Sec. 09.03.10.03. Disclosures for Certain Mortgage Loans

A. Mortgage Loan Provisions Requiring Disclosure. A regulated person that offers to make or procure a mortgage loan secured by residential real estate shall provide to the borrower the disclosures set forth in §B of this regulation if the terms of the mortgage loan:

(1) Include a balloon payment;

(2) Do not provide for the establishment of an escrow account for the payment of taxes and insurance; or

(3) Include mandatory binding arbitration.

B. Content and Form of Disclosures.

(1) If the terms of a mortgage loan of the type described in §A of this regulation contain a balloon payment feature, a disclosure containing the following information, as applicable, and in substantially similar form, shall be provided to the borrower:

BALLOON PAYMENT: This mortgage loan contains a balloon payment provision. A balloon payment is a scheduled lump sum usually due at the end of the mortgage loan term that is significantly larger than the other regularly scheduled periodic payments. If you cannot pay the balloon payment when due, you may have to obtain a new loan to make the balloon payment or you may lose your property through foreclosure. Before deciding to take this loan, consider your ability to pay the balloon payment when it comes due. The balloon payment on the mortgage loan you have applied for is due (insert number of months) from the date your mortgage loan begins.

(2) If the terms of a mortgage loan of the type described in §A of this regulation, which is secured by a first-position lien on residential real estate, do not provide for the establishment of an escrow account from which property tax and homeowner's insurance payments are made, a disclosure containing the following information, as applicable, and in substantially similar form shall be provided to the borrower:

YOU ARE RESPONSIBLE FOR PROPERTY TAX AND HOMEOWNER'S INSURANCE PAYMENTS IN ADDITION TO YOUR REGULARLY SCHEDULED PERIODIC MORTGAGE LOAN PAYMENT: The terms of your mortgage loan do not provide for the establishment of an escrow account from which your property taxes and homeowner's insurance will be paid. This means that your regularly scheduled periodic mortgage loan payment does not cover these sums and you are responsible for paying property taxes and home insurance premiums when the bills arrive. You will need to consider your ability to pay these tax and insurance amounts in addition to paying your regularly scheduled periodic mortgage loan payment.

(3) If the terms of a mortgage loan of the type described in §A of this regulation contain a provision requiring the borrower to engage in binding arbitration to resolve disputes, a disclosure containing the following information, as applicable, and in substantially similar form shall be provided to the borrower:

MANDATORY BINDING ARBITRATION: The mortgage loan you have applied for contains a mandatory binding arbitration provision. This means that, as to the matters covered by the arbitration provision, you are giving up your right to a jury or court trial if you have a dispute with the lender. Read your mortgage loan documents carefully to understand how mandatory binding arbitration will impact your rights to resolve disputes.

(4) The disclosures required by this regulation shall be written clearly and conspicuously and shall appear in at least a 10-point type font. The applicable disclosures shall appear together on a sheet or sheets of paper that contain no information other than the disclosures. All of the disclosures may be printed on a sheet or sheets of paper that include check boxes that may be marked to indicate which disclosures apply.

C. Timing.

(1) A regulated person shall deliver to a borrower the disclosures required by this regulation within 10 business days after the application for the mortgage loan is completed, and not less than 72 hours before the time of settlement agreed to by the parties.

(2) An application for a mortgage loan is completed at the time of initial application.

(3) If any change to the terms of a mortgage loan requires additional or modified disclosures pursuant to this regulation, the regulated person shall deliver to the borrower a final set of disclosures at least 72 hours before the time of settlement agreed to by the parties.