12 C.F.R. § 226.34 Prohibited acts or practices in connection with credit secured by a consumer's dwelling.
Title 12 - Banks and Banking
(a) Prohibited acts or practices for loans subject to §226.32. A creditor extending mortgage credit subject to §226.32 shall not— (1) Home improvement contracts. Pay a contractor under a home improvement contract from the proceeds of a mortgage covered by §226.32, other than: (i) By an instrument payable to the consumer or jointly to the consumer and the contractor; or (ii) At the election of the consumer, through a third-party escrow agent in accordance with terms established in a written agreement signed by the consumer, the creditor, and the contractor prior to the disbursement. (2) Notice to assignee. Sell or otherwise assign a mortgage subject to §226.32 without furnishing the following statement to the purchaser or assignee: “Notice: This is a mortgage subject to special rules under the federal Truth in Lending Act. Purchasers or assignees of this mortgage could be liable for all claims and defenses with respect to the mortgage that the borrower could assert against the creditor.” (3) Refinancings within one-year period. Within one year of having extended credit subject to §226.32, refinance any loan subject to §226.32 to the same borrower into another loan subject to §226.32, unless the refinancing is in the borrower's interest. An assignee holding or servicing an extension of mortgage credit subject to §226.32, shall not, for the remainder of the one-year period following the date of origination of the credit, refinance any loan subject to §226.32 to the same borrower into another loan subject to §226.32, unless the refinancing is in the borrower's interest. A creditor (or assignee) is prohibited from engaging in acts or practices to evade this provision, including a pattern or practice of arranging for the refinancing of its own loans by affiliated or unaffiliated creditors, or modifying a loan agreement (whether or not the existing loan is satisfied and replaced by the new loan) and charging a fee. (4) Repayment ability. Engage in a pattern or practice of extending credit subject to §226.32 to a consumer based on the consumer's collateral without regard to the consumer's repayment ability, including the consumer's current and expected income, current obligations, and employment. There is a presumption that a creditor has violated this paragraph (a)(4) if the creditor engages in a pattern or practice of making loans subject to §226.32 without verifying and documenting consumers' repayment ability. (b) Prohibited acts or practices for dwelling-secured loans; open-end credit. In connection with credit secured by the consumer's dwelling that does not meet the definition in §226.2(a)(20), a creditor shall not structure a home-secured loan as an open-end plan to evade the requirements of §226.32. [Reg. Z, 66 FR 65618, Dec. 20, 2001]
Title 12: Banks and Banking
PART 226—TRUTH IN LENDING (REGULATION Z)
Subpart E—Special Rules for Certain Home Mortgage Transactions
§ 226.34 Prohibited acts or practices in connection with credit secured by a consumer's dwelling.
