February 26, 2004
HOUSE BILL No. 1229
DIGEST OF HB 1229
(Updated February 25, 2004 5:27 pm - DI 44)
Citations Affected: IC 4-6; IC 24-9; IC 34-7; IC 36-2; noncode.
Synopsis: Home loan practices. Restricts certain lending acts and
practices. Establishes the homeowner protection unit in the office of
the attorney general. Provides enforcement procedures for deceptive
mortgage acts. Establishes a $3 mortgage recording fee. Provides that
certain provisions do not apply to certain financial institutions.
Changes the definition of a high cost home loan. Prohibits certain
Effective: Upon passage; July 1, 2004.
(SENATE SPONSORS _ BRAY, LANANE, CLARK, BRODEN)
January 20, 2004, read first time and referred to Committee on Judiciary.
January 29, 2004, amended, reported _ Do Pass.
February 4, 2004, read second time, amended, ordered engrossed.
February 5, 2004, engrossed. Read third time, recommitted to Committee of One,
amended; passed. Yeas 96, nays 0.
February 6, 2004, re-engrossed.
February 12, 2004, read first time and referred to Committee on Insurance and Financial
February 19, 2004, reported favorably _ Do Pass.
February 25, 2004, read second time, amended, ordered engrossed.
February 26, 2004
Second Regular Session 113th General Assembly (2004)
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
Constitution) is being amended, the text of the existing provision will appear in this style type,
additions will appear in this style type
, and deletions will appear in
this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional
provision adopted), the text of the new provision will appear in this style type
. Also, the
will appear in that style type in the introductory clause of each SECTION that adds
a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type
this style type
between statutes enacted by the 2003 Regular Session of the General Assembly.
HOUSE BILL No. 1229
A BILL FOR AN ACT to amend the Indiana Code concerning trade
regulations; consumer sales and credit and to make an appropriation.
Be it enacted by the General Assembly of the State of Indiana:
SOURCE: IC 4-6-3-3; (04)EH1229.2.1. -->
SECTION 1. IC 4-6-3-3, AS AMENDED BY P.L.2-2002,
SECTION 24, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 3. If the attorney general has reasonable cause to
believe that a person may be in possession, custody, or control of
documentary material, or may have knowledge of a fact that is relevant
to an investigation conducted to determine if a person is or has been
engaged in a violation of IC 4-6-9, IC 4-6-10, IC 13-14-10,
IC 13-14-12, IC 13-24-2, IC 13-30-4, IC 13-30-5, IC 13-30-6,
IC 13-30-8, IC 23-7-8, IC 24-1-2, IC 24-5-0.5, IC 24-5-7, IC 24-5-8,
IC 24-9, IC 25-1-7, IC 32-34-1, or any other statute enforced by the
attorney general, only the attorney general may issue in writing, and
cause to be served upon the person or the person's representative or
agent, an investigative demand that requires that the person served do
any combination of the following:
(1) Produce the documentary material for inspection and copying
(2) Answer under oath and in writing written interrogatories.
(3) Appear and testify under oath before the attorney general or
the attorney general's duly authorized representative.
SOURCE: IC 4-6-12; (04)EH1229.2.2. -->
SECTION 2. IC 4-6-12 IS ADDED TO THE INDIANA CODE AS
A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY
Chapter 12. Homeowner Protection Unit
Sec. 1. As used in this chapter, "unit" refers to the homeowner
protection unit established under this chapter.
Sec. 2. The attorney general shall establish a homeowner
protection unit to enforce IC 24-9 and to carry out this chapter.
Sec. 3. The unit shall do the following:
(1) Investigate deceptive acts in connection with mortgage
(2) Investigate violations of IC 24-9.
(3) Institute appropriate administrative and civil actions to
(A) deceptive acts in connection with mortgage lending;
(B) violations of IC 24-5-0.5 and IC 24-9.
(4) Cooperate with federal, state, and local law enforcement
agencies in the investigation of:
(A) deceptive acts in connection with mortgage lending;
(B) criminal violations involving deceptive acts in
connection with mortgage lending; and
(C) violations of IC 24-5-0.5 and IC 24-9.
(5) Adopt rules under IC 4-22-2 to the extent necessary to
organize the unit.
Sec. 4. (a) The following may cooperate with the unit to
implement this chapter:
(1) The Indiana professional licensing agency and the
appropriate licensing boards with respect to persons licensed
under IC 25.
(2) The department of financial institutions.
(3) The department of insurance with respect to the sale of
insurance in connection with mortgage lending.
(4) The securities division of the office of the secretary of
(5) The supreme court disciplinary commission with respect
to attorney misconduct.
(6) The Indiana housing finance authority.
(7) The department of state revenue.
(8) The state police department.
(9) A prosecuting attorney.
(10) Local law enforcement agencies.
(b) Notwithstanding IC 5-14-3, the entities listed in subsection
(a) may share information with the unit.
Sec. 5. The attorney general may file complaints with any of the
entities listed in section 4 of this chapter to carry out this chapter
and IC 24-9.
Sec. 6. The establishment of the unit and the unit's powers does
not limit the jurisdiction of an entity described in section 4 of this
Sec. 7. The attorney general and an investigator of the unit may
do any of the following when conducting an investigation under
section 3 of this chapter:
(1) Issue and serve a subpoena for the production of records,
including records stored in electronic data processing systems,
for inspection by the attorney general or the investigator.
