Delaware Licensed Lendors, Recommended Practices (5 Del. Admin. Code 2107-5.0)

Establishes recommended practices for nontraditional mortgage products, including clear consumer disclosures, risk communication, and internal controls, subject to regulatory enforcement.

Status: Passed State: Delaware Tags: Mortgage and Lending

About the Legislation:

This regulation describes recommended practices for addressing the risks of nontraditional mortgage products.

(1) When promoting or describing nontraditional mortgage products, providers should give consumers information that is designed to help them make informed decisions. This requires appropriate attention to the timing, content, and clarity of information. Promotional materials and product descriptions should provide information on the costs, terms, features, and risks of nontraditional mortgages - including information on payment shock, negative amortization, prepayment penalties, and cost of reduced documentation loans. Monthly statements that are provided to consumers on payment option ARMs should provide information that enables consumers to make informed payment choices, including an explanation of each payment option available and the impact of that choice on loan balances. Providers should avoid leading payment option ARM borrowers to select a non-amortizing or negatively-amortizing payment. Providers should avoid practices that obscure significant risks to the consumer. Providers should avoid promoting payment patterns that are structurally unlikely to occur.

(2) Providers should develop and use strong control systems to monitor whether actual practices are consistent with their policies and procedures relating to nontraditional mortgage products. Providers should design control systems to address compliance and consumer information concerns as well as risk management considerations. Lending personnel should be trained so that they are able to convey information to consumers about the product terms and risks in a timely, accurate, and balanced manner. With respect to nontraditional mortgage loans that a provider makes, purchases, or services using a third party, such as a mortgage broker, correspondent, or other intermediary, the provider should take appropriate steps to mitigate risks relating to compliance and consumer information concerns.

Private Right of Action: No.
Damages/Enforcement: Subject to administrative enforcement by the State Bank Commissioner.

Read the Legislation

State Association Contact

Josephine Bahn, Member

Aaron Krauss, Member

Any updates or new legislation should be sent to fraud@aba.com.

Delaware Licensed Lendors, Recommended Practices (5 Del. Admin. Code 2107-5.0)

About the Legislation:

State Association Contact

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