Sec. 58-102. - Definitions.
The following definitions shall apply throughout this article:
Affiliate means any entity that controls, is controlled by, is under common control with, or makes loans to, including capital business loans, another entity, including any successors in interest or alter egos. For the purposes of this definition, "control" shall mean any entity that has control over another entity if:
(1) The entity directly or indirectly or acting through one or more other persons owns, controls, or has power to vote 25 percentum or more of any class of voting securities of another entity; or
(2) The entity controls in any manner the election of a majority of the directors or trustees of another entity.
Annual percentage rate means the annual percentage rate for the loan calculated according to the provisions of the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.), and the regulations promulgated thereunder by the Federal Reserve Board (as said Act and regulations are amended from time to time).
Business entity means any individual, domestic corporation, foreign corporation, association, syndicate, joint stock company, partnership, joint venture, or unincorporated association, including any parent company, subsidiary, exclusive distributor or company affiliated therewith, engaged in a business or commercial enterprise.
City means the City of Atlanta.
City agency means the City of Atlanta, its departments, boards and commissions.
City-related agency means all authorities and quasi public corporations which either:
(1) Receive appropriations from the city; or
(2) Have entered into continuing contractual or cooperative relationships with the city; or
(3) Operate under legal authority granted to them by city ordinance.
High cost lender means a business entity that, through itself and/or an affiliate has made, issued or arranged, within any 12-month period, high cost loans that comprise either:
(1) Five percent of the total annual number of loans made, issued or arranged; or
(2) Ten individual loans; whichever is less.
The term "high cost lender" shall not include a business entity, or its affiliates, that has submitted to the city a plan to discontinue the practice of making high cost loans, if the plan ensures:
(1) The prompt disengagement from the practice of making, issuing, or arranging high cost loans by the business entity(s) and its affiliates; and
(2) The complete cessation of the making, issuing or arranging of high cost loans by the business entity and its affiliates within 90 days after the plan is submitted; provided that no more than one plan may be submitted on behalf of any business entity.
High cost loan means a high cost loan is a loan that is secured by residential real property located within the city on which there is situated a dwelling for not more than four families or a condominium unit, or is secured by a cooperative unit within the city, if:
(1) The annual percentage rate of the loan equals or exceeds five percentage points over the weekly average yield on United States Treasury securities with a comparable duration to the term of the loan, as of the week immediately preceding the week in which the interest rate for the loan is established, subject to the following conditions:
a. If the terms of the loan offer any initial or introductory period, and the annual percentage rate is less than that which will apply after the end of such initial or introductory period, then the annual percentage rate that shall be taken into account for purposes of this paragraph shall be the rate which applies after the initial or introductory period; and
b. In the case of an interest rate which varies in accordance with an index, the loan shall be deemed a high cost loan if:
1. Potential or scheduled increases in the interest rate of the loan are not directly tied to future increases and decreases in a widely used federal or private market measurement that reflects the cost of borrowing money, such as the interest rate yield on United States Treasury securities, the federal funds rate, or the prime interest rate; or
2. The margin over such index at any point during the life of the loan exceeds five percentage points.
(2) The total points and fees exceeds three percent of the total loan amount.
Points and fees means:
(1) All items required to be disclosed under sections 226.4(a) and 226.4(b) of Title 12 of the Code of Federal Regulations, as amended from time to time, except the interest rate or time-price differential;
(2) All charges for items listed under section 226.4(c)(7) of Title 12 of the Code of Federal Regulations, as amended from time to time, but only if the charges are not bona fide and reasonable in amount or the lender receives direct or indirect compensation in connection with the charge or the charge is paid to an affiliate of the lender;
(3) All compensation paid directly or indirectly (including but not limited to yield spread premiums) to a mortgage broker, including a broker that originates a loan in its own name in a table funded transaction, not otherwise included in subparagraph (1) or (2) of this paragraph;
(4) All premiums or other charges financed, directly or indirectly, in the loan for any credit life, credit disability, credit unemployment, accident, health, or loss-of-income insurance or any other line or subline of insurance which may become accepted as credit insurance by the insurance and lending industries or for any debt cancellation or suspension agreements or contracts (whether or not the debt cancellation or suspension agreement coverage is insurance under applicable law), or similar products; and
(5) The maximum prepayment fees or penalties that may be charged under the terms of the loan.
Predatory lender means a business entity that, through itself and or an affiliate has made, issued or arranged, within any 12-month period, predatory loans that comprise either:
(1) Five percent of the total annual number of loans made, issued or arranged; or
(2) Ten individual loans; whichever is less.
The term "predatory lender" shall not include a business entity, or its affiliates, that has submitted to the city a plan to discontinue the practice of making predatory loans, if the plan ensures:
(1) The prompt disengagement from the practice of making predatory loans by the financial institution and its affiliates, and
(2) The complete cessation of the making of predatory loans by the financial institution and its affiliates within 90 days after the plan is submitted; provided that no more than one plan may be submitted on behalf of any financial institution.
Predatory loan means a threshold or high cost loan that was made under circumstances that involve any of the following acts or practices or that contain any of the following loan terms:
(1) Fraudulent or deceptive acts or practices, including fraudulent or deceptive marketing and sales efforts to sell high cost loans.
(2) "Loan flipping". "Flipping" a loan means the making of a threshold or high cost loan to a borrower that refinances an existing loan secured by residential property in the city when the new loan does not have a reasonable, tangible net benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan, and the borrower's circumstances. Reduction of monthly payments alone shall not be considered a tangible net benefit to the borrower.
