TITLE 34
Property

CHAPTER 34-25.2
Rhode Island Home Loan Protection Act

SECTION 34-25.2-4


§ 34-25.2-4 Definitions.

The following definitions shall apply for the purposes of this chapter, unless the context otherwise requires:

(a) "Accelerate" means the advancing of a loan agreement's maturity date so that payment of the entire debt is due immediately.

(b) "Affiliate" means any company that controls, is controlled by, or is under common control with another company, as set forth in 12 U.S.C. § 1841.

(c) "Annual percentage rate" means the annual percentage rate for the loan calculated according to the provisions of 12 C.F.R. part 226.

(d) "Bona fide discount points" means an amount knowingly paid by the borrower for the express purpose of reducing, and which in fact does result in a bona fide reduction of, the interest rate applicable to the home loan; provided the undiscounted interest rate for the home loan does not exceed the conventional mortgage rate by two (2) percentage points for a home loan secured by a first lien, or by three and one-half (3.5) percentage points for a home loan secured by a subordinated lien.

(e) "Borrower" means any person obligated to repay the loan, including a co-borrower, co-signor or guarantor.

(f) "Brokering" means to act as a loan broker as defined in Rhode Island general laws § 19-14-1.

(g) "Conventional mortgage rate" means the most recently published annual yield on conventional mortgages published by the board of governors of the Federal Reserve System, as published in statistical release H.15 or any publication that may supersede it, as of the applicable time set forth in 12 C.F.R. 226.32(a)(1)(i).

(h) "Conventional prepayment penalty" means any prepayment penalty or fee that may be collected or charged in a home loan, and that is authorized by law other than this chapter, provided the home loan: (1) does not have an annual percentage rate that exceeds the conventional mortgage rate by more than two (2) percentage points; and (2) does not permit any prepayment fees or penalties that exceed two percent (2%) of the amount prepaid.

(i) "Creditor" means any person who regularly makes available a home loan and shall include a loan broker.

(j) "Department" means the department of business regulation.

(k) "Director" means the director of the department of business regulation.

(l) "High-cost home loan" means a home loan in which the terms of the loan meet or exceed one of more of the thresholds as defined in subsection (r) of this section.

(m) "Home loan" means a loan, including an open-end credit plan, other than a reverse mortgage transaction, where the loan is secured by:

(1) A mortgage or deed of trust on real estate in this state upon which there is located or there is to be located a structure or structures designed principally for occupancy of from one to four (4) families which is or will be occupied by a borrower as the borrower's principal dwelling; or

(2) A security interest on a manufactured home which is or will be occupied by a borrower as the borrower's principal dwelling.

(n) "Loan originator" means a natural person employee of a lender or loan broker that is required to be licensed under Rhode Island general laws § 19-14-1 et seq., and who for or with the expectation of a fee, commission or other valuable consideration and whose job responsibilities include direct contact with applicants during the loan application process, which includes soliciting, negotiating, acquiring, arranging or making mortgage loans, or who in connection with the taking of loan applications or the taking of loan pre-approval requests obtains personal financial information or other documents, quotes loan rates or terms, or provides required disclosures.

(o) "Points and fees" means:

(1) All items included in the definition of finance charge in 12 C.F.R. 226.4(a) and 12 C.F.R. 226.4(b) except interest or the time price differential;

(2) All items described in 12 C.F.R. 226.32(b)(1)(iii);

(3) All compensation paid directly by a borrower to a loan broker including a loan broker that originates a loan in its own name in a table-funded transaction;

(4) All compensation paid indirectly to a loan broker from any source other than the borrower in excess of one percentage point of the total loan amount, including a loan broker that originates a loan in its own name in a table-funded transaction;

(5) The cost of all premiums financed by the creditor, directly or indirectly for any credit life, credit disability, credit unemployment or credit property insurance, or any other life or health insurance, or any payments financed by the creditor directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums or debt cancellation or suspension fees calculated and paid in full on a monthly basis shall not be considered financed by the creditor;

(6) The maximum prepayment fees and penalties that may be charged or collected under the terms of the loan documents; and

(7) All prepayment fees or penalties that are incurred by the borrower if the loan refinances a previous loan originated or currently held by the same creditor or an affiliate of the creditor.

