Printable Format16a-3-308a. Loans secured by mortgages on consumer's principal residence; negative amortization and balloon payments prohibited. (1) A loan subject to this section may not provide for the negative amortization of principal or a balloon payment. A loan payment is not a balloon payment if the amount of the payment is less than twice the amount of any other payment.
(2) Subsection (1) applies to a consumer loan which is secured by a first mortgage or a second mortgage on the consumer's principal residence and with respect to which (a) the loan-to-value ratio exceeds 100% at the time the loan is made or (b) the annual percentage rate exceeds the code mortgage rate. Notwithstanding the foregoing, subsection (1) does not apply to a loan pursuant to open end credit; a purchase-money loan incurred to acquire or construct the consumer's principal residence; or a reverse mortgage transaction.
(3) The creditor must disburse the proceeds of a consumer loan secured by a first mortgage or a second mortgage upon the satisfaction of all conditions to the disbursement and the expiration of all applicable rescission, cooling-off or other waiting periods required by law, unless the parties otherwise agree in writing.
(4) No person shall record a mortgage if moneys are not available for disbursal to the mortgagor upon the expiration of all applicable rescission, cooling-off or other waiting periods required by law unless, before that recording, the person informs the mortgagor in writing of a definite date by which payment shall be made and obtains the mortgagor's written permission for the delay.
(5) This section shall be supplemental to and a part of the uniform consumer credit code.
History: L. 1999, ch. 107, § 3; L. 2005, ch. 144, § 15; L. 2006, ch. 67, § 1; July 1.
KANSAS COMMENT, 2010
1. Subsections (1) and (2) prohibit negative amortization or balloon payments on loans secured by a first or second mortgage on the consumer's principal residence if the loan-to-value ratio (K.S.A. 16a-1-301(28)) of the loan exceeds 100% or the annual percentage rate on the loan exceeds the code mortgage rate (K.S.A. 16a-1-301(11)). These restrictions do not apply to open end consumer loans (such as a home equity line of credit), purchase money loans used to acquire or build the residence, or to reverse mortgages. This provision is based on Regulation Z, 12 C.F.R. § 226.32(d), but expands the limitations of that provision.
2. Subsection (3) of this section requires the lender to disburse the proceeds of a first or second mortgage loan as soon as all conditions are satisfied. There is an exception for situations (such as a line of credit or a construction loan) where the parties agree to a different disbursement schedule.