Issues with David Thomas

 

 

2003 PREDATORY LENDING LEGISLATION INFORMATION

  • 37-23-10 - South Carolina High-Cost and Consumer Home Loans Act (Adds a new Chapter to the Consumer Protection Code to address High-cost and consumer home loans made in South Carolina.)

  • 37-23-20 - Defines terms for purposes of the Act

    1. Affiliate:  Company controlled by another
    2. Annual Percentage Rate:  Interest rate charged
    3. Broker or Mortgage Broker:  Person or organization in business of soliciting, processing, placing, or negotiating mortgage loans for others
    4. Consumer home loan:  Loans made for personal, family and household use
    5. Conventional Conforming Discount Points:  Points paid for bona fide reduction of borrower’s interest rate
    6. Conventional Mortgage Rate:  Mortgage rates as defined by federal law
    7. Conventional Prepayment Penalty:  Prepayment penalty or fee authorized by law, other than this Chapter, with restrictions provided in this Chapter
    8. Flipping:  Refinancing existing loan within 42 months with no net tangible benefit to borrower (See Exhibit B attached)
    9. High-cost Loan:  Loans made to consumer that exceed Thresholds below (See Exhibit A attached)
    10. Lender:  Includes mortgage broker, mortgage banker
    11. Obligor:  Borrower, co borrower or obligor of loan
    12. Originator:  Employee of mortgage loan broker whose job responsibilities include direct contact with and informing applicants of aspects of loan
    13. Points and fees:  Charges associated with mortgage loans as defined
    14. Table-funded Transaction:  Settlement at which a mortgage loan is funded by an advance of loan funds to a lender
    15. Threshold:  Loans where borrower is charged more than 5% of the loan amount in up front points, fees, or other charges or the borrower is charged an interest rate that is 8% above the comparable Treasury bond rate for first mortgages and 10% for second; and 10% above Treasury or 3% points and fees for nonreal estate manufactured housing lien.  (See Exhibit C attached)
    16. Total loan amount:  Loan amount as defined under federal law.

    ARTICLE 3

  • 37-23-30 - Specifies what cannot be included in a High-Cost Loan:
    1. Call provision
    2. balloon payment
    3. negative amortization
    4. rate increase after default
    5. financing of upfront payments
    6. charges to modify, renew, extend, or amend
    7. choice of Law in contract

  • 37-23-40 - Specifies requirements by Lender on High-Cost Loan:
    1. Must have written certification that consumer has received counseling on the loan;
    2. Must believe, based on objective standard, that consumer has the ability to repay;
    3. Cannot finance directly or indirectly (a) prepayment penalties or penalties if lender or affiliate of lender is noteholder of note being refinanced; (b) points and fees in excess of two and one-half percent;
    4. Cannot charge points and fees on a high-cost home loan if proceeds of loan are used to refinance existing high-cost loan held by the same lender; or
    5. Pay a contractor on a home improvement contract from proceeds of high-cost loan other than by instrument payable jointly to the borrower and the contractor. A home improvement contract does not include money for a new home construction loan or a purchase money loan for a home.

  • 37-23-45 - Yield Spread Premium (as well as other profits) Disclosure to be provided by broker to borrower on high-cost loan

  • 37-23-50 - Penalty Section on High-cost Loans:
    •     (A) Class actions prohibited;
        $1,500 to $7,500 damages for each loan transaction;
        six-year statute of limitations; and
        (B) (1) (a) refuse to enforce the agreement or part of transaction that was unlawful;
        (b) enforce the remainder of the agreement with unlawful part eliminated;
        (c) rewrite or modify the agreement to eliminate unlawful part; or
        (d) award either one of the following:
        (i) not more than total amount of loan finance charge and allow repayment of unpaid balance of loan without any finance charge; or
        (ii) not more than double the amount of the excess loan finance charge or other charges and fees paid;
        (2) Action may not be brought after maturity date of debt.
        (C) Award of attorneys? fees and court cost.
        (D) Consumer protections in addition to other protections available by law.
        (E) This provision will apply even if the lender attempts to evade the law through a loan with the following:
        (1) Open-end credit plan with intent of evading provision;
        (2) dividing a loan transaction into separate parts with intent of evading provision; or
        (3) other subterfuge.
        (F) Department of Consumer Affairs, Attorney General, Director of the Consumer Finance Division, and Commissioner of Banking or any party to a high-cost home loan may enforce this article.

  • 37-23-60 - Safe Harbor Provision for Lender ? High-cost Loan


    		•
               Lender who makes bona fide error must make restitution to borrower. Within 45 days lender must notify borrower of compliance failure and make the necessary adjustment to loan to satisfy requirements of 37-23-30, 37-23-40, and 37-23-45. If harm cannot be remedied by compliance, lender must change terms in manner beneficial to borrower so loan is no longer considered a high-cost loan.

