12 U.S.C. § 4905 - Disclosure requirements for lender paid mortgage insurance
12 USC 4905 - Disclosure requirements for lender paid mortgage insurance
(a) Definitions
For purposes of this section
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 mortgagees written confirmation of its approval, including any applicable closing conditions, of the application of a prospective mortgagor for a residential mortgage loan.
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(b) Exclusion
Sections 4902 through 4904 of this title do not apply in the case of lender paid mortgage insurance.
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
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
(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.
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(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.
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.