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U.S. Code as of:
01/19/04
Section 4905. Disclosure requirements for lender paid mortgage insurance
(a) Definitions
For purposes of this section -
(1) the term "borrower paid mortgage insurance" means private
mortgage insurance that is required in connection with a
residential mortgage transaction, payments for which are made by
the borrower;
(2) the term "lender paid mortgage insurance" means private
mortgage insurance that is required in connection with a
residential mortgage transaction, payments for which are made by
a person other than the borrower; and
(3) the term "loan commitment" means a prospective mortgagee's
written confirmation of its approval, including any applicable
closing conditions, of the application of a prospective mortgagor
for a residential mortgage loan.
(b) Exclusion
Sections 4902 through 4904 of this title do not apply in the case
of lender paid mortgage insurance.
(c) Notices to mortgagor
In the case of lender paid mortgage insurance that is required in
connection with a residential mortgage transaction -
(1) not later than the date on which a loan commitment is made
for the residential mortgage transaction, the prospective
mortgagee shall provide to the prospective mortgagor a written
notice -
(A) that lender paid mortgage insurance differs from borrower
paid mortgage insurance, in that lender paid mortgage insurance
may not be canceled by the mortgagor, while borrower paid
mortgage insurance could be cancelable by the mortgagor in
accordance with section 4902(a) of this title, and could
automatically terminate on the termination date in accordance
with section 4902(b) of this title;
(B) that lender paid mortgage insurance -
(i) usually results in a residential mortgage having a
higher interest rate than it would in the case of borrower
paid mortgage insurance; and
(ii) terminates only when the residential mortgage is
refinanced (under the meaning given such term in the
regulations issued by the Board of Governors of the Federal
Reserve System to carry out the Truth in Lending Act (15
U.S.C. 1601 et seq.)), paid off, or otherwise terminated; and
(C) that lender paid mortgage insurance and borrower paid
mortgage insurance both have benefits and disadvantages,
including a generic analysis of the differing costs and
benefits of a residential mortgage in the case lender paid
mortgage insurance versus borrower paid mortgage insurance over
a 10-year period, assuming prevailing interest and property
appreciation rates;
(D) that lender paid mortgage insurance may be tax-deductible
for purposes of Federal income taxes, if the mortgagor itemizes
expenses for that purpose; and
(2) not later than 30 days after the termination date that
would apply in the case of borrower paid mortgage insurance, the
servicer shall provide to the mortgagor a written notice
indicating that the mortgagor may wish to review financing
options that could eliminate the requirement for private mortgage
insurance in connection with the residential mortgage
transaction.
(d) Standard forms
The servicer of a residential mortgage transaction may develop
and use a standardized form or forms for the provision of notices
to the mortgagor, as required under subsection (c) of this section.
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