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Electronic Code of Federal Regulations
Amendment from January 31, 2013
12 CFR--PART 1026
View Printed Federal Register page 78 FR 6966 in PDF format.
Amendment(s) published January 31, 2013, in 78 FR 6966
Effective Dates: January 10, 2014
8. Section 1026.36 is amended by adding and reserving paragraphs (g) and (j) and adding paragraph (k) to read as follows:
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§1026.36 Prohibited acts or practices in connection with credit secured by a dwelling.
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(k)Negative amortization counseling.(1)Counseling required.A creditor shall not extend credit to a first-time borrower in connection with a closed-end transaction secured by a dwelling, other than a reverse mortgage transaction subject to §1026.33 or a transaction secured by a consumer's interest in a timeshare plan described in 11 U.S.C. 101(53D), that may result in negative amortization, unless the creditor receives documentation that the consumer has obtained homeownership counseling from a counseling organization or counselor certified or approved by the U.S. Department of Housing and Urban Development to provide such counseling.
(2)Definitions.For the purposes of this paragraph (k), the following definitions apply:
(i) A “first-time borrower” means a consumer who has not previously received a closed-end credit transaction or open-end credit plan secured by a dwelling.
(ii) “Negative amortization” means a payment schedule with regular periodic payments that cause the principal balance to increase.
(3)Steering prohibited.A creditor that extends credit to a first-time borrower in connection with a closed-end transaction secured by a dwelling, other than a reverse mortgage transaction subject to §1026.33 or a transaction secured by a consumer's interest in a timeshare plan described in 11 U.S.C. 101(53D), that may result in negative amortization shall not steer or otherwise direct a consumer to choose a particular counselor or counseling organization for the counseling required under this paragraph (k).