CODING: Words stricken are deletions; words underlined are additions.
c1121120
Senate
s2200-98
s2262
2002
SA
052916
Senators Clary and Rossin moved the following substitute for
amendment (052916):
Delete everything after the enacting clause
SENATE AMENDMENT
Bill No. CS for SB 2262
Amendment No. ___ Barcode 121120
CHAMBER ACTION
Senate House
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11 Senators Clary and Rossin moved the following substitute for
12 amendment (052916):
13
14 Senate Amendment (with title amendment)
15 Delete everything after the enacting clause
16
17 and insert:
18 Section 1. Short title.--This act shall be known as
19 the "Florida Fair Lending Act."
20 Section 2. Definitions.--As used in this act:
21 (1) "Affiliate" means any company that controls, is
22 controlled by, or is in common control with another company,
23 as set forth in 12 U.S.C. s. 1841, et seq., and the
24 regulations adopted thereunder.
25 (2) "Annual percentage rate" means the annual
26 percentage rate for the loan calculated according to the
27 provisions of 15 U.S.C. s. 1606 and the regulations adopted
28 thereunder by the Federal Reserve Board.
29 (3) "Borrower" means any natural person obligated to
30 repay a loan, including, but not limited to, a coborrower,
31 cosignor, or guarantor.
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1 (4) "Bridge loan" means a loan with a maturity of less
2 than 18 months that only requires the payment of interest
3 until such time as the entire unpaid balance is due and
4 payable.
5 (5) "Department" means the Department of Banking and
6 Finance.
7 (6) "High-cost home loan" means a home loan as defined
8 in 15 U.S.C. s. 1602(aa) and regulations adopted thereunder.
9 (7) "Lender" means any person who makes a high-cost
10 home loan or acts as a mortgage broker or lender, finance
11 company, or retail installment seller with respect to a
12 high-cost home loan, but shall not include any entity
13 chartered by the United States Congress when engaging in
14 secondary market mortgage transactions as an assignee or
15 otherwise.
16 Section 3. Prohibited acts.--
17 (1) PREPAYMENT PENALTIES.--
18 (a) A high-cost home loan may not contain terms that
19 require a borrower to pay a prepayment penalty for paying all
20 or part of the loan principal before the date on which the
21 payment is due.
22 (b) Notwithstanding paragraph (a), a lender making a
23 high-cost home loan may include in the loan contract a
24 prepayment fee or penalty, for up to the first 36 months after
25 the date of consummation of the loan, if:
26 1. The borrower has also been offered a choice of
27 another product without a prepayment penalty.
28 2. The borrower has been given, at least 3 business
29 days prior to the loan consummation, a written disclosure of
30 the terms of the prepayment fee or penalty by the lender,
31 including the benefit the borrower will receive for accepting
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SENATE AMENDMENT
Bill No. CS for SB 2262
Amendment No. ___ Barcode 121120
1 the prepayment fee or penalty through either a reduced
2 interest rate on the loan or reduced points or fees.
3 (2) DEFAULT INTEREST RATE.--A high-cost home loan may
4 not provide for a higher interest rate after default on the
5 loan. However, this prohibition does not apply to interest
6 rate changes in a variable rate loan otherwise consistent with
7 the provisions of the loan documents, provided the change in
8 interest rate is not triggered by a default or the
9 acceleration of the interest rate.
10 (3) BALLOON PAYMENTS.--A high-cost home loan having a
11 term of less than 5 years may not contain terms under which
12 the aggregate amount of the regular periodic payments would
13 not fully amortize the outstanding principal balance.
14 However, this prohibition does not apply when the payment
15 schedule is adjusted to account for the seasonal or irregular
16 income of the borrower or if the loan is a bridge loan.
17 (4) NEGATIVE AMORTIZATION.--A high-cost home loan may
18 not contain terms under which the outstanding principal
19 balance will increase at any time over the course of the loan
20 because the regular periodic payments do not cover the full
21 amount of the interest due.
22 (5) PREPAID PAYMENTS.--A high-cost home loan may not
23 include terms under which more than two periodic payments
24 required under the loan are consolidated and paid in advance
25 from the loan proceeds provided to the borrower.
26 (6) EXTENDING CREDIT WITHOUT REGARD TO THE PAYMENT
27 ABILITY OF THE BORROWER.--A lender making a high-cost home
28 loan shall not engage in any pattern or practice of extending
29 high-cost home loans to borrowers based upon the borrowers'
30 collateral without regard to the borrowers' ability to repay
31 the loan, including the borrowers' current and expected
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Amendment No. ___ Barcode 121120
1 income, current obligations, and employment.
