(a) Definitions.
(1) Loan originator.
(i) For purposes of this section, the
term “loan originator” means a person who, in expectation of direct
or indirect compensation or other monetary gain or for direct or indirect
compensation or other monetary gain, performs any of the following
activities: takes an application, offers, arranges, assists a consumer
in obtaining or applying to obtain, negotiates, or otherwise obtains
or makes an extension of consumer credit for another person;
or through advertising or other means of communication represents
to the public that such person can or will perform any of these activities.
The term “loan originator” includes an employee, agent, or contractor
of the creditor or loan originator organization if the employee, agent,
or contractor meets this definition. The term “loan originator” includes
a creditor that engages in loan origination activities if the creditor
does not finance the transaction at consummation out of the creditor’s
own resources, including by drawing on a bona fide warehouse
line of credit or out of deposits held by the creditor. All creditors
that engage in any of the foregoing loan origination activities are
loan originators for purposes of paragraphs (f) and (g) of this section.
The term does not include:
(A) A person who does not take a consumer
credit application or offer or negotiate credit terms available from
a creditor to that consumer selected based on the consumer’s financial
characteristics, but who performs purely administrative or clerical
tasks on behalf of a person who does engage in such activities.
(B) An employee of a manufactured
home retailer who does not take a consumer credit application, offer
or negotiate credit terms, or advise a consumer on credit terms.
(C) A person that performs
only real estate brokerage activities and is licensed or registered
in accordance with applicable State law, unless such person is compensated
by a creditor or loan originator or by any agent of such creditor
or loan originator for a particular consumer credit transaction subject
to this section.
(D) A
seller financer that meets the criteria in paragraph (a)(4) or (a)(5)
of this section, as applicable.
(E) A servicer or servicer’s employees, agents,
and contractors who offer or negotiate terms for purposes of renegotiating,
modifying, replacing, or subordinating principal of existing mortgages
where consumers are behind in their payments, in default, or have
a reasonable likelihood of defaulting or falling behind. This exception
does not apply, however, to a servicer or servicer’s employees, agents,
and contractors who offer or negotiate a transaction that constitutes
a refinancing under section 1026.20(a) or obligates a different consumer
on the existing debt.
(ii) An “individual loan originator”
is a natural person who meets the definition of “loan originator”
in paragraph (a)(1)(i) of this section.
(iii) A “loan originator organization”
is any loan originator, as defined in paragraph (a)(1)(i) of this
section, that is not an individual loan originator.
(2) Mortgage broker. For purposes of this section, a mortgage broker
with respect to a particular transaction is any loan originator that
is not an employee of the creditor.
(3) Compensation. The term “compensation” includes salaries, commissions, and any
financial or similar incentive.
(4) Seller financers;
three properties. A person (as defined in section 1026.2(a)(22))
that meets all of the following criteria is not a loan originator
under paragraph (a)(1) of this section:
(i) The person provides
seller financing for the sale of three or fewer properties in any
12-month period to purchasers of such properties, each of which is
owned by the person and serves as security for the financing.
(ii) The person has not
constructed, or acted as a contractor for the construction of, a residence
on the property in the ordinary course of business of the person.
(iii) The person provides
seller financing that meets the following requirements:
(A) The financing
is fully amortizing.
(B)
The financing is one that the person determines in good faith the
consumer has a reasonable ability to repay.
(C) The financing has a fixed rate or an adjustable
rate that is adjustable after five or more years, subject to reasonable
annual and lifetime limitations on interest rate increases. If the
financing agreement has an adjustable rate, the rate is determined
by the addition of a margin to an index rate and is subject to reasonable
rate adjustment limitations. The index the adjustable rate is based
on is a widely available index such as indices for U.S. Treasury securities
or SOFR.
(5) Seller financers;
one property. A natural person, estate, or trust that meets all
of the following criteria is not a loan originator under paragraph
(a)(1) of this section:
(i) The natural person, estate, or trust
provides seller financing for the sale of only one property in any
12-month period to purchasers of such property, which is owned by
the natural person, estate, or trust and serves as security for the
financing.
(ii)
The natural person, estate, or trust has not constructed, or acted
as a contractor for the construction of, a residence on the property
in the ordinary course of business of the person.