(2) Issue and serve a subpoena for the appearance of a person
to provide testimony under oath.
(3) Apply to a court with jurisdiction to enforce a subpoena
described in subdivision (1) or (2).
Sec. 8. (a) The homeowner protection unit account within the
general fund is established to support the operations of the unit.
The account is administered by the attorney general.
(b) The homeowner protection unit account consists of fees
collected under IC 24-9-9.
(c) The expenses of administering the homeowner protection
unit account shall be paid from money in the account.
(d) The treasurer of state shall invest the money in the
homeowner protection unit account not currently needed to meet
the obligations of the account in the same manner as other public
money may be invested.
SOURCE: IC 24-9; (04)EH1229.2.3. -->
SECTION 3. IC 24-9 IS ADDED TO THE INDIANA CODE AS A
ARTICLE TO READ AS FOLLOWS [EFFECTIVE JULY 1,
ARTICLE 9. HOME LOAN PRACTICES
Chapter 1. Application
Sec. 1. Except for the provisions of IC 24-9-3-7(3), this article
does not apply to:
(1) a loan made or acquired by a person organized or
chartered under the laws of this state, any other state, or the
United States relating to banks, trust companies, savings
associations, savings banks, credit unions, or industrial loan
and investment companies; or
(2) a loan:
(A) that can be purchased by the Federal National
Mortgage Association, the Federal Home Loan Mortgage
Association, or the Federal Home Loan Bank;
(B) to be insured by the United States Department of
Housing and Urban Development;
(C) to be guaranteed by the United States Department of
(D) to be made or guaranteed by the United States
Department of Agriculture Rural Housing Service;
(E) to be funded by the Indiana housing finance authority;
(F) with a principal amount that exceeds the conforming
loan size limit for a single family dwelling as established by
the Federal National Mortgage Association.
Chapter 2. Definitions
Sec. 1. The definitions in this chapter apply throughout this
Sec. 2. "Benchmark rate" means the interest rate established
under Section 152 of the Federal Home Ownership and Equity
Protection Act of 1994 (15 U.S.C. 1602 (aa)) and the regulations
adopted under that Act by the Federal Reserve Board, including 12
CFR 226.32 and the Official Staff Commentary to the regulations
Sec. 3. "Bona fide discount points" means loan discount points
(1) are knowingly paid by the borrower;
(2) are paid for the express purpose of reducing the interest
rate applicable to the loan;
(3) reduce the interest rate from an interest rate that does not
exceed the benchmark rate; and
(4) are recouped within the first four (4) years of the
scheduled loan payments;
if the reduction in the interest rate that is achieved by the payment
of the loan discount points reduces the interest charged on the
scheduled payments so that the borrower's dollar amount of
savings in interest during the first four (4) years of the loan is equal
to or greater than the dollar amount of loan discount points paid
by the borrower.
Sec. 4. "Borrower" means a person obligated to repay a home
loan, including a coborrower, cosigner, or guarantor.
Sec. 5. "Bridge loan" means temporary or short term financing
with a maturity of less than eighteen (18) months that requires
payments of interest only until the entire unpaid balance is due and
Sec. 6. (a) "Creditor" means:
(1) a person:
(A) who regularly extends consumer credit that is subject
to a finance charge or that is payable by written agreement
in more than four (4) installments; and
(B) to whom the debt arising from a home loan transaction
is initially payable; or
(2) a person who brokers a home loan, including a person
(A) directly or indirectly solicits, processes, places, or
negotiates home loans for others;
(B) offers to solicit, process, place, or negotiate home loans
for others; or
(C) closes home loans that may be in the person's own
name with funds provided by others and that are
thereafter assigned to the person providing funding for the
(b) The term does not include:
(1) a servicer;
(2) a state or local housing finance authority;
(3) any other state or local governmental or
quasi-governmental entity; or
(4) an attorney providing legal services in association with the
closing of a home loan.
Sec. 7. (a) "Deceptive act" means an act or a practice as part of
a consumer credit mortgage transaction involving real property
located in Indiana in which a person at the time of the transaction
knowingly or intentionally:
(1) makes a material misrepresentation; or
(2) conceals material information regarding the terms or
conditions of the transaction.
(b) For purposes of this section, "knowingly" means having
actual knowledge at the time of the transaction.
Sec. 8. (a) "High cost home loan" means a home loan with:
(1) a trigger rate that exceeds the benchmark rate; or
(2) total points and fees that exceed:
(A) five percent (5%) of the loan principal for a home loan
having a loan principal of at least forty thousand dollars
(B) six percent (6%) of the loan principal for a home loan
having a loan principal of less than forty thousand dollars
(b) Beginning July 1, 2006, the dollar amounts set forth in this
section are subject to change at the times and according to the
procedure set forth in the provisions of IC 24-4.5-1-106 concerning
the adjustment of dollar amounts in IC 24-4.5 regarding consumer
credit transactions. The department of financial institutions shall
adopt rules under IC 4-22-2 to establish procedures to implement
this subsection, and shall issue an emergency rule announcing a
change required under this subsection by April 30 of each year in
which dollar amounts are to change.