    ARTICLE 5
    CONSUMER HOME LOANS

  • 37-23-70 - Consumer Home Loan


    •     A Lender of a consumer home loan may not:

        (A) Engage in flipping of the loan if there is no tangible benefit to borrower;
        (B) Finance directly or indirectly credit insurance after January 1, 2005;
        (C) Encourage the borrower to default on existing loan; and
        (D) Must provide a document to borrower specifying agency designated to receive complaints; and
        (E) Agreement cannot contain a choice of law provision other than South Carolina;
        (F) Penalty Section: Class actions prohibited; $1,500 to $7,500 damages for each loan transaction; six-year statute of limitations.
        (G) (1) If Court finds provisions of this article are violated, the court may:
        (a) refuse to enforce the agreement or part of transaction that was unlawful;
        (b) enforce the remainder of the agreement with unlawful part eliminated;
        (c) rewrite or modify the agreement to eliminate unlawful part; or
        (d) award either one of the following:
        (i) not more than total amount of loan finance charge and allow repayment of unpaid balance of loan without any finance charge; or
        (ii) not more than double the amount of the excess loan finance charge or other charges and fees paid;
        (2) Action may not be brought after maturity date of debt.
        (H) Award of attorneys’ fees and court cost.
        (I) Consumer protections in addition to other protections available by law.
        (J) Department of Consumer Affairs, Attorney General, Director of the Consumer Finance Division, and Commissioner of Banking or any party to a high-cost home loan may enforce this article.
        (K) Points and fees charged on consumer home loans are earned immediately - Parity for junior liens.

  • 37-23-75 - Yield Spread Premium (as well as other profits) Disclosure to be provided by broker to borrower on consumer home loan

  • 37-23-80 - Prepayment penalty prohibited if loan does not exceed $150,000.

  • 37-23-85 - Safe Harbor Provision for Lender - Consumer Home Loan

    • Does not violate article if:
              (1) Lender notifies borrower within 45 days of loan closing and before an action of compliance failure and makes appropriate restitution and makes the necessary adjustments for loan to satisfy requirements of 37-23-70, 37-23-75, and 37-23-80; or
    (2) Compliance failure resulted from bona fide error and within ninety days after discovery of compliance failure and before the institution of an action or receipt of written notice from borrower, lender makes appropriate restitution and makes necessary adjustments for loan to satisfy requirements of 37-23-70, 37-23-75, or 37-23-80.

    CONSUMER PROTECTION CODE
    SECTION 2

  • 37-10-103 - Prepayment penalty prohibition threshold increased to $150,000

  • 37-1-109(6) - Prepayment penalty threshold tied to indexes in Code and can be increased with the Consumer Price Index.

    • SECTION 3

  • 37-2-309, 37-3-308, and 37-5-203 - Manufactured Home Disclosures

    		•


               Disclosure on manufactured home credit sale (37-2-309) and loan for purchase, refinance, or consolidation of a manufactured home (37-3-308) is required two days prior to closing, and seller must notify borrower of change in disclosure figures one day prior to closing if material change is as specified in section.  A private cause of action is provided for if there is a violation (37-5-203) as follows:  Amount equal to sum of twice the amount of the finance charge, but not less than $100 or more than $1000; costs of action with reasonable attorneys fees; and a safe harbor for a bona fide error is provided.  Class actions are prohibited.

    SECTION 4

  • 37-5-108 (4)(b) - Unconscionability - Consumer Home Loans

    		•


               This section amends the Consumer Protection Code that defines unconscionable conduct by applying an objective standard to a creditor’s knowledge of a borrower’s ability to pay, requiring a "knows or should have known" standard.  It also applies standard underwriting criteria such as the consumer’s current and future income, debts and obligations to determine whether the consumer had the ability to repay.  Unconscionability is defined as an act or transaction that would shock the conscience.

    SECTION 5

  • 37-3-103 - Definition Section amended to include ’Short Term Vehicle Secured Loan’

    		•

  • 37-3-413 - Title Loans (New Section Added)

    		•
        (1) ’Short-term Vehicle Secured Loan’ is a nonpurchase money loan with original repayment of 120 days or less secured by motor vehicle.
        (2) Must be for original period of at least one month; loan is restricted to 6 renewals, not to exceed 240 days, with each period equal to length of original period; interest freezes after 6 renewals and borrower may repay principal and interest in six equal monthly installments; interest cannot be charged on past-due interest; and fees must not be charged, other than the lien recording fee.
        (3) Lender shall form a good faith belief that borrower has ability to repay the loan based on criterion in subsection.
        (4) Lender may not make loan in amount greater than fair market value of vehicle.
        (5) Except in event of fraud, if borrower defaults, lender can repossess and sale vehicle and pursue borrower for deficiency and lender must return surplus after sale to borrower.
        (6) Notice must be above borrower’s signature advising them that they are entering into a higher interest loan and that they are placing their vehicle at risk if they default; and, a right of rescission is provided.
        (7) Lender may not offer a rate of interest that is lower in original period if that rate increased in later renewals.

    SECTION 6 - TITLE 40

    40-58-78 - Mortgage Broker Duty

       
  • Requires a duty of care, loyalty, and honesty by a mortgage loan broker.
    		•
       
  • (B) Penalty for violation:
    		•
            1) penalty determined by Court of not less than $1,500 and not more than $7,500 for each loan transaction;
            2) fees paid by borrower to mortgage broker or originator for services rendered; and
            3) actual costs, including attorney’s fee for enforcing borrower’s rights.
       
  • (C) Safe harbor for bona fide error.
    		•


    SECTION 7 - TITLE 34

    Local Government Preemption


              
  • Prohibits local governments from adopting lending laws and regulations.  State and federal law prevails.
    		•


    SECTION 8

    Severability Clause


              
  • The finding of any section of this Act unconstitutional does not impact the enforcement or constitutionality of the remaining sections.
    		•


    SECTION 9

    Effective Date


              
  • Act effective January 1, 2004, and applies to all loans for which the loan application was taken on or after that date.
    		•



     
    Hosting provided by Periweb Inc