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Truth in Lending: 33(c)(4) Limitations on Consumer Liability.

1. In general. Creditors must include any limitation on the consumer’s liability (such as a nonrecourse limit or an equity conservation agreement) in the projected total cost of credit. These limits and agreements protect a portion of the equity in the dwelling for the consumer or the consumer’s estate. For example, the following are limitations on the consumer’s liability that must be included in the projected total cost of credit:

Truth in Lending: 34(a)(1) Home-Improvement Contracts.

Paragraph 34(a)(1)(i)

1. Joint payees. If a creditor pays a contractor with an instrument jointly payable to the contractor and the consumer, the instrument must name as payee each consumer who is primarily obligated on the note.

Truth in Lending: 34(a)(2) Notice to Assignee.

1. Subsequent sellers or assignors. Any person, whether or not the original creditor, that sells or assigns a mortgage subject to § 1026.32 must furnish the notice of potential liability to the purchaser or assignee.

2. Format. While the notice of potential liability need not be in any particular format, the notice must be prominent. Placing it on the face of the note, such as with a stamp, is one means of satisfying the prominence requirement.

Truth in Lending: 34(a)(3) Refinancings Within One-Year Period.

1. In the borrower’s interest. The determination of whether or not a refinancing covered by § 1026.34(a)(3) is in the borrower’s interest is based on the totality of the circumstances, at the time the credit is extended. A written statement by the borrower that “this loan is in my interest” alone does not meet this standard.

i. A refinancing would be in the borrower’s interest if needed to meet the borrower’s “bona fide personal financial emergency” (see generally § 1026.23(e) and § 1026.31(c)(1)(iii)).

Truth in Lending: 34(a)(4)(i) Mortgage-Related Obligations.

1. Mortgage-related obligations.406 A creditor must include in its repayment ability analysis the expected property taxes and premiums for mortgage-related insurance required by the creditor as set forth in § 1026.35(b), as well as similar mortgage-related expenses. Similar mortgage-related expenses include homeowners’ association dues and condominium or cooperative fees.

Truth in Lending: 34(a)(4)(ii) Verification of Repayment Ability.

1. Income and assets relied on. A creditor must verify the income and assets the creditor relies on to evaluate the consumer’s repayment ability. For example, if a consumer earns a salary and also states that he or she is paid an annual bonus, but the creditor only relies on the applicant’s salary to evaluate repayment ability, the creditor need only verify the salary.

Truth in Lending: 34(a)(4)(iii) Presumption of Compliance.

1. In general.408 A creditor is presumed to have complied with § 1026.34(a)(4) if the creditor follows the three underwriting procedures specified in paragraph 34(a)(4)(iii) for verifying repayment ability, determining the payment obligation, and measuring the relationship of obligations to income.

Truth in Lending: 34(a)(5)(i) Certification of counseling required.

Editor’s Note410

Editor’s Note411

1. HUD-approved counselor.412 For purposes of § 1026.34(a)(5), counselors approved by the Secretary of the U.S. Department of Housing and Urban Development are homeownership counselors certified pursuant to section 106(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e)), or as otherwise determined by the Secretary.

Truth in Lending: 34(a)(5)(ii) Timing of counseling.

Editor’s Note417

1. Disclosures for open-end credit plans.418 Section 1026.34(a)(5)(ii) permits receipt of either the disclosure required by section 5(c) of RESPA or the disclosures required under § 1026.40 to allow counseling to occur. Pursuant to 12 CFR 1024.7(h), the disclosures required by § 1026.40 can be provided for open-end plans in lieu of the usual disclosure required by section 5(c) of RESPA.

Truth in Lending: 34(a)(5)(v) Counseling fees.

Editor’s Note424

1. Financing.425 Section 1026.34(a)(5)(v) does not prohibit a creditor from financing the counseling fee as part of the transaction for a high-cost mortgage, if the fee is a bona fide third-party charge as provided by § 1026.32(b)(5)(i).

Truth in Lending: 34(a)(5)(vi) Steering prohibited.

Editor’s Note426

1. An example of an action that constitutes steering would be when a creditor repeatedly highlights or otherwise distinguishes the same counselor in the notices the creditor provides to consumers pursuant to § 1026.34(a)(5)(vii).427

Home Foreclosures: B.3.3 VA Guaranteed Loans Circulars and Handbook

The VA provides instruction to lenders and servicers of guaranteed loans through circulars and the VA Servicer Handbook. The Handbook outlines servicers’ responsibility with respect to loss mitigation, and the VA’s role with respect to monitoring servicer activity. The VA Servicer Handbook M26-4 is available at https://www.benefits.va.gov.

The VA Circulars provide up-to-date information on the guaranteed loan program, including the VA’s policy on:

Home Foreclosures: Introduction

This appendix is a summary of individual state laws relating to reverse mortgages. These statutes vary dramatically. Some states merely define reverse mortgages or leave their regulation to more general laws related to home-secured loans. Other states provide specific substantive and procedural protections to reverse mortgage borrowers in varying degrees.

Home Foreclosures: ALABAMA

Definition and Scope

No applicable law. There is no explicit definition of “reverse mortgage.”

Origination

Authorized Lenders: No applicable law.

Disclosures: No applicable law.

Application and Approval: No applicable law.

Cooling Off Period: No applicable law.

Home Foreclosures: ALASKA

Alaska Stat. § 06.45.060; Alaska Admin. Code tit. 3, § 170

Definition and Scope

There is no explicit definition of “reverse mortgage.”

Origination

Home Foreclosures: ARKANSAS

Ark. Code Ann. §§ 23-54-101 to 23-54-109 (Reverse Mortgage Protection Act)

Definition and Scope

“Reverse mortgage” is a nonrecourse loan secured by a borrower’s principal residence that: (a) provides cash advances to a borrower based upon equity in the borrower’s residence; and (b) requires no payment of principal or interest until the entire loan becomes due and payable. § 23-54-103. Statute applies to reverse mortgages executed on or after January 1, 2006. § 23-54-102.

Home Foreclosures: CALIFORNIA

Cal. Civ. Code §§ 1923 to 1923.10 (West); Cal. Civ. Code §§ 2923.4 to 2923.7, 2924.9 to 2924.19 (West) (loss mitigation, non-judicial foreclosure); Cal. Fin. Code § 7504 (West) (savings associations)

Definition and Scope

Home Foreclosures: COLORADO

Colo. Rev. Stat. §§ 11-38-101 to 11-38-112; Colo. Rev. Stat. § 38-38-103.1 (loss mitigation)

Definition and Scope

Home Foreclosures: CONNECTICUT

Conn. Gen. Stat. §§ 8-265i, 36a-265, 49-2; Conn. Gen. Stat. §§ 49-31k to 49-31o (foreclosure mediation program); Conn. Agencies Regs. § 17a-392-6(b)

Definition and Scope

Home Foreclosures: DELAWARE

Del. Code Ann. tit. 5, §§ 2244 (licensed lenders), 2118(a) (mortgage loan brokers)

Definition and Scope

Mortgage loans, the proceeds of which are disbursed to the mortgagor in one or more lump sums, or in equal or unequal installments, and which requires no repayment until a future time, upon the earliest occurrence of one or more events specified in the reverse mortgage loan contract. § 2244(a)(2) (licensed lenders), § 2118(a)(2) (mortgage loan brokers).