Sec. 9. "Home loan" means a loan, other than an open end
credit plan or a reverse mortgage transaction, that is secured by a
mortgage or deed of trust on real estate in Indiana on which there
is located or will be located a structure or structures:
(1) designed primarily for occupancy of one (1) to four (4)
(2) that is or will be occupied by a borrower as the borrower's
Sec. 10. (a) Except as provided in subsection (b), "points and
fees" means the total of the following:
(1) Points and fees (as defined in 12 CFR 226.32(b)(1) on
January 1, 2004).
(2) All compensation paid directly or indirectly to a mortgage
broker, including a broker that originates a loan in the
broker's own name. January 1, 2004).
As used in subdivision (2), "compensation" does not include a
payment included in subdivision (1).
(b) The term does not include the following:
(1) Bona fide discount points.
(2) An amount not to exceed one and one-half (1 1/2) points in
indirect broker compensation; if the terms of the loan do not
include a prepayment penalty that exceeds two percent (2%)
of the home loan principle.
(3) Reasonable fees paid to an affiliate of the creditor.
(4) Interest prepaid by the borrower for the month in which
the home loan is closed.
Sec. 11. "Political subdivision" means a municipality, school
district, public library, local housing authority, fire protection
district, public transportation corporation, local building
authority, local hospital authority or corporation, local airport
authority, special service district, special taxing district, or any
other type of local governmental corporate entity.
Sec. 12. "Rate" means the interest rate charged on a home loan,
based on an annual simple interest yield.
Sec. 13. "Total loan amount" means the principal of the home
loan minus the points and fees that are included in the principal
amount of the loan.
Sec. 14. "Trigger rate" means:
(1) for fixed rate home loans in which the interest rate will not
vary during the term of the loan, the rate as of the date of
(2) for home loans in which the interest varies according to an
index, the sum of the index rate as of the date of closing plus
the maximum margin permitted at any time under the loan
(3) for all other home loans in which the rate may vary at any
time during the term of the loan, the maximum rate that may
be charged during the term of the home loan.
Chapter 3. Prohibited Lending Practices Generally
Sec. 1. (a) A creditor making a home loan may not finance,
directly or indirectly, any:
(1) credit life insurance;
(2) credit disability insurance;
(3) credit unemployment insurance;
(4) credit property insurance; or
(5) payments directly or indirectly for any cancellation
suspension agreement or contract.
(b) Insurance premiums, debt cancellation fees, or suspension
fees calculated and paid on a monthly basis are not considered to
be financed by the creditor for purposes of this chapter.
Sec. 2. (a) A creditor may not knowingly or intentionally replace
or consolidate a zero (0) interest rate or other subsidized low rate
loan made by a governmental or nonprofit lender with a high cost
home loan within the first ten (10) years of the subsidized low rate
loan unless the current holder of the loan consents in writing to the
(b) For purposes of this section, a "subsidized low rate loan" is
a loan that carries a current interest rate of at least two (2)
percentage points below the current yield on treasury securities
with a comparable maturity. If the loan's current interest rate is
either a discounted introductory rate or a rate that automatically
steps up over time, the fully indexed rate or the fully stepped up
rate, as appropriate, should be used instead of the current rate to
determine whether a loan is a subsidized low rate loan.
(c) Each mortgage or deed of trust securing a zero (0) interest
rate or other subsidized low rate loan executed after January 1,
2005, must prominently display the following on the face of the
"This instrument secures a zero (0) interest rate or other
subsidized low rate loan subject to IC 24-9-3-2.".
(d) A creditor may reasonably rely on the presence or absence
of the statement described in subsection (c) on the face of an
instrument executed after January 1, 2005, as conclusive proof of
the existence or nonexistence of a zero (0) interest rate or other
subsidized low rate loan.
Sec. 3. A creditor may not recommend or encourage default on
an existing loan or other debt before and in connection with the
closing or planned closing of a home loan that refinances all or part
of the existing loan or debt.
Sec. 4. A creditor shall treat each payment made by a borrower
in regards to a home loan as posted on the same business day as the
payment was received by the creditor, servicer, or creditor's agent,
or at the address provided to the borrower by the creditor,
servicer, or creditor's agent for making payments.
Sec. 5. (a) A home loan agreement may not contain a provision
that permits the creditor, in the creditor's sole discretion, to
accelerate the indebtedness without material cause.
(b) This section does not prohibit acceleration of a home loan in
good faith due to the borrower's failure to abide by the material
terms of the loan.
Sec. 6. (a) A creditor may not charge a fee for informing or
transmitting to a person the balance due to pay off a home loan or
to provide a written release upon prepayment. A creditor must
provide a payoff balance not later than ten (10) business days after
the request is received by the creditor.
(b) For purposes of this section, "fee" does not include actual
charges incurred by a creditor for express or priority delivery
requested by the borrower of home loan documents to the
Sec. 7. A person may not:
(1) divide a loan transaction into separate parts with the
intent of evading a provision of this article;
(2) structure a home loan transaction as an open-end loan
with the intent of evading the provisions of this article if the
loan would be a high cost home loan if the home loan had been
structured as a closed-end loan; or
(3) engage in a deceptive act in connection with a home loan.
Sec. 8. A person, in seeking to enforce the person's rights under
section 7(3) of this chapter, may not knowingly or intentionally
intimidate, coerce, or harass another person.
Sec. 9. It is unlawful for a creditor to discriminate against any
applicant with respect to any aspect of a credit transaction on the
basis of race, color, religion, national origin, sex, marital status, or
age, if the applicant has the ability to contract.
