The Trusted Adviser October 2009 | Volume 2 - Number 8

ATTORNEYS | Practice Notes

Legislative Updates



PL 52-2009, HEA 1176, Effective Date July 1, 2009 (for all provisions). Modifies: IC 24-4.4-2, 24-9-1-1, 24-9-2-10, 24-9-3-6 through 3-8, 24-9-4-1, 25-1-11-17, and 11-18, 25-34.1-6-2.5, 25-34.1-8-7.5; Adds: IC Chapter 24-5-23.5, IC Section 24-5.5-5-7.2.

This Act affects trade regulation in Indiana, especially regarding prepayment penalties for variable rate mortgages, improper influence in real estate appraisals, and various other prohibited acts in real estate practice.

Prepayment Fees Prohibited on Variable Rate Mortgages

First, at Indiana Code Section 24-4.4-2-201(2), this Act prohibits a creditor from contracting for or charging a prepayment penalty on any first lien mortgage transaction, refinancing, or consolidation, closed after June 30, 2009, with an interest rate that is subject to change at one or more times during the mortgage term.

Almost identically, the Act adds a new subsection, IC 24-9-3-6(b), indicating that a creditor of a home loan, refinancing or consolidation that is closed after June 30, 2009, and that has an interest rate that is subject to change one or more times during its term, may not contract for or charge a borrower a prepayment fee or penalty.

Regulating Real Estate Appraisals

Next, the Act regulates real estate appraisals. It defines "appraisal," "appraisal company," "creditor," "mortgage loan," "real estate appraiser," and "real estate transaction."

The Act prohibits improperly influencing the independent judgment of a real estate appraiser or the reporting of an appraisal. For every application for a mortgage loan receives after December 31, 2009, the creditor is required to provide a prescribed form (available no later than September 1, 2009) to the applicant within three business days. The form must include the following information: 1) contact information for the homeowner protection unit (HPU), including its email address and toll free phone number; 2) a statement advising the applicant that the applicant my contact the HPU to report the prohibited improper influencing mentioned above or other fraudulent real estate transactions; and, 3) a statement advising the applicant of the applicant's right to review the HUD-1 or HUD-1A Settlement Statement during the business day immediately preceding settlement. The HPU and real estate appraiser licensure and certification board shall promote awareness and availability of the form.

A creditor may share information concerning suspected violations of the Act with the HPU, and the HPU may in turn share with federal, state and local law enforcement agencies, federal regulatory agencies, and any agency that may have jurisdiction over a suspected violator. Furthermore, any person, or agent of such person, who makes a good faith, voluntary disclosure of a suspected violation, shall not be liable under any law or legally enforceable agreement for making the disclosure or for failing to provide notice to the person who is the subject of the disclosure.

The Act prescribes what information must be provided to the legislative council by the mortgage lending and fraud prevention task force.

Under the penalties section, a violation of this law is a Class A misdemeanor, it is an act actionable by the attorney general, and it is subject to the penalties listed in IC Chapter 24-5-0.5. The attorney general may seek the following: 1) an injunction to prevent a violation of this law; 2) an order to make restitution; 3) an order to reimburse the state for costs of investigation and prosecution; and 4) a civil penalty of not more than $10,000 per violation. A violation of an injunction sought under this law is subject to a civil penalty not more than $10,000 per violation. These enforcement procedures are cumulative and supplemental to any other enforcement procedure.

Foreclosure Consultants

Next, the Act provides a new section that regulates foreclosure consultant behavior. A foreclosure consultant acting on behalf of a homeowner must retain records for at least three years after the termination of a foreclosure consultant contract.

Points and Fees

The Act slightly alters IC Section 24-9-2-10, defining "points and fees."

Prohibited Acts

Next, the Act defines "mortgage transaction" and "real estate transaction" before adding to a list of prohibited acts.

Previously, the law prohibited a person from, among other things, engaging in "a deceptive act in connection with a" home loan or loan described at IC Chapter That language is stricken from the code. Now a person is prohibited to "engage in, or solicit to engage in, a real estate transaction or a mortgage transaction without a permit or license required by law." A person is also prohibited from representing that a transaction has the approval of a person or entity when the person knows or reasonably should know that it does not. Furthermore, a person is prohibited from representing that a property has "improvements, appurtenances, uses, characteristics, or associated benefits that it does not have" when the person knows or should reasonably know that it does not.

High-Cost Home Loans

IC Section 24-9-3-1 prohibited certain additional practices regarding high-cost home loans. That section is altered so that subparts (2) through (4) include the identical language, "This subdivision does not apply to a high cost home loan described in IC Section 24-9-3-6(b)." As stated above, that section describes variable rate mortgages closed after June 30, 2009.






THE TRUSTED ADVISER is published by Attorneys’ Title Guaranty Fund, Inc., P.O. Box 9136, Champaign, IL 61826-9136. Inquiries may be made directly to Mary Beth McCarthy, Corporate Communications Manager. ATG®, ATG® plus logo, are marks of Attorneys’ Title Guaranty Fund, Inc. and are registered in the U.S. Patent and Trademark Office. The contents of the The Trusted Adviser © Attorneys' Title Guaranty Fund, Inc.

[Last update: 9-29-09]