(8) For open-end loans, the points and fees are calculated by adding the total points and fees known at or before closing, including the maximum prepayment penalties which may be charged or collected under the terms of the loan documents, plus the minimum additional fees the borrower would be required to pay to draw down an amount equal to the total credit line.

(9) Points and fees shall not include:

(i) Points and fees up to and including one percent (1%) of the total loan amount attributable to bona fide fees paid to a federal or state government agency that insures payment of some portion of a home loan plus an amount not to exceed two percent (2%) of the total loan amount attributable to a bona fide discount points or a conventional prepayment penalty. In no case shall the total excluded points and fees in connection with a home loan exceed three percent (3%) of the total loan amount;

(ii) Taxes, filing fees, recording and other charges and fees paid or to be paid to public officials for determining the existence of or for perfecting, releasing or satisfying a security interest; or

(iii) Bona fide and reasonable fees paid to a person other than the creditor or an affiliate of the creditor for the following: fees for tax payment services; fees for flood certification; fees for pest infestation and flood determination; appraisal fees; fees for inspections performed prior to closing; credit reports; surveys; attorneys' fees; notary fees; escrow charges, so long as not otherwise included under subparagraph (1) of this paragraph; title insurance premiums; and fire and hazard insurance and flood insurance premiums, provided that the conditions in 12 C.F.R. 226.4(d)(2) are met; or

(p) "Predatory lending" means any act and practice which is found in violation of those acts and practices prohibited by §§ 34-25.2-5 and 34-25.2-6 of this chapter.

(q) "Tangible, net benefit" means at the time of refinancing a home loan(s), the new home loan(s) meet, at a minimum, one of the following:

(1) The borrower's new monthly payment(s) is lower than the total of all monthly obligations being financed, taking into account the costs and fees as disclosed on the HUD-1 settlement statement;

(2) There is a beneficial change in the amortization period of the new loan(s);

(3) The borrower receives cash in excess of the costs and fees, as disclosed on the HUD-1 settlement statement, as part of the refinancing;

(4) The borrower's current note rate of interest is reduced, or in the event more than one loan in being refinanced, the weighted average note rate of the current loans is reduced;

(5) There is a change from an adjusted rate loan(s) to a fixed rate loan(s); or

(6) The refinancing is necessary to respond to a bona fide personal need or an order of a court of competent jurisdiction.

(r) "Threshold" means any one of the following two (2) items, as defined:

(1) "Rate threshold" means:

(i) For a first lien mortgage home loan, an interest rate equal to eight (8) percentage points over the yield on comparable United States treasury securities on the fifteenth (15th) day of the month immediately preceding the month in which the loan application was received by the lender; and

(ii) For a subordinate mortgage lien, an interest rate equal to nine (9) percentage points over the yield on comparable United States treasury securities on the fifteenth (15th) day of the month immediately preceding the month in which the loan application was received by the lender;

(2) "Total points and fees threshold" means:

(i) For loans in which the total loan amount is fifty thousand dollars ($50,000) or more, the total points and fees payable in connection with the home loan less any excluded points and fees exceed five percent (5%) of the total loan amount; and

(ii) For loans in which the total loan amount is less than fifty thousand dollars ($50,000) the total points and fees payable in connection with the home loan less any excluded points and fees exceed eight percent (8%) of the total loan amount.

(s) "Total loan amount" means the total amount the consumer will borrow, as reflected by the face amount of the note. For open-end loans, the total loan amount shall be calculated using the total line of credit allowed under the home loan at closing.

History of Section.
(P.L. 2006, ch. 569, § 1; P.L. 2006, ch. 573, § 1.)