(a) Issuing Predatory Loans. No person 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 subsection will not be deemed to have violated this subsection if the person establishes that either:
(.1) Within 30 days of the loan closing and prior to the institution of any action under this Chapter, 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; or
(.2) 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 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.
(b) Lending Without Home Loan Counseling. No person shall make, issue or arrange any threshold or high cost loan, or assist others in doing so, without first receiving notice from a counselor employed by a housing counseling agency approved by the Office of Housing and Community Development that the borrower has received counseling on the advisability of the loan transaction and the appropriateness of the loan for the borrower based upon the information provided by borrower and lender to the counselor at the time counseling is provided to the borrower.
(c) Lending Without Due Regard to Repayment. No lender shall make, issue or originate any threshold or high cost loan if the lender does not reasonably believe at the time the loan is consummated that the borrower or borrowers (when considered collectively in the case of multiple borrowers) will be able to make the scheduled payments to repay the obligation based upon a consideration of their current and expected income, current obligations, employment status, and other financial resources (other than the borrower's equity in the dwelling which secures repayment of the loan). A borrower shall be presumed to be able to make the scheduled payments to repay the obligation if, at the time the loan is consummated, or at the time of the first rate adjustment in the case of a lower introductory interest rate (i) the borrower's scheduled monthly payments on the loan (including principal, interest, taxes, insurance and assessments), combined with the scheduled payments for all other debt, do not exceed fifty percent (50%) of the borrower's documented and verified monthly gross income, and (ii) provided that the borrower has sufficient "residual income" as defined in the guidelines established in 38 C.F.R. § 36.4337(e) and VA form 26-6393 to pay essential monthly expenses after paying the scheduled payments and any additional debt. This subsection applies only to borrowers whose income, as reported on the loan application which the lender relied upon in making the credit decision, is no greater than one hundred twenty percent (120%) of the median family income for the Philadelphia Metropolitan Statistical Area (MSA) (as defined by the Director of the U.S. Office of Management and Budget). For purposes of this Section, the median family income shall be derived from the most recent estimates made available by the U.S. Department of Housing and Urban Development, at the time the application is received. For purposes of determining median income, only the income of the borrower or borrowers shall be considered.
(d) Payments to Home Improvement Contractors. A lender shall not pay proceeds of a threshold or high cost loan to any "home improvement contractor", as that term is defined in the Home Improvement Finance Act, 73 P.S. § 500-102(9), and a home improvement contractor may not receive the proceeds of a threshold or high cost loan, other than (i) by an instrument payable solely to the borrower or borrowers, or (ii) at the election of the borrower, through a third-party escrow agent in accordance with terms established in a written agreement signed by the borrower and the home improvement contractor prior to the disbursement; provided however that in no instance shall more than twenty-five percent (25%) of the total proceeds of the threshold or high cost loan be disbursed at the time of closing.
(e) 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 or a City Agency which are subject to regulation under Chapter 21-1100 of The Philadelphia Code in combination with any high cost or predatory loan. Any contract, lease, grant condition or other agreement entered into by the City with any City-related Agency shall contain a provision requiring that the City-related Agency, in the administration of governmental housing assistance funds abide by the provisions of this subsection as though its administration of such funds was directly subject to the provisions of this subsection.
(f) Provisions Not Applicable to Activities of Certain Financial Institutions.
(.1) Subsection (a) is not applicable in the following circumstances:
(.a) With respect to a licensed duly lender as may be required under State law, solely because of the presence of a loan provision described in subsection 9-2402(11)(c), (d) or (j), 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 subsection 9-2402(11); or
(.b) In the case of a loan made pursuant to the Pennsylvania Consumer Discount Act, 7 P.S. §§ 6201 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 subsection 9-2402(11);
(.c) In the case of a loan made pursuant to the Pennsylvania Secondary Mortgage Loan Act, 7 P.S. §§ 6601 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 subsection 9-2402(11).
(.2) Subsections (a), (b), (c), and (d) are not applicable with respect to a State-chartered bank, bank and trust company, savings bank, private bank or national bank, a State or federally chartered savings and loan association, a federally chartered savings bank or a State or federally chartered credit union. However, the provisions of subsections (a), (b), (c) and (d) shall apply to affiliates of such entities, except insofar as such affiliates are themselves one of the financial institutions enumerated above.
(2) Notice to Customers of Home Improvement Contractors. Each home improvement contractor must furnish the following notice, as published from time to time by the Office of Housing and Community Development along with each home improvement contract or bid for home improvement contract for any work to be performed on a residence located within the City of Philadelphia:
IMPORTANT NOTICE TO CUSTOMERS OF HOME IMPROVEMENT CONTRACTORS
If you need a loan to pay for home improvements:
BE CAREFUL. A lender will probably want to take a mortgage on your house. You should not borrow more than you can afford or more than you need. The loan you are being offered may be a threshold or high cost loan. You may be eligible for a different loan which charges significantly less interest or fees. Be very cautious about consolidating your debt with a home mortgage. Beware that if you default on this loan you could lose your house!
It is now the law in Philadelphia that before you sign any threshold or high cost home loan you must receive housing counseling assistance.
For the name, address and phone number of a housing counseling or legal services agency in your neighborhood, turn this notice over to see the list of agencies printed on the reverse side.
I received this notice on this date:
___________________________
(date)
___________________________
(signature of home owner(s))
(3) Certification of Compliance to be Recorded. At the time of recording a mortgage, the lender and, if applicable the mortgage broker, must submit a certification of compliance to the Department of Records for recording along with the mortgage instrument and deed. The Department of Records shall make the information contained in such certifications available to the public in the most usable form the department practicably can provide. The certification of compliance shall be substantially in the following form and shall comply with any formatting requirements promulgated from time to time by the Department of Records.
The undersigned lender and mortgage broker certify, that to the best of our knowledge, information and belief, the attached mortgage, described below, entered into between _______________ (name of lender) and _______________ (name of borrower) on __________ (date of execution) for the property located at _______________ (street address of property) contains the following characteristics and terms:
Type of mortgage:
Purchase Money Non-purchase Money
(circle one)
First Mortgage Junior Mortgage
(circle one)
a. The annual percentage rate of the loan is _____.
b. The applicable Treasury Rate1 is: _____.
c. The total loan amount is _____.
d. The total amount of points and fees2 is _____.
e. The percentage of points and fees financed3 is _____.
1 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.
2 Points and fees are defined in Section 9-2402 of The Philadelphia Code.
3 Calculated according to the equation d/(c-d)x100.
1. The mortgage is or is not (circle one) a threshold or high cost loan.
2. The borrower has or has not (circle one) received housing counseling. A certification of housing counseling is or is not (circle one) attached to this certification.
3. The mortgage does or does not (circle one) violate any provisions of Chapter 9-2400 of The Philadelphia Code.
Date: _______________
______________________________
Mortgage Lender
______________________________
Name and Title of Officer
______________________________
Address
______________________________
Telephone Number
______________________________
Commercial Activity Lic. No.
______________________________
Mortgage Broker
______________________________
Name and Title of Officer
______________________________
Address
______________________________
Telephone Number
______________________________
Commercial Activity Lic. No.
Notes
| 1211 | Enrolled Bill No. 000715-A read "Subjects". |
| 1212 | Amended, Bill No. 110758 (approved December 21, 2011), effective May 1, 2012. |