Chapter 4. Additional Prohibitions for High Cost Home Loans
Sec. 1. The following additional limitations and prohibited
practices apply to a high cost home loan:
(1) A creditor making a high cost home loan may not directly
or indirectly finance any points and fees.
(2) Prepayment fees or penalties may not be included in the
loan documents for a high cost home loan or charged to the
borrower if the fees or penalties exceed in total two percent
(2%) of the high cost home loan amount prepaid during the
first twenty-four (24) months after the high cost home loan
(3) A prepayment penalty may not be contracted for after the
second year following the high cost home loan closing.
(4) A creditor may not include a prepayment penalty fee in a
high cost home loan unless the creditor offers the borrower
the option of choosing a loan product without a prepayment
fee. The terms of the offer must be made in writing and must
be initialed by the borrower. The document containing the
offer must be clearly labeled in large bold type and must
include the following disclosure:
"LOAN PRODUCT CHOICE
I was provided with an offer to accept a product both with
and without a prepayment penalty provision. I have chosen
to accept the product with a prepayment penalty.".
(5) A creditor shall not sell or otherwise assign a high cost
home loan without furnishing the following statement to the
purchaser or assignee:
"NOTICE: This is a loan subject to special rules under
IC 24-9. Purchasers or assignees may be liable for all
claims and defenses with respect to the loan that the
borrower could assert against the lender.".
(6) A mortgage or deed of trust that secures a high cost home
loan at the time the mortgage or deed of trust is recorded
must prominently display the following on the face of the
"This instrument secures a high cost home loan as defined
in IC 24-9-2-8.".
(7) A creditor making a high cost home loan may not finance,
directly or indirectly, any life or health insurance.
Sec. 2. A creditor may not knowingly or intentionally:
(1) refinance a high cost home loan by charging points and
fees on the part of the proceeds of the new high cost home
loan that is used to refinance the existing high cost loan within
four (4) years of the origination of the existing high cost home
(2) divide a home loan transaction into multiple transactions
with the effect of evading this article. Where multiple
transactions are involved, the total points and fees charged in
all transactions shall be considered when determining
whether the protections of this section apply.
Sec. 3. Notwithstanding IC 24-4.5-3-402, a high cost home loan
agreement may not require a scheduled payment that is more than
twice as large as the average of earlier scheduled monthly
payments under the high cost home loan agreement unless the
payment becomes due and payable at least one hundred twenty
(120) months after the date of the high cost home loan. This
prohibition does not apply if:
(1) the payment schedule is adjusted to account for the
seasonal or irregular income of the borrower; or
(2) the loan is a bridge loan connected with or related to the
acquisition or construction of a dwelling intended to become
the borrower's principal dwelling.
Sec. 4. (a) Except as provided in subsection (b), a high cost home
loan may not include payment terms under which the outstanding
principal balance will increase at any time over the course of the
high cost home loan because the regular periodic payments do not
cover the full amount of interest due.
(b) This section does not apply to a temporary forbearance that
is requested by a borrower regarding a high cost home loan.
Sec. 5. A high cost home loan may not contain a provision that
increases the interest rate after default. However, this section does
not apply to interest rate changes in a variable rate loan otherwise
consistent with the provisions of the high cost home loan
documents if the change in the interest rate is not triggered by the
event of default or the acceleration of the indebtedness.
Sec. 6. A high cost home loan may not include terms under
which more than two (2) periodic payments required under the
high cost home loan are consolidated and paid in advance from the
high cost home loan proceeds provided to the borrower.
Sec. 7. A creditor may not make a high cost home loan without
first providing the borrower information to facilitate contact with
a nonprofit counseling agency certified by:
(1) the United States Department of Housing and Urban
(2) the Indiana housing finance authority under
at the same time as the good faith estimates are provided to the
borrower in accordance with the requirements of the federal Real
Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) as
Sec. 8. (a) A creditor may not make a high cost home loan
without regard to repayment ability.
(b) If a creditor presents evidence that the creditor followed
commercially reasonable practices in determining the borrower's
debt to income ratio, there is a rebuttable presumption that the
creditor made the high cost home loan with due regard to
repayment ability. For purposes of this section, there is a
rebuttable presumption that the borrower's statement of income
provided to the creditor is true and complete.
(c) Commercially reasonable practices include the use of:
(1) the debt to income ratio:
(A) listed in 38 CFR 36.4337(c)(1); and
(B) defined in 38 CFR 36.4337(d); and
(2) the residual income guidelines established under:
(A) 38 CFR 36.4337(e); and
(B) United States Department of Veterans Affairs form
Sec. 9. A creditor may not pay a contractor under a home
improvement contract from the proceeds of a high cost home loan
(1) the creditor is presented with a signed and dated
completion certificate showing that the home improvements
have been completed; and
(2) the instrument is payable to the borrower or jointly to the
borrower and the contractor or, at the election of the
borrower, through a third party escrow agent under a written
agreement signed by the borrower, the creditor, and the
contractor before the disbursement.
Sec. 10. A creditor may not charge a borrower any fees or other
charges to modify, renew, extend, or amend a high cost home loan
or to defer a payment due under the terms of a high cost home
Sec. 11. A creditor may not make a high cost home loan unless
the creditor has given the following notice, in writing, to the
borrower not later than the time that notice is required under 12
"NOTICE TO BORROWER
YOU SHOULD BE AWARE THAT YOU MIGHT BE ABLE
TO OBTAIN A LOAN AT A LOWER COST. YOU SHOULD
COMPARE LOAN RATES, COSTS, AND FEES.