(iii) The natural person, estate, or
trust provides seller financing that meets the following requirements:
(A) The financing has a repayment schedule that does not result in
negative amortization.
(B) The financing has a fixed rate or an adjustable rate that is
adjustable after five or more years, subject to reasonable annual
and lifetime limitations on interest rate increases. If the financing
agreement has an adjustable rate, the rate is determined by the addition
of a margin to an index rate and is subject to reasonable rate adjustment
limitations. The index the adjustable rate is based on is a widely
available index such as indices for U.S. Treasury securities or SOFR.
(6) Credit terms. For purposes of this section, the term “credit terms” includes rates,
fees, and other costs. Credit terms are selected based on the consumer’s
financial characteristics when those terms are selected based on any
factors that may influence a credit decision, such as debts, income,
assets, or credit history.
(b) Scope. Paragraphs (c)(1) and (2) of this
section apply to closed-end consumer credit transactions secured by
a consumer’s principal dwelling. Paragraph (c)(3) of this section
applies to a consumer credit transaction secured by a dwelling. Paragraphs
(d) through (i) of this section apply to closed-end consumer credit
transactions secured by a dwelling. This section does not apply to
a home equity line of credit subject to section 1026.40, except that
paragraphs (h) and (i) of this section apply to such credit when secured
by the consumer’s principal dwelling and paragraph (c)(3) applies
to such credit when secured by a dwelling. Paragraphs (d) through
(i) of this section do not apply to a loan that is secured by a consumer’s
interest in a timeshare plan described in 11 U.S.C. 101(53D).
(c) Servicing practices. For purposes of this paragraph (c), the terms “servicer” and “servicing”
have the same meanings as provided in 12 CFR 1024.2(b).
(1) Payment processing. In connection with a closed-end consumer credit transaction secured
by a consumer’s principal dwelling:
(i) Periodic payments. No servicer shall fail to credit a periodic
payment to the consumer’s loan account as of the date of receipt,
except when a delay in crediting does not result in any charge to
the consumer or in the reporting of negative information to a consumer
reporting agency, or except as provided in paragraph (c)(1)(iii) of
this section. A periodic payment, as used in this paragraph (c), is
an amount sufficient to cover principal, interest, and escrow (if
applicable) for a given billing cycle. A payment qualifies as a periodic
payment even if it does not include amounts required to cover late
fees, other fees, or non-escrow payments a servicer has advanced on
a consumer’s behalf.
(ii) Partial payments. Any servicer
that retains a partial payment, meaning any payment less than a periodic
payment, in a suspense or unapplied funds account shall:
(A) Disclose to
the consumer the total amount of funds held in such suspense or unapplied
funds account on the periodic statement as required by section 1026.41(d)(3),
if a periodic statement is required; and
(B) On accumulation of sufficient funds to
cover a periodic payment in any suspense or unapplied funds account,
treat such funds as a periodic payment received in accordance with
paragraph (c)(1)(i) of this section.
(iii) Non-conforming
payments. If a servicer specifies in writing requirements for
the consumer to follow in making payments, but accepts a payment that
does not conform to the requirements, the servicer shall credit the
payment as of five days after receipt.
(2) No pyramiding
of late fees. In connection with a closed-end consumer credit
transaction secured by a consumer’s principal dwelling, a servicer
shall not impose any late fee or delinquency charge for a payment
if:
(i) Such a fee or charge is attributable
solely to failure of the consumer to pay a late fee or delinquency
charge on an earlier payment; and
(ii) The payment is otherwise a periodic
payment received on the due date, or within any applicable courtesy
period.
(3) Payoff statements. In connection
with a consumer credit transaction secured by a consumer’s dwelling,
a creditor, assignee or servicer, as applicable, must provide an accurate
statement of the total outstanding balance that would be required
to pay the consumer’s obligation in full as of a specified date. The
statement shall be sent within a reasonable time, but in no case more
than seven business days, after receiving a written request from the
consumer or any person acting on behalf of the consumer. When a creditor,
assignee, or servicer, as applicable, is not able to provide the statement
within seven business days of such a request because a loan is in
bankruptcy or foreclosure, because the loan is a reverse mortgage
or shared appreciation mortgage, or because of natural disasters or
other similar circumstances, the payoff statement must be provided
within a reasonable time. A creditor or assignee that does not currently
own the mortgage loan or the mortgage servicing rights is not subject
to the requirement in this paragraph (c)(3) to provide a payoff statement.