2 (7) PAYMENTS TO A HOME CONTRACTOR.--A lender shall not
3 make any payments to a contractor under a home improvement
4 contract from amounts of a high-cost home loan other than:
5 (a) In the form of an instrument that is payable to
6 the borrower or jointly to the borrower and the contractor; or
7 (b) At the election of the borrower by a third-party
8 escrow agent in accordance with terms established in a written
9 agreement signed by the borrower, the lender, and the
10 contractor prior to the date of payment.
11 (8) DUE-ON-DEMAND CLAUSE.--A creditor shall not
12 terminate a loan in advance of the original maturity date of
13 the loan and demand repayment of the entire outstanding
14 balance, except when:
15 (a) There is fraud or material misrepresentation by
16 the consumer in connection with the loan;
17 (b) The consumer fails to meet the repayment terms of
18 the agreement for any outstanding balance; or
19 (c) There is any action or inaction by the borrower
20 that adversely affects the lender's security for the loan or
21 any right of the creditor in such security.
22 (9) REFINANCING WITHIN A 1-YEAR PERIOD.--
23 (a) A lender, its affiliate, or an assignee shall not
24 refinance any high-cost home loan to the same borrower when
25 the refinancing does not have a reasonable benefit to the
26 borrower considering all of the circumstances, including, but
27 not limited to, the terms of both the new and refinanced
28 loans, the cost of the new loan, and the borrower's
29 circumstances.
30 (b) For purposes of paragraph (a), a presumption of
31 reasonable benefit to the borrower occurs when:
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1 1. The borrower's monthly payment to pay a new
2 consolidated loan will be lower than the total of all monthly
3 obligations being financed, taking into consideration all
4 costs and fees;
5 2. There is a beneficial change for the borrower in
6 the duration of the loan;
7 3. The borrower receives a reasonable amount of cash
8 in excess of and in relation to the costs and fees as part of
9 the refinancing; or
10 4. There is a change from an adjustable rate loan to a
11 fixed rate loan, taking into account all costs and fees.
12 (c) A lender or assignee shall not engage in acts or
13 practices to evade this requirement, including a pattern or
14 practice of arranging for the refinancing of the lender's or
15 assignee's own loans by affiliated or unaffiliated lenders or
16 modifying a loan agreement, whether or not the existing loan
17 is satisfied and replaced by the new loan, and charging a fee.
18 (10) OPEN-ENDED LOANS.--A lender shall not make any
19 loan as an open-ended loan in order to evade the provisions of
20 this act unless such open-ended loans meet the definition in
21 12 C.F.R. s. 226.2(a)(20).
22 (11) RECOMMENDATION OF DEFAULT.--No creditor shall
23 recommend or encourage default on an existing loan or other
24 debt prior to and in connection with the closing or planned
25 closing of a high-cost home loan that refinances all or any
26 portion of such existing loan or debt.
27 (12) PROHIBITED LOANS.--A high-cost home loan may not
28 be made as a direct result of a potential or future lender or
29 its representative offering or selling a high-cost home loan
30 at the residence of a potential borrower without a prearranged
31 appointment with the potential borrower or the expressed
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Amendment No. ___ Barcode 121120
1 invitation of the potential borrower. This subsection does not
2 apply to mail solicitations that may be received by the
3 potential borrower.
4 Section 4. Required disclosures for high-cost home
5 loans.--
6 (1) In addition to other disclosures required by law
7 and in conspicuous type:
8 (a) NOTICE TO BORROWER.--A lender making a high-cost
9 home loan shall provide a notice to a borrower in
10 substantially the following form:
11 If you obtain this high-cost home loan, the lender will
12 have a mortgage on your home. You could lose your home and
13 any money you have put into it if you do not meet your
14 obligations under the loan.
15 Mortgage loan rates and closing costs and fees vary
16 based on many factors, including your particular credit and
17 financial circumstances, your employment history, the
18 loan-to-value requested, and the type of property that will
19 secure your loan. The loan rate and fees could also vary
20 based upon which lender or broker you select. As a borrower,
21 you should shop around and compare loan rates and fees.
