§ 4905. — Disclosure requirements for lender paid mortgage insurance.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC4905]
TITLE 12--BANKS AND BANKING
CHAPTER 49--HOMEOWNERS PROTECTION
Sec. 4905. Disclosure requirements for lender paid mortgage
insurance
(a) Definitions
For purposes of this section--
(1) the term ``borrower paid mortgage insurance'' means private
mortgage insurance that is required in connection with a residential
mortgage transaction, payments for which are made by the borrower;
(2) the term ``lender paid mortgage insurance'' means private
mortgage insurance that is required in connection with a residential
mortgage transaction, payments for which are made by a person other
than the borrower; and
(3) the term ``loan commitment'' means a prospective mortgagee's
written confirmation of its approval, including any applicable
closing conditions, of the application of a prospective mortgagor
for a residential mortgage loan.
(b) Exclusion
Sections 4902 through 4904 of this title do not apply in the case of
lender paid mortgage insurance.
(c) Notices to mortgagor
In the case of lender paid mortgage insurance that is required in
connection with a residential mortgage transaction--
(1) not later than the date on which a loan commitment is made
for the residential mortgage transaction, the prospective mortgagee
shall provide to the prospective mortgagor a written notice--
(A) that lender paid mortgage insurance differs from
borrower paid mortgage insurance, in that lender paid mortgage
insurance may not be canceled by the mortgagor, while borrower
paid mortgage insurance could be cancelable by the mortgagor in
accordance with section 4902(a) of this title, and could
automatically terminate on the termination date in accordance
with section 4902(b) of this title;
(B) that lender paid mortgage insurance--
(i) usually results in a residential mortgage having a
higher interest rate than it would in the case of borrower
paid mortgage insurance; and
(ii) terminates only when the residential mortgage is
refinanced (under the meaning given such term in the
regulations issued by the Board of Governors of the Federal
Reserve System to carry out the Truth in Lending Act (15
U.S.C. 1601 et seq.)), paid off, or otherwise terminated;
and
(C) that lender paid mortgage insurance and borrower paid
mortgage insurance both have benefits and disadvantages,
including a generic analysis of the differing costs and benefits
of a residential mortgage in the case lender paid mortgage
insurance versus borrower paid mortgage insurance over a 10-year
period, assuming prevailing interest and property appreciation
rates;
(D) that lender paid mortgage insurance may be tax-
deductible for purposes of Federal income taxes, if the
mortgagor itemizes expenses for that purpose; and
(2) not later than 30 days after the termination date that would
apply in the case of borrower paid mortgage insurance, the servicer
shall provide to the mortgagor a written notice indicating that the
mortgagor may wish to review financing options that could eliminate
the requirement for private mortgage insurance in connection with
the residential mortgage transaction.
(d) Standard forms
The servicer of a residential mortgage transaction may develop and
use a standardized form or forms for the provision of notices to the
mortgagor, as required under subsection (c) of this section.
(Pub. L. 105-216, Sec. 6, July 29, 1998, 112 Stat. 904; Pub. L. 106-569,
title IV, Secs. 403(c), 406(a), Dec. 27, 2000, 114 Stat. 2957, 2959.)
References in Text
The Truth in Lending Act, referred to in subsec.(c)(1)(B)(ii), is
title I of Pub. L. 90-321, May 29, 1968, 82 Stat. 146, as amended, which
is classified generally to subchapter I (Sec. 1601 et seq.) of chapter
41 of Title 15, Commerce and Trade. For complete classification of this
Act to the Code, see Short Title note set out under section 1601 of
Title 15 and Tables.
Amendments
2000--Subsec. (c). Pub. L. 106-569, Sec. 403(c)(1)(A), struck out
``a residential mortgage or'' before ``a residential mortgage
transaction'' in introductory provisions.
Subsec. (c)(1)(B)(ii). Pub. L. 106-569, Sec. 406(a), inserted
``(under the meaning given such term in the regulations issued by the
Board of Governors of the Federal Reserve System to carry out the Truth
in Lending Act (15 U.S.C. 1601 et seq.))'' after ``refinanced''.
Subsec. (c)(2). Pub. L. 106-569, Sec. 403(c)(1)(B), inserted
``transaction'' before period at end.
Subsec. (d). Pub. L. 106-569, Sec. 403(c)(2), inserted
``transaction'' after ``residential mortgage''.
