§ 5.33.050. Prohibited terms and practices for high-cost home loans.

No lender may make a high-cost home loan in violation of any of the following prohibited terms or practices:

A.

No Lending Without Home Loan Counseling. No lender may make a high-cost home loan without first receiving written certification from an independent housing or credit counselor approved by the United States Department of Housing and Urban Development, the state of California, or the city, that the borrower either has received counseling on the advisability of the loan transaction and the appropriateness of the loan for the borrower, or has waived the counseling option as provided for in this subsection. A borrower may waive the counseling option by contacting an approved independent housing or credit counselor by personal meeting or live telephone conversation at least three days prior to the closing of the home loan and certifying in writing to the counselor that he or she has elected to waive the counseling option. The counselor shall keep any such certification of waiver on file for at least three years following the certification. A lender is not liable for the content of any advice or counseling an independent counselor gives to the borrower, nor is an independent counselor liable to a lender for the content of any advice or counseling the counselor gives to the borrower.

B.

No Lending Without Regard for Repayment Ability. No lender may make a high-cost home loan unless the lender reasonably believes at the time it makes the loan that one or more of the borrowers under the loan will be able to make the scheduled payments on the loan. Such a determination of the lender must be based upon a consideration of the borrower's 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 is presumed to be able to make the scheduled payments to repay the loan if, at the time the loan is made, the borrower's debt-to-income ratio does not exceed fifty (50) percent. If the borrower's debt-to-income ratio exceeds fifty (50) percent, the lender must fully justify the decision to approve the high-cost home loan in a written statement provided to the borrower at loan closing that sets forth specific compensating factors, such as the excellent long-term credit history of the borrower, a demonstrated ability in the past by the borrower to make payments under comparable or greater debt-to-income ratios, conservative use of credit standards, significant liquid assets of the borrower, or other factors that reasonably justify the approval of the loan. For purposes of this paragraph, "debt" means the scheduled monthly principal and interest payments on all of the borrower's debts, including amounts owed under the home loan as well as other secured or unsecured debts of the borrower, plus payments associated with the dwelling prorated monthly for property taxes and assessments, homeowners insurance premiums, mortgage insurance premiums, and condominium or homeowners association dues or fees, and "income" means the borrower's monthly gross income as verified by the credit application, the borrower's financial statement, a credit report, financial information provided to the lender by or on behalf of the borrower, or any other reasonable means. In the case of a high-cost home loan offering a lower introductory or initial interest rate, the lender's determination of borrower debt must be based on the borrower's monthly payments on said loan at the interest rate following the introductory or initial rate rather than the monthly payments under the introductory rate. The provisions of this paragraph apply only to a high-cost home loan in which all of the borrowers have an income, as reported on the loan application that the lender relied on in making the credit decision, no greater than one hundred twenty (120) percent of the median family income for the Oakland Metropolitan Statistical Area (as determined by the United States Department of Housing and Urban Development), adjusted for family size.

C.

No Excessive Financing of Points and Fees. No lender may finance points and fees in excess of either five percent of the total loan amount or eight hundred dollars ($800.00), whichever amount is greater, when making a high-cost home loan.

D.

No Advance Payments. No lender may make a high-cost home loan that 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.

E.

No modification or deferral fees. No lender may charge a borrower any fees or charges to modify, renew, extend, or amend a high-cost home loan or to defer any payment due under the terms of a high-cost home loan, unless after the modification, renewal, extension or amendment, the home loan is no longer a high-cost home loan and the annual percentage rate on the home loan has decreased by at least two percentage points as a result of the modification, renewal, extension or amendment. The prohibition on such fees or charges shall not apply if the high-cost home loan is in default and the modification, renewal, extension, amendment, or deferral is part of a work-out arrangement.

F.

No Prepayment Penalties. No lender may charge a prepayment penalty on a high-cost home loan. For purposes of this paragraph, a "prepayment penalty" means any penalty, fee, or charge imposed on a borrower by the lender or an affiliate of the lender for paying all or part of the principal of the high-cost home loan before the date when the principal payment is due.

G.

No Call Provisions. No lender may make a high-cost home loan that includes terms which permit the lender in its discretion to accelerate the indebtedness. This restriction does not apply to terms that provide for the acceleration of repayment of the high-cost home loan upon default or pursuant to a due-on-sale clause.

H.

No Increased Interest Rate Upon Default. No lender may make a high cost home loan that includes any provision increasing the interest rate after default or delinquency. This restriction does not apply to interest rate changes for a variable rate home loan otherwise consistent with the provisions of the loan documents, if the change in the interest rate is not triggered by an event of default, delinquency, or acceleration of the indebtedness.

I.

No Refinancing Without Borrower Benefit. No lender may make a high-cost home loan if the high-cost home loan pays off all or part of an existing home loan or other debt of the borrower, and the borrower does not receive a reasonable and tangible net benefit from the new high-cost home loan considering all the circumstances, including the terms of both the new home loan and the refinanced debt, the cost of the new home loan, and the borrower's circumstances. A borrower is presumed to receive a reasonable and tangible net benefit from a refinance if any of the following are true: 1) as a result of the refinance there is a net reduction in the borrower's total monthly payments on all debts consolidated into the new home loan combined with the borrower's payments, prorated monthly, for homeowners insurance, mortgage insurance, and property taxes and assessments, whether such insurance and taxes are paid through the lender or not, and this reduction will continue for at least thirty six (36) months after the refinance; 2) as a result of the refinance there is a reduction in the borrower's blended interest rate on all debts consolidated into the new home loan, and it will not take more than five years for the borrower to recoup the points and fees charged for the refinance; 3) the borrower receives cash proceeds from the refinance, provided that either the amount of the points and fees charged for the refinance is no greater than five percent of the amount of the cash proceeds received by the borrower, or the cash proceeds received by the borrower equals or exceeds the greater of fifteen (15) percent of the total loan amount of the new loan or twelve thousand dollars ($12,000); or 4) the new home loan is necessary to prevent default under an existing home loan or other secured debt of the borrower, provided that the lender for the new home loan is not the same as or an affiliate of the creditor for the existing home loan or other secured debt.

J.

No Refinancing Special Mortgages. No lender may make a high-cost home loan if the high-cost home loan pays off all or part of an existing home loan, and such existing loan 1) is originated, subsidized, or guaranteed by the state of California, the city or other unit of local government, or a nonprofit organization; and 2) either has an interest rate at least two percentage points below prevailing market mortgage interest rates, or has one or more nonstandard payment terms beneficial to the borrower, such as deferred payments, loan forgiveness features, or payments that vary with income, that would be lost as a result of the refinance. This restriction shall not apply if an independent housing or credit counselor has reviewed the terms of the refinance of the special mortgage and has determined that the refinance is in the best interests of the borrower.

(Ord. 12361 § 2 (part), 2001)