22 You should also consider consulting a qualified
23 independent credit counselor or other experienced financial
24 advisor regarding the rates, fees, and provisions of this
25 mortgage loan before you proceed.
26 You are not required to complete this agreement merely
27 because you have received these disclosures or have signed a
28 loan application.
29 Borrowing for the purpose of debt consolidation can be
30 an appropriate financial management tool. However, if you
31 continue to incur significant new credit card charges or other
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1 debts after this high-cost home loan is closed and then
2 experience financial difficulties, you could lose your home
3 and any equity you have in it if you do not meet your mortgage
4 loan obligations.
5 Remember that property taxes and homeowners' insurance
6 are your responsibility. Not all lenders provide escrow
7 services for these payments. You should ask your lender about
8 these services.
9 Also, your payments on existing debts contribute to
10 your credit rating. You should not accept any advice to
11 ignore your regular payments to your existing creditors.
12 (b) ANNUAL PERCENTAGE RATE.--A lender making a
13 high-cost home loan shall disclose:
14 1. In the case of a fixed mortgage, the annual
15 percentage rate and the amount of the regular monthly payment.
16 2. In the case of any other credit transaction, the
17 annual percentage rate, the amount of the regular monthly
18 payment and the amount of any balloon payment permitted under
19 this section, a statement that the interest rate and monthly
20 payment may increase, and the amount of the maximum monthly
21 payment based upon the maximum interest rate allowed pursuant
22 to law.
23 (c) NOTICE TO PURCHASERS AND ASSIGNEES.--All high-cost
24 home loans shall contain the following notice:
25 Notice: This is a mortgage subject to the provisions of
26 the Florida Fair Lending Act. Purchasers and assignees of this
27 mortgage could be liable for all claims and defenses with
28 respect to the mortgage which the borrower could assert
29 against the creditor.
30 (2) Timing of disclosure.--
31 (a) The disclosure required by this subsection shall
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1 be given not less than 3 business days prior to the
2 consummation of the high-cost home loan.
3 (b) New disclosures are required when, after
4 disclosure is made, the lender making the high-cost home loan
5 changes the terms of the extension of credit, including if
6 such changes make the original disclosures inaccurate, unless
7 new disclosures are provided that meet the requirements of
8 this section.
9 (c) A lender may provide new disclosures pursuant to
10 paragraph (b) by telephone, if:
11 1. The change is initiated by the borrower.
12 2. At the consummation of the high-cost home loan:
13 a. The lender provides the disclosures in writing to
14 the borrower.
15 b. The lender and the borrower certify in writing that
16 the new disclosures were provided by telephone no later than 3
17 days prior to the consummation of the high-cost home loan.
18 (d) A creditor must disclose to any high-cost home
19 loan borrower the rights of the borrower to rescind the
20 high-cost home loan pursuant to 15 U.S.C. s. 1635(a) and shall
21 provide appropriate forms for the borrower to exercise his or
22 her right to rescission. The notice, forms, and provisions
23 thereof must be in accordance with the requirements of 15
24 U.S.C. s. 1635(a).
25 Section 5. Liability of purchasers and assignees.--Any
26 person who purchases or is otherwise assigned a high-cost home
27 loan shall be subject to all claims and defenses with respect
28 to that mortgage that the borrower could assert against the
29 creditor of the mortgage, to the same extent and subject to
30 the same limitations that a borrower of a high-cost home loan
31 may assert against an assignee or purchaser pursuant to 15
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1 U.S.C. s. 1641.
2 Section 6. Powers and duties of the Department of
3 Banking and Finance; investigations; examinations;
4 injunctions; orders.--
5 (1)(a) The department shall be responsible for the
6 administration and enforcement of this act.
7 (b) The department may adopt rules pursuant to
8 sections 120.536(1) and 120.54, Florida Statutes, to implement
9 this act. The department may adopt rules to allow electronic
10 submission of any forms, documents, or fees required by this
11 act.
12 (2)(a) The department may conduct an investigation of
13 any person whenever the department has reason to believe, upon
14 complaint or otherwise, that any violation of the act has
15 occurred.
16 (b) Any person having reason to believe that a
17 provision of this act has been violated may file a written
18 complaint with the department setting forth the details of the
19 alleged violation.
20 (c) The department may conduct examinations of any
21 person to determine compliance with this act.
22 (3)(a) The department may bring action, through its
23 own counsel in the name and on behalf of the state, against
24 any person who has violated or is about to violate any
25 provision of this act, or any rule or order of the department
26 issued under the act, to enjoin the person from continuing in
27 or engaging in any act in furtherance of the violation.