(3) "Balloon payments". A loan that contains a scheduled payment that is more than twice as large as the average of earlier scheduled payments or which contains a provision that gives the lender, in its sole discretion, the right to accelerate the indebtedness in the absence of the default of the borrower.
(4) "Negative amortization". A loan that contains a payment schedule with regular periodic payments that causes the principal balance to increase.
(5) "Points and fees." The direct or indirect financing of the following:
a. Any prepayment fees or penalties payable by the borrower in a refinancing transaction if the lender or an affiliate of the lender is the noteholder of the note being refinanced;
b. Any points and fees; or
c. Any other charges payable to third parties.
(6) "Increased interest rate". A loan that contains a provision that increases the interest rate after the occurrence of a default. Interest rate increases do not constitute a predatory loan practice in a variable rate loan where the increase is otherwise consistent with the provisions of the loan documents, provided that the event of default or the acceleration of the indebtedness does not trigger the change in the interest rate.
(7) "Advance payments". A loan which includes terms under which more than two periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower other than a loan issued by or guaranteed by city agencies, city-related agencies, or another state or federal government agency.
(8) "Modification or deferral fees". A loan which includes terms under which the lender may charge a borrower any fees or other charges to modify, renew, extend, or amend a loan product or to defer any payment due under the terms of a loan product.
(9) "Mandatory arbitration". A loan that contains a mandatory arbitration clause that limits in any way the right of the borrower to seek relief through a court of law or equity.
(10) "Prepayment penalties". The lender has charged or contracted to charge any prepayment fee or penalty for the voluntary or involuntary prepayment of the home loan, or the lender has charged or contracted to charge any fee for informing any person of the balance due to pay off the home loan.
(11) "Financing of credit insurance". The lender has financed, directly or indirectly, premiums or other charges for any credit life, credit disability, credit unemployment insurance, accident, health, or loss-of-income insurance or any other line or sub-line of insurance which may become accepted as a credit insurance by the insurance and lending industries or for any debt cancellation or suspension agreements or contracts (whether or not the debt cancellation or suspension agreement coverage is insurance under applicable law), or similar products. Insurance premiums calculated and paid on a monthly basis shall not be considered financed by the lender; provided, however, that in no event shall the amount of coverage for any home loan exceed the amount necessary to satisfy the borrower's obligation on any given date during the life of such home loan.
(12) "Lending without home loan counseling" means making, issuing, or arranging a threshold or high-cost loan without first receiving notice from a counselor approved by the United States Department of Housing and Urban Development that the borrower has received counseling on the advisability of the loan transaction and the appropriateness of the loan for the borrower based upon the information provided by borrower and lender to the counselor at the time counseling is provided to the borrower.
(13) "Lending without due regard to repayment" means that the lender does not reasonably believe at the time the loan is consummated that the borrower or borrowers who reside in the home (when considered individually or collectively) will be able to make the scheduled payments to repay the obligation based upon consideration of their current and expected income, current obligations, employment status, and other financial resources (other than the borrower's equity in the dwelling which secures repayment of the loan). A lender who follows the debt-to-income ratio listed in 38 C.F.R. Section 36.4337(c)(1) and as defined in 38 C.F.R. Section 36.4337(d), and follows the residual income guidelines established in 38 C.F.R. Section 36.4337(e) and VA-Form 26-6393 shall benefit from a rebuttable presumption that the lender made the loan with due regard to repayment ability.
(14) "Encouraging default." The lender recommends or encourages default on an existing loan or other debt prior to and in connection with the closing or planned closing of a loan that refinances all or any portion of such existing loan or debt.
(15) "Late fees." The lender charges late fees for the late payment of an installment due on a home loan, unless:
a. The fee does not exceed five percent of the past due installment;
b. The fee is not charged more than once as a result of a single late payment; and
c. The borrower has agreed to the imposition of the late fees in the home loan contract.
(16) Charging of points, fees or other charges in connection with a high-cost home loan if the proceeds of the high cost home loan are used to refinance an existing high-cost home loan held by the same lender or an affiliate of the lender.
(17) Refinancing of a special mortgage originated, subsidized or guaranteed by or through a state, tribal or local government, or nonprofit organization, which bears either a below-market interest rate, or has nonstandard payment terms beneficial to the borrower, such as payments that vary with income, are limited to a percentage of income, or where no payments are required under specified conditions, and where, as a result of the refinancing, the borrower will lose one or more of the benefits of the special mortgage.
Threshold loan means a loan that is secured by residential real property located within the city on which there is situated a dwelling for not more than four families or a condominium unit, or is secured by a cooperative unit within the city, if the annual percentage rate of the loan equals or exceeds by at least four percentage points but less than five percentage points the weekly average yield on United States Treasury securities with a comparable duration to the term of the loan, as of the week immediately preceding the week in which the interest rate for the loan is established, subject to the following conditions:
(1) If the terms of the loan offer any initial or introductory period, and the annual percentage rate is less than that which will apply after the end of such initial or introductory period, then the annual percentage rate that shall be taken into account for purposes of this paragraph shall be the rate which applies after the initial or introductory period; and
(2) In the case of an interest rate which varies in accordance with an index, a loan shall be deemed a threshold loan if:
a. Potential or scheduled increases in the interest rate of the loan are not directly tied to future increases and decreases in a widely used federal or private market measurement that reflects the cost of borrowing money, such as the interest rate yield on United States Treasury securities, the federal funds rate, or the prime interest rate; or
b. The margin over such index at any point during the life of the loan exceeds five percentage points.
(Ord. No. 2001-71, § 1, 9-25-01)