(d) Prohibited
payments to loan originators.
(1) Payments
based on a term of a transaction.
(i) Except as provided
in paragraph (d)(1)(iii) or (iv) of this section, in connection with
a consumer credit transaction secured by a dwelling, no loan originator
shall receive and no person shall pay to a loan originator, directly
or indirectly, compensation in an amount that is based on a term of
a transaction, the terms of multiple transactions by an individual
loan originator, or the terms of multiple transactions by multiple
individual loan originators. If a loan originator’s compensation is
based in whole or in part on a factor that is a proxy for a term of
a transaction, the loan originator’s compensation is based on a term
of a transaction. A factor that is not itself a term of a transaction
is a proxy for a term of the transaction if the factor consistently
varies with that term over a significant number of transactions, and
the loan originator has the ability, directly or indirectly, to add,
drop, or change the factor in originating the transaction.
(ii) For purposes of this
paragraph (d)(1) only, a “term of a transaction” is any right or obligation
of the parties to a credit transaction. The amount of credit extended
is not a term of a transaction or a proxy for a term of a transaction,
provided that compensation received by or paid to a loan originator,
directly or indirectly, is based on a fixed percentage of the amount
of credit extended; however, such compensation may be subject to a
minimum or maximum dollar amount.
(iii) An individual loan originator
may receive, and a person may pay to an individual loan originator,
compensation in the form of a contribution to a defined contribution
plan that is a designated tax-advantaged plan or a benefit under a
defined benefit plan that is a designated tax-advantaged plan. In
the case of a contribution to a defined contribution plan, the contribution
shall not be directly or indirectly based on the terms of that individual
loan originator’s transactions. As used in this paragraph (d)(1)(iii),
“designated tax-advantaged plan” means any plan that meets the requirements
of Internal Revenue Code section 401(a), 26 U.S.C. 401(a); employee
annuity plan described in Internal Revenue Code section 403(a), 26
U.S.C. 403(a); simple retirement account, as defined in Internal Revenue
Code section 408(p), 26 U.S.C. 408(p); simplified employee pension
described in Internal Revenue Code section 408(k), 26 U.S.C. 408(k);
annuity contract described in Internal Revenue Code section 403(b),
26 U.S.C. 403(b); or eligible deferred compensation plan, as defined
in Internal Revenue Code section 457(b), 26 U.S.C. 457(b).
(iv) An individual loan
originator may receive, and a person may pay to an individual loan
originator, compensation under a non-deferred profits-based compensation
plan (i.e., any arrangement for the payment of non-deferred compensation
that is determined with reference to the profits of the person from
mortgage-related business), provided that:
(A) The compensation
paid to an individual loan originator pursuant to this paragraph (d)(1)(iv)
is not directly or indirectly based on the terms of that individual
loan originator’s transactions that are subject to this paragraph
(d); and
(B) At least
one of the following conditions is satisfied:
(1) The compensation paid to an individual
loan originator pursuant to this paragraph (d)(1)(iv) does not, in
the aggregate, exceed 10 percent of the individual loan originator’s
total compensation corresponding to the time period for which the
compensation under the non-deferred profits-based compensation plan
is paid; or
(2) The individual loan originator was a loan originator for ten or
fewer transactions subject to this paragraph (d) consummated during
the 12-month period preceding the date of the compensation determination.
(2) Payments
by persons other than consumer.
(i) Dual compensation.
(A) Except as
provided in paragraph (d)(2)(i)(C) of this section, if any loan originator
receives compensation directly from a consumer in a consumer credit
transaction secured by a dwelling:
(1) No loan originator shall receive compensation, directly
or indirectly, from any person other than the consumer in connection
with the transaction; and
(2) No person who knows or has reason to know of the consumer-paid
compensation to the loan originator (other than the consumer) shall
pay any compensation to a loan originator, directly or indirectly,
in connection with the transaction.
