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Legislative Updates

Indiana
Mortgages

PL 52-2009. HB 1176, Residential mortgage lending practices, Effective Date: July 1, 2009, Statutes Amended: Indiana Code 24-4.4-2-201, 24-5.5-5-7.2, 24-5-23.5, 24-9-1-1, 24-9-2-10, 24-9-3-7, 24-9-3-8, 24-9-4-1, 25-1-11-17, 25-1-11-18, 25-34.1-8-7.5.

This act alters several sections of the statutes and provides for a series of changes in residential mortgage practices.

The act in part revises Section 7 of Indiana Code 24-9-3, which defines illegal mortgage lending practices. It includes a new definition section that more clearly identifies those that fall under these regulations. Furthermore, it renders it illegal to engage in, or solicit to engage in, a mortgage or real estate transaction without the required licenses and/or permits. It also makes it illegal to misrepresent the approval or involvement of an individual in a transaction, or the benefits, characteristics, and appurtenances of a property. Per the modification brought on by this law, the violation of Section 7's provisions shall constitute a Class A misdemeanor. The court to which an action to enjoin an individual from violating Section 7 is brought has the power to do the following: issue injunctions; order restitution; order reimbursement of the attorney general's costs; and impose penalties up to $10,000 per violation. Any of these measures are in addition to, not in replacement of, any other enforcement mechanism created by state or federal law.

The act provides that creditors may share information concerning suspected violations of Section 7 to the Homeowner Protection Unit of the Attorney General's Office and further releases individuals making voluntary disclosures of suspected violations of Section 7 from liability under federal and state law as well as contract or other agreement for the disclosure itself as well as for failing to provide notice of said disclosure to the person or persons who are subject thereof.

Creditors in first lien mortgages and home loans, as well as refinancing and consolidations thereof, that close after June 30, 2009, and are subject to a change in interest rate one or more times during the term of the loan may no longer charge the borrower a prepayment penalty and/or fee. Furthermore, creditors are now required to provide, within three days of receiving a mortgage loan application, contact information for the homeowner protection unit as well as a notification of the borrower's right to contact the unit to report suspected violations of Section 7 or other suspected fraudulent activity in residential real estate.

Several other small changes to current regulation are present in the act. Foreclosure consultants are now required to keep records of their dealings with clients for three years after the termination of their contract with the homeowner. In addition, several changes are made to practitioner regulations, including prohibitions on surrendering licenses while under investigation, and adding real estate review appraisals to the list of costs a sanctioned practitioner may be made to pay.

[Last update: 6-18-09]