REFERENCE TITLE: high-cost home loans; regulations

State of Arizona Senate Forty-ninth Legislature Second Regular Session 2010

SB 1288

Introduced by Senator Nelson

 

AN ACT

 

amending title 33, chapter 6, Arizona Revised Statutes, by adding article 4; relating to high-cost home loans.

 

 

(TEXT OF BILL BEGINS ON NEXT PAGE)

 

Be it enacted by the Legislature of the State of Arizona:

Section 1.  Title 33, chapter 6, Arizona Revised Statutes, is amended by adding article 4, to read:

ARTICLE 4.  HIGH-COST HOME LOANS

START_STATUTE33-761.  Definition of high‑cost home loan

In this article, unless the context otherwise requires, "high-cost home loan":

1.  Means a loan that:

(a)  Is made to one or more individuals for personal, family, or household purposes.

(b)  Is secured in whole or part by either a manufactured home, used or to be used as the borrower's principal residence, or real property improved by a dwelling designed for occupancy by four or fewer families and used or to be used as the borrower's principal residence.

(c)  Is a credit transaction described by 12 Code of Federal Regulations section 226.35(a).

2.  Does not include:

(a)  A reverse mortgage.

(b)  An open-end account. END_STATUTE

START_STATUTE33-762.  Balloon payment

A high-cost home loan may not contain a provision for a scheduled payment that is more than twice as large as the average of earlier scheduled monthly payments, unless the balloon payment becomes due not less than sixty months after the date of the loan.  This prohibition does not apply if the payment schedule is adjusted to account for the seasonal or otherwise irregular income of the borrower or if the loan is a bridge loan in connection with the acquisition or construction of a dwelling intended to become the borrower's principal dwelling. END_STATUTE

START_STATUTE33-763.  Negative amortization

A high-cost home loan may not provide for a payment schedule with regular periodic payments that cause the principal balance to increase, except that this section does not prohibit negative amortization as a consequence of a temporary forbearance, bridge loan or restructure sought by the borrower. END_STATUTE

START_STATUTE33-764.  Consideration of obligor's payment; definition

A.  A lender may not engage in a pattern or practice of extending credit to consumers under high-cost home loans based on the consumers' collateral without regard to the obligor's repayment ability, including the obligor's current and expected income, current obligations, employment status and other financial resources other than the obligor's equity in the dwelling that secures repayment of the loan.

B.  For the purposes of this section, "obligor" means a person obligated to pay a loan, including a borrower, cosigner or guarantor.  If more than one person is obligated to pay a loan, the term refers to those persons collectively. END_STATUTE

START_STATUTE33-765.  Prepayment penalties prohibited

A lender may not make a high-cost home loan containing a provision for a prepayment penalty. END_STATUTE

START_STATUTE33-766.  Charge prohibited for product or service not received

A lender, in connection with a high-cost home loan, may not charge a borrower an amount for a service or product if the borrower does not receive the service or product. END_STATUTE

Sec. 2.  Emergency

This act is an emergency measure that is necessary to preserve the public peace, health or safety and is operative immediately as provided by law.