As used in this chapter, unless the context clearly indicates or requires a different meaning:
(a) “Affiliate” means any company that controls, is controlled by, or is under common control related to or associated with another company, as set forth in the Bank Holding Company Act of 1956 (12 USC 1841 et seq.), as amended from time to time. However, an “affiliate” shall not include any entity whose predominant business is the providing of tax deferred, defined contribution, pension plans to public employees in accordance with Section 403(b) and 457 of the Internal Revenue Code.
(b) “Annual percentage rate” means the annual percentage rate for the loan calculated according to the provisions of the Federal Truth-in-Lending Act (15 USC 1601, et seq.), and the regulations promulgated thereunder by the Federal Reserve Board (as said Act and regulations are amended from time to time).
(c) “Bona fide loan discount points” means discount points knowingly paid by the borrower for the purpose of reducing, and which in fact result in a bona fide reduction of, the interest rate or time-price differential applicable to the credit transaction or loan. For purposes of this provision, it shall be presumed that a point is a bona fide loan discount point if it reduces the interest rate by a minimum of 35 basis points or 3/8 of a point, provided all other terms of the loan remain the same.
(d) “City” the City of Kenton.
(e) “City Agency” the City of Kenton, its departments, boards and commissions.
(f) “CRA Compliant Lender” means any person, party, institution, business entity, or affiliate who might otherwise be a lender within the meaning of Section 834.01(h), if such person, party, institution, business entity, or affiliate has received a CRA (Community Reinvestment Act) rating of satisfactory or above from any one of the federal review agencies, including but not limited to the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Office of Comptroller of the Currency (OCC), or any similar agency.
(g) “High Cost Loan” means a loan that is secured by residential real property located within the City of Kenton on which there is situated a dwelling for not more than four families or a condominium unit, if:
(1) At any time over the life of the loan, the annual percentage rate of the loan equals or exceeds by more than nine (9%) percentage points, or the current annual percentage rate limitation included within the Home Ownership and Equity Protection Act (“HOEPA”), whichever is less, 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,
(2) The total points and fees financed in such loan equal or exceed the:
A. Points and fees limitation included with the Home Ownership and Equity Protection Act (“HOEPA”), or;
B. Five percent (5%) of the total loan amount; or, six percent (6%) of the loan amount if the total transaction amount is twenty thousand ($20,000) or more and the loan is a purchase money loan guaranteed by the Federal Housing Administration or the Veterans Administration, whichever is less. However, “high cost loan” shall not include a loan that is made primarily for a business purpose unrelated to the residential real property securing the loan, or any loan, which exceeds $250,000.
(h) “Lender” means:
(1) Any person, party, institution, business entity, or affiliate (not including an individual acting in the capacity of an employee of any of the foregoing) that actively transacts business involving the placement, origination, purchasing or selling of loans; or,
(2) Any person, party, institution, business entity, or affiliate (not including an individual acting in the capacity of an employee of any of the foregoing) that actively assists a borrower in obtaining a high cost or predatory loan, when the person, party, institution, or affiliate charges or receives money or other valuable consideration for providing this assistance.
(i) “Points and fees” means:
(1) All items required to be disclosed under sections 226.4(a) and 226.4(b) of Title 12 of the Code of Federal Regulations, as amended from time to time, except the interest rate or the timeprice differential;
(2) Subject to the exclusions provided below in this section, all charges for items listed under section 226.4(c)(7) of Title 12 of the Code of Federal Regulations, as amended from time to time, but only if the lender receives direct or indirect compensation in connection with the charge or the charge is paid to an affiliate of the lender; otherwise, the charges are not included within the meaning of the phrase “points and fees”;
(3) All compensation paid directly or indirectly to a mortgage broker, including a broker that originates a loan in its own name in a table funded transaction, not otherwise included in paragraph (1) or (2) of this subdivision;
(4) The premium of any single premium credit life, credit disability, credit unemployment, or any other life or health insurance that is financed directly or indirectly into the loan, unless the disclosures and acknowledgment described in predatory loan practice in section 834.01(k)(10) have been made.
“Points and fees” shall not include any charges or fees excluded by paragraphs (c) through (e) of Regulation Z of the Truth-in-Lending Act, Section 226.4 of Title 12 of the Code of Federal Regulations.
(j) “Predatory lender” means a lender that, through itself and/or an affiliate has made, issued or arranged, or assisted others in so doing, within any 12 month period, predatory loans, within the City of Kenton, Ohio, that comprise either:
(1) Five percent (5%) of the total annual number of loans made, issued or arranged, or five percent (5%) of the total annual number of loans which the lender has assisted others in so making, using or arranging; or,
(2) Twenty-five (25) individual loans; whichever is less.
