AUTUMN 2004

Women Entrepreneurs
Growing in Numbers

Bank's Branches Rev Up
Community Affairs Work

Campaign Warns:
Don't Borrow Trouble

Indiana Homeowner Protection
Act Exempts Bankers

Illinois Lenders Invited
to Investment Meetings

Get Checking

Have You Heard

Spanning the Region

Calendar

Resources

A Closer Look
This issue of Bridges includes a supplement for readers in Arkansas. A Closer Look focuses on what is being done in Arkansas to stem the increasing number of defaults on manufactured housing loans.

Indiana Homeowner Protection
Act Exempts Bankers

Indiana home buyers have new legislation to protect them from abusive lenders who prey on unsuspecting borrowers. The Indiana Homeowner Protection Act (IHOPA) is intended to curtail high-cost loans that are not in the best interest of the borrower.

The law covers loans made by mortgage brokers and consumer finance companies. Lending institutions that are already regulated—banks, trusts, savings and loans, credit unions, and industrial loan and investment companies—are exempt.

Unlike similar legislation in other states, IHOPA does not hold wholesale buyers of loans liable for purchasing predatory loans. Federal Home Loan Banks are also exempt from penalties if predatory loans are used as collateral for advances.

In addition, the law establishes a homeowner protection unit in the Indiana attorney general’s office. The unit will investigate deceptive practices, institute appropriate administrative and civil actions, and pursue prosecution where appropriate. A new $3 mortgage-recording fee on all mortgages made in the state, including those made by banks, will pay for the unit.

Protection Act Highlights

For all home loans, lenders may not:

• roll the cost of credit insurance into the loan amount and charge interest on it;
  
• demand that the borrower pay the total amount due on a loan unless the borrower has already stopped making loan payments;
  
• refinance a zero-interest loan, such as a Habitat for Humanity loan, or a subsidized loan within 10 years of the loan origination unless the original lender agrees to the refinancing in writing; and
  
• refuse to tell the borrower what is still owed.
  

For high-cost loans, lenders may not:

• roll points and fees into the loan and charge interest on them;
• charge certain fees if a loan is refinanced within four years;
• charge a penalty for paying off the loan early after the first two years of a loan;
• require a balloon payment after regular payments on a loan if the balloon comes within10 years of start of the loan;
• set up a loan so that, even when the borrower makes regular payments, the amount that the borrower owes grows.
• make a loan that a borrower cannot pay back, given his or her monthly income.
  
  

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