MORTGAGE LOAN RATES AND CLOSING COSTS AND
FEES VARY BASED ON MANY FACTORS, INCLUDING
YOUR PARTICULAR CREDIT AND FINANCIAL
CIRCUMSTANCES, YOUR EMPLOYMENT HISTORY,
THE LOAN-TO-VALUE REQUESTED, AND THE TYPE
OF PROPERTY THAT WILL SECURE YOUR LOAN. THE
LOAN RATE, COSTS, AND FEES COULD ALSO VARY
BASED ON WHICH CREDITOR OR BROKER YOU
IF YOU ACCEPT THE TERMS OF THIS LOAN, THE
CREDITOR WILL HAVE A MORTGAGE LIEN ON YOUR
HOME. YOU COULD LOSE YOUR HOME AND ANY
MONEY YOU HAVE PAID IF YOU DO NOT MEET YOUR
PAYMENT OBLIGATIONS UNDER THE LOAN.
YOU SHOULD CONSULT AN ATTORNEY AND A
QUALIFIED INDEPENDENT CREDIT COUNSELOR OR
OTHER EXPERIENCED FINANCIAL ADVISER
REGARDING THE RATE, FEES, AND PROVISIONS OF
THIS MORTGAGE LOAN BEFORE YOU PROCEED. A
LIST OF QUALIFIED COUNSELORS IS AVAILABLE
FROM THE INDIANA HOUSING FINANCE AUTHORITY.
YOU ARE NOT REQUIRED TO COMPLETE THIS LOAN
AGREEMENT MERELY BECAUSE YOU HAVE
RECEIVED THIS DISCLOSURE OR HAVE SIGNED A
LOAN APPLICATION. REMEMBER, PROPERTY TAXES
AND HOMEOWNER'S INSURANCE ARE YOUR
RESPONSIBILITY. NOT ALL CREDITORS PROVIDE
ESCROW SERVICES FOR THESE PAYMENTS. YOU
SHOULD ASK YOUR CREDITOR ABOUT THESE
ALSO, YOUR PAYMENTS ON EXISTING DEBTS
CONTRIBUTE TO YOUR CREDIT RATINGS. YOU
SHOULD NOT ACCEPT ANY ADVICE TO IGNORE
YOUR REGULAR PAYMENTS TO YOUR EXISTING
Sec. 12. Without regard to whether a borrower is acting
individually or on behalf of others similarly situated, a provision
of a high cost home loan agreement that:
(1) requires arbitration of a claim or defense;
(2) allows a party to require a borrower to assert a claim or
defense in a forum that is:
(A) less convenient;
(B) more costly; or
(C) more dilatory;
for the resolution of the dispute than an Indiana court in
which the borrower may otherwise bring a claim or defense;
(3) limits in any way any claim or defense the borrower may
is unconscionable and void.
Chapter 5. Claims, Defenses, Remedies
Sec. 1. (a) A person who purchases or is otherwise assigned a
high cost home loan is subject to all affirmative claims and any
defenses with respect to the high cost home loan that the borrower
could assert against a creditor or broker of the high cost home
loan. However, this section does not apply if the purchaser or
assignee demonstrates by a preponderance of the evidence that a
reasonable person exercising ordinary due diligence could not
determine that the loan was a high cost home loan. A purchaser or
an assignee is presumed to have exercised reasonable due diligence
if the purchaser or assignee:
(1) has in place at the time of the purchase or assignment of
the subject loans, policies that expressly prohibit the purchase
or acceptance of the assignment of any high cost home loans;
(2) requires by contract that a seller or an assignor of home
loans to the purchaser or assignee represents and warrants to
the purchaser or assignee that either:
(A) the seller or assignor will not sell or reassign any high
cost home loans to the purchaser or assignee; or
(B) the seller or assignor is a beneficiary of a
representation and warranty from a previous seller or
assignor to that effect;
(3) exercises reasonable due diligence:
(A) at the time of purchase or assignment of home loans;
(B) within a reasonable period after the purchase or
assignment of home loans;
intended by the purchaser or assignee to prevent the
purchaser or assignee from purchasing or taking assignment
of any high cost home loans; or
(4) satisfies the requirements of subdivisions (1) and (2) and
establishes that a reasonable person exercising ordinary due
diligence could not determine that the loan was a high cost
home loan based on the:
(A) documentation required by the federal Truth in
Lending Act (15 U.S.C. 1601 et seq.); and
(B) itemization of the amount financed and other
(b) A borrower acting only in an individual capacity may assert
against the creditor or any subsequent holder or assignee of a high
cost home loan:
(1) a violation of IC 24-9-4-2 as a defense, claim, or
(A) an action to enjoin foreclosure or to preserve or obtain
possession of the dwelling that secures the loan is initiated;
(B) an action to collect on the loan or foreclose on the
collateral securing the loan is initiated; or
(C) the loan is more than sixty (60) days in default;
within three (3) years after the closing of a
(2) a violation of this article in connection to the high cost
home loan as a defense, claim, or counterclaim in an original
action within five (5) years after the closing of a high cost
home loan; and
(3) any defense, claim, counterclaim, or action to enjoin
foreclosure or preserve or obtain possession of the home that
secures the loan, including a violation of this article after:
(A) an action to collect on the loan or foreclose on the
collateral securing the loan is initiated;
(B) the debt arising from the loan is accelerated; or
(C) the loan is more than sixty (60) days in default;
at any time during the term of a high cost home loan.