(B) Compensation received directly from a
consumer includes payments to a loan originator made pursuant to an
agreement between the consumer and a person other than the creditor
or its affiliates, under which such other person agrees to provide
funds toward the consumer’s costs of the transaction (including loan
originator compensation).
(C) If a loan originator organization receives compensation directly
from a consumer in connection with a transaction, the loan originator
organization may pay compensation to an individual loan originator,
and the individual loan originator may receive compensation from the
loan originator organization, subject to paragraph (d)(1) of this
section.
(ii) Exemption. A payment to a loan originator
that is otherwise prohibited by section 129B(c)(2)(A) of the Truth
in Lending Act is nevertheless permitted pursuant to section 129B(c)(2)(B)
of the Act, regardless of whether the consumer makes any upfront payment
of discount points, origination points, or fees, as described in section
129B(c)(2)(B)(ii) of the Act, as long as the loan originator does
not receive any compensation directly from the consumer as described
in section 129B(c)(2)(B)(i) of the Act.
(3) Affiliates. For purposes of this paragraph (d), affiliates shall be treated
as a single “person.”
(e) Prohibition on steering.
(1) General. In connection with a consumer credit transaction secured by a dwelling,
a loan originator shall not direct or “steer” a consumer to consummate
a transaction based on the fact that the originator will receive greater
compensation from the creditor in that transaction than in other transactions
the originator offered or could have offered to the consumer, unless
the consummated transaction is in the consumer’s interest.
(2) Permissible transactions. A transaction does not violate paragraph
(e)(1) of this section if the consumer is presented with loan options
that meet the conditions in paragraph (e)(3) of this section for each
type of transaction in which the consumer expressed an interest. For
purposes of paragraph (e) of this section, the term “type of transaction”
refers to whether:
(i) A loan has an annual percentage
rate that cannot increase after consummation;
(ii) A loan has an annual percentage
rate that may increase after consummation; or
(iii) A loan is a reverse mortgage.
(3) Loan options presented. A transaction satisfies
paragraph (e)(2) of this section only if the loan originator presents
the loan options required by that paragraph and all of the following
conditions are met:
(i) The loan originator must obtain
loan options from a significant number of the creditors with which
the originator regularly does business and, for each type of transaction
in which the consumer expressed an interest, must present the consumer
with loan options that include:
(A) The loan with the lowest interest
rate;
(B) The loan with
the lowest interest rate without negative amortization, a prepayment
penalty, interest-only payments, a balloon payment in the first 7
years of the life of the loan, a demand feature, shared equity, or
shared appreciation; or, in the case of a reverse mortgage, a loan
without a prepayment penalty, or shared equity or shared appreciation;
and
(C) The loan with
the lowest total dollar amount of discount points, origination points
or origination fees (or, if two or more loans have the same total
dollar amount of discount points, origination points or origination
fees, the loan with the lowest interest rate that has the lowest total
dollar amount of discount points, origination points or origination
fees).
(ii) The loan originator must have a good faith belief that the options
presented to the consumer pursuant to paragraph (e)(3)(i) of this
section are loans for which the consumer likely qualifies.
(iii) For each type of
transaction, if the originator presents to the consumer more than
three loans, the originator must highlight the loans that satisfy
the criteria specified in paragraph (e)(3)(i) of this section.
(4) Number of loan options presented. The loan
originator can present fewer than three loans and satisfy paragraphs
(e)(2) and (e)(3)(i) of this section if the loan(s) presented to the
consumer satisfy the criteria of the options in paragraph (e)(3)(i)
of this section and the provisions of paragraph (e)(3) of this section
are otherwise met.
