§ 4905. Disclosure requirements for lender paid mortgage insurance

Statutory text

Definitions

For purposes of this section—

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;

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

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.

Exclusion

Sections 4902 through 4904 of this title do not apply in the case of lender paid mortgage insurance.

Notices to mortgagor

In the case of lender paid mortgage insurance that is required in connection with a residential mortgage transaction—

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—

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;

that lender paid mortgage insurance—

usually results in a residential mortgage having a higher interest rate than it would in the case of borrower paid mortgage insurance; and

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

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;

that lender paid mortgage insurance may be tax-deductible for purposes of Federal income taxes, if the mortgagor itemizes expenses for that purpose; and

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.

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).

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1998
Pub. L. 105–216 § 6 · 112 Stat. 897
Enacted · 12 U.S.C. § 4905
Pub. L. 105–216, § 6, July 29, 1998, 112 Stat. 904
Source evidence
Code source credit
Pub. L. 105–216, § 6, July 29, 1998, 112 Stat. 904
Enacted provision · exact public law section
SEC. 6. 12 USC 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 3 through 5 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 or 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 3(a) of this Act, and could automatically terminate on the termination date in accordance with section 3(b) of this Act; (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, 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 Deadline. 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, (d) Standard Forms.— The servicer of a residential mortgage may develop and use a standardized form or forms for the provision of notices to the mortgagor, as required under subsection (c).
2000
Private Mortgage Insurance Technical Corrections and Clarification Act
Pub. L. 106–569 § 403(c)(1)(A) · 114 Stat. 2944
Struck · 12 U.S.C. § 4905(c)
Pub. L. 106–569, § 403(c)(1)(A), struck out “a residential mortgage or” before “a residential mortgage transaction” in introductory provisions
Source evidence
Code amendment note
Subsec. (c). Pub. L. 106–569, § 403(c)(1)(A), struck out “a residential mortgage or” before “a residential mortgage transaction” in introductory provisions.
Enacted provision · exact public law section
(A) in the matter preceding paragraph (1), by striking “a residential mortgage or”; and
2000
Private Mortgage Insurance Technical Corrections and Clarification Act
Pub. L. 106–569 § 406(a) · 114 Stat. 2944
Inserted · 12 U.S.C. § 4905(c)(1)(B)(ii)
Pub. L. 106–569, § 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”
Source evidence
Code amendment note
Subsec. (c)(1)(B)(ii). Pub. L. 106–569, § 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”.
Enacted provision · exact public law section
(a) Refinanced.— Section 6(c)(l)(B)(ii) of the Homeowners Protection Act of 1998 (12 U.S.C. 4905(c)(l)(B)(ii)) is amended by inserting after “refinanced” the following: “(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.))”.
2000
Private Mortgage Insurance Technical Corrections and Clarification Act
Pub. L. 106–569 § 403(c)(1)(B) · 114 Stat. 2944
Inserted · 12 U.S.C. § 4905(c)(2)
Pub. L. 106–569, § 403(c)(1)(B), inserted “transaction” before period at end
Source evidence
Code amendment note
Subsec. (c)(2). Pub. L. 106–569, § 403(c)(1)(B), inserted “transaction” before period at end.
Enacted provision · exact public law section
(B) in paragraph (2), by inserting “transaction” after “residential mortgage”; and
2000
Private Mortgage Insurance Technical Corrections and Clarification Act
Pub. L. 106–569 § 403(c)(2) · 114 Stat. 2944
Inserted · 12 U.S.C. § 4905(d)
Pub. L. 106–569, § 403(c)(2), inserted “transaction” after “residential mortgage”
Source evidence
Code amendment note
Subsec. (d). Pub. L. 106–569, § 403(c)(2), inserted “transaction” after “residential mortgage”.
Enacted provision · exact public law section
(2) in subsection (d), by inserting “transaction” after “residential mortgage”.

5 of 5 references resolved to an enrolled provision

Editorial Notes

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, which is classified generally to subchapter I (§ 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, § 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, § 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, § 403(c)(1)(B), inserted “transaction” before period at end.

Subsec. (d). Pub. L. 106–569, § 403(c)(2), inserted “transaction” after “residential mortgage”.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective 1 year after July 29, 1998, see section 13 of Pub. L. 105–216, set out as a note under section 4901 of this title.

Credits

1998–2000 · 2 acts

1998Pub. L. 105–216, § 6, July 29, 1998, 112 Stat. 904
2000Pub. L. 106–569, title IV, §§ 403(c), 406(a), Dec. 27, 2000, 114 Stat. 2957, 2959.

Show as published

(Pub. L. 105–216, § 6, July 29, 1998, 112 Stat. 904; Pub. L. 106–569, title IV, §§ 403(c), 406(a), Dec. 27, 2000, 114 Stat. 2957, 2959.)