(c) In an action, a claim, or a counterclaim brought under
subsection (b), the borrower may recover only amounts required
to reduce or extinguish the borrower's liability under a home loan
plus amounts required to recover costs, including reasonable
(d) The provisions of this section are effective notwithstanding
any other provision of law. This section shall not be construed to
limit the substantive rights, remedies, or procedural rights
available to a borrower against any creditor, assignee, or holder
under any other law. The rights conferred on borrowers by
subsections (a) and (b) are independent of each other and do not
limit each other.
Sec. 2. (a) If a creditor asserts that grounds for acceleration
under the terms of a high cost home loan exist and requires the
payment in full of all sums secured by the security instrument, the
borrower or a person authorized to act on the borrower's behalf at
any time before the title is transferred by means of foreclosure,
judicial proceeding and sale, or otherwise may cure the default and
reinstate the high cost home loan by tendering the amount or
performance as specified in the security instrument.
(b) If the borrower cures the default on a high cost home loan,
the original loan terms shall be reinstated, and any acceleration of
any obligation under the security instrument or note arising from
the default is nullified as of the date of the cure.
Sec. 3. (a) A creditor making a high cost home loan that has the
right to foreclose must use the judicial foreclosure procedures of
the state in which the property securing the high cost home loan is
located. The borrower has the right to assert in the proceeding the
nonexistence of a default and any other claim or defense to
acceleration and foreclosure, including any claim or defense based
on any violations of this article.
(b) This section is not intended and shall not be construed to
allow any claim or defense otherwise barred by any statute of
limitation or repose.
Sec. 4. (a) A person who violates this article is liable to a person
who is a party to the home loan transaction that gave rise to the
violation for the following:
(1) Actual damages, including consequential damages. A
person is not required to demonstrate reliance in order to
receive actual damages.
(2) Statutory damages equal to two (2) times the finance
charges agreed to in the home loan agreement.
(3) Costs and reasonable attorney's fees.
(b) A person may be granted injunctive, declaratory, and other
equitable relief as the court determines appropriate in an action to
enforce compliance with this chapter.
(c) The right of rescission granted under 15 U.S.C. 1601 et seq.
for a violation of law is available to a person acting only in an
individual capacity by way of recoupment as a defense against a
party foreclosing on a home loan at any time during the term of the
loan. Any recoupment claim asserted under this provision is
limited to the amount required to reduce or extinguish the person's
liability under the home loan plus amounts required to recover
costs, including reasonable attorney's fees. This article shall not be
construed to limit the recoupment rights available to a person
under any other law.
(d) The remedies provided in this section are cumulative but are
not intended to be the exclusive remedies available to a person.
Except as provided in subsection (e), a person is not required to
exhaust any administrative remedies under this article or under
any other applicable law.
(e) Before bringing an action regarding an alleged deceptive act
under this chapter, a person must:
(1) notify the homeowner protection unit established by
IC 4-6-12-2 of the alleged violation giving rise to the action;
(2) allow the homeowner protection unit at least ninety (90)
days to institute appropriate administrative and civil action
to redress a violation.
(f) An action under this chapter must be brought within five (5)
years after the date that the person knew, or by the exercise of
reasonable diligence should have known, of the violation of this
(g) An award of damages under subsection (a) has priority over
a civil penalty imposed under this article.
Sec. 5. (a) If the creditor or an assignee establishes by a
preponderance of evidence that a violation of this article is
unintentional or the result of a bona fide error of law or fact
notwithstanding the maintenance of procedures reasonably
adopted to avoid any such violation or error, the validity of the
transaction is not affected, and no liability is imposed under section
4 of this chapter except in the case of a refusal to make a refund.
(b) Except as provided in subsection (c), a creditor in a high cost
home loan who in good faith fails to comply with this article is not
considered to have violated this article if the creditor does the
following before receiving notice of the failure from the borrower:
(1) Not later than ninety (90) days after the date of the loan
(A) makes appropriate restitution to the borrower of any
amounts collected in error; and
(B) takes necessary action to make all appropriate
adjustments to the loan to correct the error.
(2) Not later than one hundred twenty (120) days after the
date of the loan closing, notifies the borrower of:
(A) the error; and
(B) the amount of the required restitution or adjustment.
(c) Subsection (b) does not apply unless the creditor establishes
that the compliance failure was not intentional and resulted from
a bona fide error of fact or law, notwithstanding the maintenance
of procedures reasonably adopted to avoid the errors.
Sec. 6. The rights conferred by this article are in addition to
rights granted under any other law.
Chapter 6. Reporting Requirements
Sec. 1. (a) A servicer of a high cost home loan shall report at
least once each calendar quarter to a nationally recognized
consumer credit reporting agency both the favorable and
unfavorable payment history information of the borrower on
payments due to the creditor on a high cost home loan.
(b) This section does not prohibit a servicer from agreeing with
the borrower not to report specified payment history information
in the event of a resolved or an unresolved dispute with a borrower
and does not apply to high cost home loans held or serviced by a
lender for less than ninety (90) days.
