12 U.S.C. § 4905 : US Code - Section 4905: Disclosure requirements for lender paid mortgage insurance

Search 12 U.S.C. § 4905 : US Code - Section 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.