28 (b) In any injunctive proceeding, the court may, on
29 due showing by the department, issue a subpoena or subpoena
30 duces tecum requiring the attendance of any witness and
31 requiring the production of any books, accounts, records, or
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1 other documents and materials that appear necessary to the
2 expeditious resolution of the application for injunction.
3 (4) The department may issue and serve upon any person
4 an order to cease and desist and to take corrective action
5 whenever the department has reason to believe the person is
6 violating, has violated, or is about to violate any provision
7 of this act, any rule or order of the department issued under
8 this act, or any written agreement between the person and the
9 department. All procedural matters relating to issuance and
10 enforcement of cease and desist orders are governed by the
11 Administrative Procedure Act.
12 (5) Whenever the department finds a person in
13 violation of this act, it may enter an order imposing a fine
14 in an amount not exceeding $5,000 for each count or separate
15 offense, provided that the aggregate fine for all violations
16 of this act that could have been asserted at the time of the
17 order imposing the fine shall not exceed $250,000.
18 (6) Any violation of this act shall also be deemed to
19 be a violation of chapter 494, chapter 516, chapter 520,
20 chapter 655, chapter 657, chapter 658, chapter 660, chapter
21 663, chapter 665, or chapter 667, Florida Statutes. The
22 department may adopt rules to enforce this subsection.
23 Section 7. General rule.--All city, county, or
24 municipality of this state are prohibited from enacting and
25 enforcing ordinances, resolutions, and rules regulating
26 financial or lending activities, including ordinances,
27 resolutions, and rules disqualifying persons from doing
28 business with a city, county, or municipality based upon
29 lending interest rates or imposing reporting requirements or
30 any other obligations upon persons regarding financial
31 services or lending practices of persons or entities, and any
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1 subsidiaries or affiliates thereof, who:
2 (1) Are subject to the jurisdiction of the department,
3 including for activities subject to this chapter;
4 (2) Are subject to the jurisdiction of the Office of
5 Thrift Supervision, the Office of the Comptroller of the
6 Currency, the National Credit Union Administration, the
7 Federal Deposit Insurance Corporation, the Federal Trade
8 Commission, or the United States Department of Housing and
9 Urban Development;
10 (3) Originate, purchase, sell, assign, secure, or
11 service property interests or obligations created by financial
12 transactions or loans made, executed, or originated by persons
13 referred to in subsection (1) or subsection (2) to assist or
14 facilitate such transactions;
15 (4) Are chartered by the United States Congress to
16 engage in secondary market mortgage transactions; or
17 (5) Are created by the Florida Housing Finance
18 Corporation.
19
20 Proof of noncompliance with this act can be used by a city,
21 county, or municipality of this state to disqualify a vendor
22 or contractor from doing business with a city, county, or
23 municipality of this state.
24 Section 8. Severability.--The provisions of this act
25 are severable, and if any phrase, clause, sentence, or
26 provision is declared invalid or is preempted by federal law
27 or regulation, the validity of the remainder of the act shall
28 not be affected. If any provision of this act is declared to
29 be inapplicable to any specific category, type, or kind of
30 loan or points and fees, the provisions of this act shall
31 nonetheless continue to apply with respect to all other loans
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1 and points and fees.
2 Section 9. This act shall take effect October 2, 2002.
3
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5 ================ T I T L E A M E N D M E N T ===============
6 And the title is amended as follows:
7 Delete everything before the enacting clause
8
9 and insert:
10 A bill to be entitled
11 An act relating to the Florida Fair Lending
12 Act; providing a short title; providing
13 definitions; specifying prohibited acts
14 relating to high-cost home loans; specifying
15 required disclosures for high-cost home loans;
16 specifying liability of purchasers and
17 assignees; providing administration and
18 enforcement powers and duties of the Department
19 of Banking and Finance; authorizing the
20 department to conduct investigations and
21 examinations; providing for complaints;
22 authorizing the department to bring actions for
23 injunctions; providing for issuance of
24 subpoenas; authorizing the department to issue
25 and serve cease and desist orders for certain
26 purposes; authorizing the department to impose
27 certain fines under certain circumstances;
28 specifying effect; authorizing the department
29 to adopt rules; preempting regulation of
30 high-cost home loans to the state; providing
31 severability; providing an effective date.
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