(f) Loan originator qualification requirements. A loan originator for a consumer credit transaction secured by a
dwelling must, when required by applicable State or Federal law, be
registered and licensed in accordance with those laws, including the Secure
and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act,
12 U.S.C. 5102 et seq.), its implementing regulations (12 CFR
part 1007 or part 1008), and State SAFE Act implementing law. To comply
with this paragraph (f), a loan originator organization that is not
a government agency or State housing finance agency must:
(1) Comply with all applicable State law
requirements for legal existence and foreign qualification;
(2) Ensure that each individual
loan originator who works for the loan originator organization is
licensed or registered to the extent the individual is required to
be licensed or registered under the SAFE Act, its implementing regulations,
and State SAFE Act implementing law before the individual acts as
a loan originator in a consumer credit transaction secured by a dwelling;
and
(3) For each of
its individual loan originator employees who is not required to be
licensed and is not licensed as a loan originator pursuant to section
1008.103 of this chapter or State SAFE Act implementing law:
(i) Obtain
for any individual whom the loan originator organization hired on
or after January 1, 2014 (or whom the loan originator organization
hired before this date but for whom there were no applicable statutory
or regulatory background standards in effect at the time of hire or
before January 1, 2014, used to screen the individual) and for any
individual regardless of when hired who, based on reliable information
known to the loan originator organization, likely does not meet the
standards under section 1026.36(f)(3)(ii), before the individual acts
as a loan originator in a consumer credit transaction secured by a
dwelling:
(A) A criminal background check through the
Nationwide Mortgage Licensing System and Registry (NMLSR) or, in the
case of an individual loan originator who is not a registered loan
originator under the NMLSR, a criminal background check from a law
enforcement agency or commercial service;
(B) A credit report from a consumer reporting
agency described in section 603(p) of the Fair Credit Reporting Act
(15 U.S.C. 1681a(p)) secured, where applicable, in compliance with
the requirements of section 604(b) of the Fair Credit Reporting Act,
15 U.S.C. 1681b(b); and
(C) Information from the NMLSR about any administrative, civil, or
criminal findings by any government jurisdiction or, in the case of
an individual loan originator who is not a registered loan originator
under the NMLSR, such information from the individual loan originator;
(ii)
Determine on the basis of the information obtained pursuant to paragraph
(f)(3)(i) of this section and any other information reasonably available
to the loan originator organization, for any individual whom the loan
originator organization hired on or after January 1, 2014 (or whom
the loan originator organization hired before this date but for whom
there were no applicable statutory or regulatory background standards
in effect at the time of hire or before January 1, 2014, used to screen
the individual) and for any individual regardless of when hired who,
based on reliable information known to the loan originator organization,
likely does not meet the standards under this paragraph (f)(3)(ii),
before the individual acts as a loan originator in a consumer credit
transaction secured by a dwelling, that the individual loan originator:
(A)
(1) Has not been convicted
of, or pleaded guilty or nolo contendere to, a felony in a domestic
or military court during the preceding seven-year period or, in the
case of a felony involving an act of fraud, dishonesty, a breach of
trust, or money laundering, at any time;
(2) For purposes of this paragraph
(f)(3)(ii)(A):
(i) A crime is a felony only if at the time of conviction it was
classified as a felony under the law of the jurisdiction under which
the individual was convicted;
(ii) Expunged convictions and pardoned
convictions do not render an individual unqualified; and
(iii) A conviction or
plea of guilty or nolo contendere does not render an individual
unqualified under this section 1026.36(f) if the loan originator organization
has obtained consent to employ the individual from the Federal Deposit
Insurance Corporation (or the Board of Governors of the Federal Reserve
System, as applicable) pursuant to section 19 of the Federal Deposit
Insurance Act (FDIA), 12 U.S.C. 1829, the National Credit Union Administration
pursuant to section 205 of the Federal Credit Union Act (FCUA), 12
U.S.C. 1785(d), or the Farm Credit Administration pursuant to section
5.65(d) of the Farm Credit Act of 1971 (FCA), 12 U.S.C. 227a-14(d),
notwithstanding the bars posed with respect to that conviction or
plea by the FDIA, FCUA, and FCA, as applicable; and
(B) Has demonstrated
financial responsibility, character, and general fitness such as to
warrant a determination that the individual loan originator will operate
honestly, fairly, and efficiently; and
(iii) Provide periodic training covering
Federal and State law requirements that apply to the individual loan
originator’s loan origination activities.
(g) Name and NMLSR ID on
loan documents.