(k) “Predatory loan” means a high cost loan that was made under circumstances that involve any of the following acts and practices, or a high cost loan that contains any of the following loan terms:
(1) Fraudulent or deceptive acts or practices, including fraudulent or deceptive marketing and sales efforts to sell high cost loans. Fraudulent or deceptive acts and practices shall include, but are not limited to, the following:
A. A lender may not knowingly include in a loan terms that are substantially unfavorable to the borrower because of the borrower’s inability to reasonably protect his interests because of his physical or mental infirmities, or illiteracy;
B. A lender may not negotiate any terms in a loan which were less favorable to the borrower than could otherwise have been obtained in similar transactions by like consumers within the City of Kenton, where the lender receives any benefit, direct or indirect, from the business entity who provided the funds for the loan in exchange for the inclusion of the less favorable terms within the loan;
C. A lender may not charge a fee and/or costs for a loan transaction as a whole, or for any service performed in connection with the loan transaction, where the fees and/or costs exceed the fees and/or costs available in similar transactions by like consumers in the City of Kenton by more than twenty (20%) percent;
D. A lender may not charge a borrower points, fees, or other charges in connection with a loan transaction, if the proceeds of the loan transaction are used to refinance an existing loan held by the same lender;
E. A lender may not knowingly or recklessly make a false statement of fact and/or opinion to the borrower, on which the borrower justifiably relies to his detriment, in order to induce the borrower to accept terms in a loan transaction that were unfavorable to the borrower;
F. A lender may not misrepresent, in connection with a loan application, the income, assets or expenses of the borrower;
G. A lender may not procure an appraisal of the value of the secured property under circumstances where the appraisal unreasonably overstates the value of the property;
(2) “Loan flipping.” “Flipping” a loan is the making of high cost loan to a borrower that refinances an existing loan, when the new loan does not have a reasonable, tangible net benefit to the borrower considering all of the circumstances.
(3) “Balloon Payments.” A loan that has a payment schedule with regular periodic payments that, when aggregated do not fully amortize the outstanding principal balance, unless the lender, at least three business days before the borrower signs the loan agreement, makes to the borrower a separate oral disclosure, and a separate clear and conspicuous written disclosure to which the borrower agrees in writing, containing the following information, all of which must be true:
“WARNING - BALLOON PAYMENT LOAN: This loan will not be fully paid off by the regular periodic payments. At [insert the date at which the balloon payment is due] you will still owe a payment of [insert the amount of the balloon payment]. If you do not have this amount of money, you will have to get another loan to pay it. Otherwise, this loan will be in default, and you may lose your home in foreclosure.”
In addition, the written disclosure shall contain a signed and dated acknowledgment by the borrower that the oral disclosure was made and a signed and dated acknowledgment by the lender that the oral disclosure was made.
(4) “Negative Amortization.” A loan that contains a payment schedule with regular periodic payments that cause the principal balance to increase and/or remain constant.
(5) “Increased Interest Rate.” A loan that contains a provision that increases the interest rate after default. Interest rate increases do not constitute a predatory loan practice in variable rate loans where the increase is otherwise consistent with the provisions of the loan documents, provided that the event of default or the acceleration of the indebtedness does not trigger the change in the interest rate.
(6) “Advance Payments.” A loan which includes terms under which more than two periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower.
(7) “Modification or Deferral Fees.” A loan which includes terms under which the lender may charge a borrower any fees or other charges to modify, renew, extend, or amend a loan product or to defer any payment due under the terms of a loan product.
(8) “Mandatory Arbitration.” A loan which contains a mandatory arbitration clause that limits in any way the right of the borrower to seek relief through a court of law or equity.
(9) “Prepayment Penalties.” A loan which imposes prepayment fees or penalties on the borrower that apply to a prepayment of the loan made after the expiration of the 60 month period following the date the loan was originated.
(10) “Financing of Credit Insurance.” The financing of any credit life, credit disability, credit unemployment or any other life or health insurance, directly or indirectly, in a high cost loan unless the lender, at least three business days before the borrower signs the loan agreement, makes to the borrower a separate oral disclosure, and a separate clear and conspicuous written disclosure containing the following information, all of which must be true:
A. The total costs of the insurance premium;
B. The total amount of interest that will be charged for the financing of the insurance premium over the life of the loan;
C. The fact that the insurance will be prepaid and financed at the interest rate provided for in the loan;
D. The amount that the lender or its affiliates will receive as direct or indirect commissions in connection with the insurance;
E. That the borrower may terminate the insurance at any time and receive a refund of the unearned premium, and that the borrower will receive a refund of the entire premium if the borrower cancels the insurance within 90 days after the policy goes into effect;
F. The term of the insurance coverage.
In addition, the written disclosure shall contain a signed and dated acknowledgment by the borrower that the oral disclosure was made and a signed and dated acknowledgment by the lender that the oral disclosure was made.
(l) “Table funded transaction” means a settlement at which a high cost or predatory loan is funded by an advance of funds and there is a subsequent assignment of the loan from the person or entity identified as the lender in the loan transaction documents to the person or entity advancing the funds.
(Ord. 01-036. Passed 1-28-02.)