Chapter 7. State Power to Regulate Lending
Sec. 1. The state solely shall regulate the business of originating,
granting, servicing, and collecting loans and other forms of credit
in Indiana and the manner in which any business is conducted.
This regulation preempts all other regulation of these activities by
any political subdivision.
Sec. 2. Political subdivisions may not:
(1) enact, issue, or enforce ordinances, resolutions,
regulations, orders, requests for proposals, or requests for
bids pertaining to financial or lending activities, including
ordinances, resolutions, and rules disqualifying persons from
doing business with a municipality that are based upon
lending terms or practices; or
(2) impose reporting requirements or any other obligations
upon persons regarding financial services or lending practices
or upon subsidiaries or affiliates that:
(A) are subject to the jurisdiction of the department of
(B) are subject to the jurisdiction or regulatory supervision
of the Board of Governors of the Federal Reserve System,
the Office of the Comptroller of the Currency, the Office
of Thrift Supervision, the National Credit Union
Administration, the Federal Deposit Insurance
Corporation, the Federal Trade Commission, or the United
States Department of Housing and Urban Development;
(C) are chartered by the United States Congress to engage
in secondary market mortgage transactions;
(D) are created by the Indiana housing finance authority;
(E) originate, purchase, sell, assign, securitize, or service
property interests or obligations created by financial
transactions or loans made, executed, originated, or
purchased by persons referred to in clauses (A), (B), (C), or
Chapter 8. Penalties and Enforcement
Sec. 1. A person who knowingly or intentionally violates this
(1) a Class A misdemeanor; and
(2) an act that is actionable by the attorney general under
IC 24-5-0.5 and is subject to the penalties listed in IC 24-5-0.5.
Sec. 2. (a) The attorney general and the attorney general's
homeowner protection unit established under IC 4-6-12 shall
enforce this article for any violation occurring within five (5) years
after the making of a home loan.
(b) The attorney general may refer a matter under section 1 of
this chapter to a prosecuting attorney for enforcement.
Sec. 3. (a) The attorney general may bring an action to enjoin a
violation of this article. A court in which the action is brought may:
(1) issue an injunction;
(2) order a person to make restitution;
(3) order a person to reimburse the state for reasonable costs
of the attorney general's investigation and prosecution of the
violation of this article; and
(4) impose a civil penalty of not more than ten thousand
dollars ($10,000) per violation.
(b) A person who violates an injunction under this section is
subject to a civil penalty of not more than ten thousand dollars
($10,000) per violation.
(c) The court that issues an injunction retains jurisdiction over
a proceeding seeking the imposition of a civil penalty under this
Sec. 4. The attorney general may file complaints with any of the
agencies listed in IC 4-6-12-4 to implement this chapter.
Chapter 9. Fees
Sec. 1. The county recorder shall assess a fee of three dollars
($3) under IC 36-2-7-10(b)(11) for each mortgage recorded. The
fee shall be paid to the county treasurer at the end of each calendar
month as provided in IC 36-2-7-10(a).
Sec. 2. The county treasurer shall credit fifty cents ($0.50) of the
fee collected under IC 36-2-7-10(b)(11) for each mortgage recorded
to the county recorder's records perpetuation fund established
under IC 36-2-7-10(c).
Sec. 3. On or before June 20 and December 20 of each year,
after completing an audit of the county treasurer's monthly reports
required by IC 36-2-10-16, the county auditor shall distribute to
the auditor of state two dollars and fifty cents ($2.50) of the
mortgage recording fee collected under IC 36-2-7-10(b)(11) for
each mortgage recorded by the county recorder.
Sec. 4. The auditor of state shall distribute one dollar and
twenty-five cents ($1.25) of the mortgage recording fee to the state
general fund. The auditor of state shall credit one dollar and
twenty-five cents ($1.25) of the mortgage recording fee to the
homeowner protection unit account established by IC 4-6-12-8.
SOURCE: IC 34-7-4-2; (04)EH1229.2.4. -->
SECTION 4. IC 34-7-4-2, AS AMENDED BY P.L.2-2002,
SECTION 90, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2004]: Sec. 2. Statutes outside IC 34 providing causes of
action or procedures include the following:
(1) IC 4-21.5-5 (Judicial review of administrative agency actions).
(2) IC 22-3-4 (Worker's compensation administration and
(3) IC 22-4-17 (Unemployment compensation system, employee's
claims for benefits).
(4) IC 22-4-32 (Unemployment compensation system, employer's
(5) IC 22-9 (Civil rights actions).
(6) IC 24-9 (Home loans).
(7) IC 31-14 (Paternity).
(7) (8) IC 31-15 (Dissolution of marriage and legal separation).
(8) (9) IC 31-16 (Support of children and other dependants).
(9) (10) IC 31-17 (Custody and visitation).
(10) (11) IC 31-19 (Adoption).
(11) (12) IC 32-27-2, IC 32-30-1, IC 32-30-2, IC 32-30-2.1,
IC 32-30-2, IC 32-30-4, IC 32-30-9, IC 32-30-10, IC 32-30-12,
IC 32-30-13, and IC 32-30-14 (Real property).
(12) (13) IC 33-1-3 (Attorney liens).