(1) For a consumer credit transaction secured
by a dwelling, a loan originator organization must include on the
loan documents described in paragraph (g)(2) of this section, whenever
each such loan document is provided to a consumer or presented to
a consumer for signature, as applicable:
(i) Its name and NMLSR
ID, if the NMLSR has provided it an NMLSR ID; and
(ii) The name of the individual loan
originator (as the name appears in the NMLSR) with primary responsibility
for the origination and, if the NMLSR has provided such person an
NMLSR ID, that NMLSR ID.
(2) The loan documents that must include
the names and NMLSR IDs pursuant to paragraph (g)(1) of this section
are:
(i) The credit application;
(ii) The disclosures required
by section 1026.19(e) and (f);
(iii) The note or loan contract; and
(iv) The security
instrument.
(3) For purposes of this section, NMLSR ID means a number assigned
by the Nationwide Mortgage Licensing System and Registry to facilitate
electronic tracking and uniform identification of loan originators
and public access to the employment history of, and the publicly adjudicated
disciplinary and enforcement actions against, loan originators.
(h) Prohibition
on mandatory arbitration clauses and waivers of certain consumer rights.
(1) Arbitration. A contract or other agreement for a consumer credit
transaction secured by a dwelling (including a home equity line of
credit secured by the consumer’s principal dwelling) may not include
terms that require arbitration or any other non-judicial procedure
to resolve any controversy or settle any claims arising out of the
transaction. This prohibition does not limit a consumer and creditor
or any assignee from agreeing, after a dispute or claim under the
transaction arises, to settle or use arbitration or other non-judicial
procedure to resolve that dispute or claim.
(2) No waivers
of Federal statutory causes of action. A contract or other agreement
relating to a consumer credit transaction secured by a dwelling (including
a home equity line of credit secured by the consumer’s principal dwelling)
may not be applied or interpreted to bar a consumer from bringing
a claim in court pursuant to any provision of law for damages or other
relief in connection with any alleged violation of any Federal law.
This prohibition does not limit a consumer and creditor or any assignee
from agreeing, after a dispute or claim under the transaction arises,
to settle or use arbitration or other non-judicial procedure to resolve
that dispute or claim.
(i) Prohibition on financing credit insurance.
(1) A creditor may not finance,
directly or indirectly, any premiums or fees for credit insurance
in connection with a consumer credit transaction secured by a dwelling
(including a home equity line of credit secured by the consumer’s
principal dwelling). This prohibition does not apply to credit insurance
for which premiums or fees are calculated and paid in full on a monthly
basis.
(2) For purposes
of this paragraph (i):
(i) “Credit insurance”:
(A) Means credit
life, credit disability, credit unemployment, or credit property insurance,
or any other accident, loss-of-income, life, or health insurance,
or any payments directly or indirectly for any debt cancellation or
suspension agreement or contract, but
(B) Excludes credit unemployment insurance
for which the unemployment insurance premiums are reasonable, the
creditor receives no direct or indirect compensation in connection
with the unemployment insurance premiums, and the unemployment insurance
premiums are paid pursuant to a separate insurance contract and are
not paid to an affiliate of the creditor;
(ii) A creditor finances
premiums or fees for credit insurance if it provides a consumer the
right to defer payment of a credit insurance premium or fee owed by
the consumer beyond the monthly period in which the premium or fee
is due; and
(iii)
Credit insurance premiums or fees are calculated on a monthly basis
if they are determined mathematically by multiplying a rate by the
actual monthly outstanding balance.
(j) Policies and procedures
to ensure and monitor compliance.
(1) A depository institution must establish
and maintain written policies and procedures reasonably designed to
ensure and monitor the compliance of the depository institution, its
employees, its subsidiaries, and its subsidiaries’ employees with
the requirements of paragraphs (d), (e), (f), and (g) of this section.
These written policies and procedures must be appropriate to the nature,
size, complexity, and scope of the mortgage lending activities of
the depository institution and its subsidiaries.
(2) For purposes of this paragraph (j),
“depository institution” has the meaning in section 1503(3) of the
SAFE Act, 12 U.S.C. 5102(3). For purposes of this paragraph (j), “subsidiary”
has the meaning in section 3 of the Federal Deposit Insurance Act,
12 U.S.C. 1813.
(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 section
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 section 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).
