the borrower's option, either to make the higher-priced mortgage loan comply with the requirements of this division or change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a higher-priced mortgage loan subject to the provisions of this division.
(iv) Within a reasonable period of time following the borrower's election of remedies, took appropriate action based on the borrower's choice.
(B) For purposes of this subdivision, examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors.
(1) Dividing any loan transaction into separate parts for the purpose and with the intent of evading the provisions of this division.
(2) Any other subterfuge.
(b) Notwithstanding any other provision of law, a licensed person shall not make, or cause to be made, any false, deceptive, or misleading statement or representation in connection with a higher-priced mortgage loan.
(c) A mortgage broker who arranges only higher-priced mortgage loans shall disclose that fact to a borrower, both orally and in writing, at the time of initially engaging in mortgage brokerage services with that borrower.
(d) A mortgage broker who provides mortgage brokerage services shall not steer, counsel, or direct a borrower to accept a loan at a higher cost than that for which the borrower could qualify based upon the loans offered by the persons with whom the broker regularly does business.
(e) (1) A mortgage broker who provides mortgage brokerage services for a borrower shall not receive compensation, including a yield spread premium, fee, commission, or any other compensation, for arranging a higher-priced mortgage loan with a prepayment penalty that exceeds the compensation that the mortgage broker would otherwise receive for arranging that higher-priced mortgage loan without a prepayment penalty.
(2) When providing mortgage brokerage services for a borrower, a mortgage broker shall receive the same compensation for providing those services whether paid by the lender, borrower, or a third party.
(f) No licensed person shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a higher-priced mortgage loan that refinances all or any portion of the existing loan or debt.
(g) A licensed person shall not make a higher-priced mortgage loan that contains a provision for negative amortization. This subdivision shall not preclude a licensed person from entering into a subsequent agreement with a borrower to capitalize payments as a means of permitting a borrower to cure or prevent a delinquency.
(h) A licensed person who makes a higher-priced mortgage loan and who, when acting in good faith, fails to comply with this section, shall not be liable if the licensed person establishes either of the following:
(1) Within 90 days of the loan closing and prior to the institution of any action against the licensed person under this section, the licensed person did all of the following:
(A) Notified the borrower of the compliance failure.
(B) Tendered appropriate restitution.
(C) Offered, at the borrower's option, either to make the higher-priced mortgage loan comply with the requirements of this division or change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a higher-priced mortgage loan subject to the provisions of this division.
(D) Within a reasonable period of time following the borrower's election of remedies, took appropriate action based on the borrower's choice.
(2) (A) The compliance failure was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid those errors, and within 120 days after receipt of a complaint or the discovery of the compliance failure or the licensed person's receipt of written notice of the compliance failure, the licensed person did all of the following:
(i) Notified the borrower of the compliance failure.
(ii) Tendered appropriate restitution.
(iii) Offered, at the borrower's option, either to make the higher-priced mortgage loan comply with the requirements of this division or change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a higher-priced mortgage loan subject to the provisions of this division.
(iv) Within a reasonable period of time following the borrower's election of remedies, took appropriate action based on the borrower's choice.
(B) For purposes of this subdivision, examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors.