SOURCE: IC 36-2-7-10; (04)EH1229.2.5. -->
SECTION 5. IC 36-2-7-10, AS AMENDED BY P.L.2-2003,
SECTION 101, IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2004]: Sec. 10. (a) The county recorder shall
tax and collect the fees prescribed by this section for recording, filing,
copying, and other services the recorder renders, and shall pay them
into the county treasury at the end of each calendar month. The fees
prescribed and collected under this section supersede all other
recording fees required by law to be charged for services rendered by
the county recorder.
(b) The county recorder shall charge the following:
(1) Six dollars ($6) for the first page and two dollars ($2) for each
additional page of any document the recorder records if the pages
are not larger than eight and one-half (8 1/2) inches by fourteen
(2) Fifteen dollars ($15) for the first page and five dollars ($5) for
each additional page of any document the recorder records, if the
pages are larger than eight and one-half (8 1/2) inches by fourteen
(3) For attesting to the release, partial release, or assignment of
any mortgage, judgment, lien, or oil and gas lease contained on a
multiple transaction document, the fee for each transaction after
the first is the amount provided in subdivision (1) plus the amount
provided in subdivision (4) and one dollar ($1) for marginal
mortgage assignments or marginal mortgage releases.
(4) One dollar ($1) for each cross-reference of a recorded
(5) One dollar ($1) per page not larger than eight and one-half (8
1/2) inches by fourteen (14) inches for furnishing copies of
records produced by a photographic process, and two dollars ($2)
per page that is larger than eight and one-half (8 1/2) inches by
fourteen (14) inches.
(6) Five dollars ($5) for acknowledging or certifying to a
(7) Five dollars ($5) for each deed the recorder records, in
addition to other fees for deeds, for the county surveyor's corner
perpetuation fund for use as provided in IC 32-19-4-3 or
(8) A fee in an amount authorized under IC 5-14-3-8 for
transmitting a copy of a document by facsimile machine.
(9) A fee in an amount authorized by an ordinance adopted by the
county legislative body for duplicating a computer tape, a
computer disk, an optical disk, microfilm, or similar media. This
fee may not cover making a handwritten copy or a photocopy or
using xerography or a duplicating machine.
(10) A supplemental fee of three dollars ($3) for recording a
document that is paid at the time of recording. The fee under this
subdivision is in addition to other fees provided by law for
recording a document.
(11) Three dollars ($3) for each mortgage on real estate
recorded, in addition to other fees required by this section,
distributed as follows:
(A) Fifty cents ($0.50) is to be deposited in the recorder's
record perpetuation fund.
(B) Two dollars and fifty cents ($2.50) is to be distributed
to the auditor of state on or before June 20 and December
20 of each year as provided in IC 24-9-9-3.
(c) The county treasurer shall establish a recorder's records
perpetuation fund. All revenue received under subsection (b)(5), (b)(8),
(b)(9), and (b)(10), and fifty cents ($0.50) from revenue received
under subsection (b)(11), shall be deposited in this fund. The county
recorder may use any money in this fund without appropriation for the
preservation of records and the improvement of record keeping systems
(d) As used in this section, "record" or "recording" includes the
functions of recording, filing, and filing for record.
(e) The county recorder shall post the fees set forth in subsection (b)
in a prominent place within the county recorder's office where the fee
schedule will be readily accessible to the public.
(f) The county recorder may not tax or collect any fee for:
(1) recording an official bond of a public officer, a deputy, an
appointee, or an employee; or
(2) performing any service under any of the following:
(A) IC 6-1.1-22-2(c).
(B) IC 8-23-7.
(C) IC 8-23-23.
(D) IC 10-17-2-3.
(E) IC 10-17-3-2.
(F) IC 12-14-13.
(G) IC 12-14-16.
(g) The state and its agencies and instrumentalities are required to
pay the recording fees and charges that this section prescribes.
SOURCE: ; (04)EH1229.2.6. -->
SECTION 6. [EFFECTIVE UPON PASSAGE] Beginning January
1, 2005, the attorney general shall carry out the duties imposed on
the attorney general under IC 4-6-12 and IC 24-9, both as added by
SOURCE: ; (04)EH1229.2.7. -->
SECTION 7. [EFFECTIVE UPON PASSAGE] (a)
Notwithstanding IC 5-20-1-15.5, as added by this act, the Indiana
housing finance authority shall carry out the duties imposed on it
under IC 5-20-1-15.5, as added by this act, under interim written
guidelines approved by the executive director of the Indiana
housing finance authority.
(b) This SECTION expires on the earlier of the following:
(1) The date rules are adopted under IC 5-20-1-15.5(a)(2), as
added by this act.
(2) January 1, 2005.
SOURCE: ; (04)EH1229.2.8. -->
SECTION 8. [EFFECTIVE UPON PASSAGE] Notwithstanding
IC 24-9-3 and IC 24-9-4, both as added by this act, a person is not
subject to a prohibition or requirement of IC 24-9-3 and IC 24-9-4,
both as added by this act, before January 1, 2005.
SOURCE: ; (04)EH1229.2.9. -->
SECTION 9. [EFFECTIVE UPON PASSAGE] Notwithstanding
IC 24-9, as added by this act, a person may not file a civil action
under IC 24-9, as added by this act, before January 1, 2005.
SOURCE: ; (04)EH1229.2.10. -->
SECTION 10. An emergency is declared for this act.