(a) Prohibited Conduct. Subject to the limitations of division (b) of this section:
(1) Issuing Predatory Loans. No person or business entity shall make, issue, or arrange a predatory loan, or assist others in doing so. A person who, when acting in good faith, fails to comply with this division will not be deemed to have violated this division if the person establishes that the compliance failure was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such errors, and within sixty (60) days after the discovery of the compliance failure and prior to the institution of any action under this chapter or the receipt of written notice of compliance failure, the borrower is notified of the compliance failure, appropriate restitution is made, and whatever adjustments are necessary are made to the loan to either, at the choice of the borrower, (i) make the predatory loan satisfy the requirements of this chapter, or (ii) change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a predatory loan subject to the provisions of this chapter. Examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors. An error of legal judgment with respect to a person’s obligations under this chapter is not a bona fide error.
(2) Lending Without Home Loan Counseling. No person or business entity shall make, issue or arrange, or assist others in making, issuing or arranging, any loan that is secured by owner-occupied residential real property located within the City of Cleveland on which there is situated a dwelling for not more than four (4) families, a condominium unit, or a cooperative unit in which either:
A. The annual percentage rate at consummation will exceed by more than eight (8) percentage points for first lien loans, or by more than ten (10) percentage points for subordinate-lien loans, the yield on Treasury securities having comparable periods of maturity to the loan maturity as of the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or
B. The total points and fees payable by the consumer at or before loan closing will exceed the greater of eight percent (8%) of the total loan amount, or four hundred dollars ($400.00); the four hundred dollar ($400.00) figure shall be adjusted annually on January 1 by the annual percentage rate change in the consumer price index that was reported on the preceding June 1, unless that person or business entity first receives notice from a counselor employed by a housing counseling agency approved by the Department of Housing and Urban Development that the borrower has received counseling describing the loan transaction and its impact on the borrower based upon the information provided by borrower and lender to the counselor at the time counseling is provided to the borrower.
(3) Payments to Home Improvement Contractors. A home improvement contractor may not receive directly and solely from the lender, the proceeds of a loan that is secured by owner-occupied residential real property located within the City of Cleveland on which there is situated a dwelling for not more than four (4) families, a condominium unit, or a cooperative unit in which, at any time over the life of the loan for a fixed interest rate loan, or at the time a loan is consummated for a variable interest rate loan, the annual percentage rate of the loan equals or exceeds by more than four and one half (4-1/2) percentage points in the case of a mortgage that is a first lien when it is made, or equals or exceeds by more than six and one half (6-1/2) percentage points in the case of a mortgage that is junior when it is made, the yield on Treasury securities having comparable periods of maturity to the loan maturity as of the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor.
(4) Incorporating Governmental Financial Assistance Funds. All persons shall be barred from promoting, utilizing, packaging, or in any other way incorporating funds from any of the programs administered by the City in combination with any predatory loan. Any contract, lease, grant or other agreement entered into by the City with any person or business entity shall contain a provision requiring that the person or business entity, in the administration of governmental housing assistance funds, abide by the provisions of this division as though its administration of such funds was directly subject to the provisions of this division.
(b) Activities of Certain Financial Institutions Exempted.
(1) Division (a) of this section is not applicable in the following circumstances:
A. With respect to a lender duly licensed as may be required under State law, solely because of the presence of a loan provision described in divisions (f)(2)B., C. or H. of Section 659.01, provided that such provision(s) are made in conformity with the requirements of federal law pursuant to the Alternative Mortgage Transaction Parity Act, 12 U.S.C. 3803 and provided that any such loan is not otherwise predatory as defined in division (f) of Section 659.01; or
B. In the case of a loan made pursuant to the Ohio’s Mortgage Loan Act, RC 1321.51 et seq., solely because the loan contains any provision authorized by such act, provided that any such loan is not otherwise predatory as defined in division (f) of Section 659.01.
(2) Divisions (a)(1) and (a)(2) of this section are not applicable with respect to a State chartered bank, bank and trust company, savings bank, private bank, national bank, or a State or federally chartered savings and loan association, a federally chartered savings bank, a State or federally chartered credit union.
(3) This section shall apply to affiliates of the entities enumerated in division (b)(2) of this section, except insofar as such affiliates are themselves one (1) of those financial institutions.
(Ord. No. 45-03. Passed 1-13-03, eff. 1-15-03)