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Oklahoma Administrative Code (Last Updated: March 11, 2021) |
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TITLE 85. State Banking Department |
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Chapter 10. Supervision, Regulation and Administration of Banks, Trust Companies, and the Oklahoma Banking Code |
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Subchapter 11. Substantive Guidelines and Restrictions |
SECTION 85:10-11-7. Adjustable rate mortgage loans, graduated payment adjustable mortgage loans and reverse annuity mortgage loans
Latest version.
- (a) Definitions. The following words and terms, when used in this section, shall have the following meaning, unless the text clearly indicates otherwise.(1) "Adjustable rate mortgage loan" means any amortized loan made by a bank or trust company secured by a lien on a one-to-four family dwelling where such loan is made pursuant to an agreement which enables the bank or trust company to make periodic adjustments to the interest rate.(2) "Graduated payment adjustable mortgage loan" means a specific type of adjustable rate mortgage loan for which the monthly payment amount is insufficient at the beginning of the loan term to fully amortize the loan, but which provides for periodic adjustment of the payment amount to a level sufficient to fully amortize the loan at the then-existing interest rate.(3) "Reverse annuity mortgage loan" means a debt instrument which provides periodic payments to homeowners secured by the accumulated equity in their home. The loan becomes due either upon a specific date or when a specified event occurs.(b) Authorization. Banks and trust companies supervised by the Department are hereby authorized to make, purchase or participate in adjustable rate mortgage loans, graduated payment adjustable mortgage loans and reverse annuity mortgage loans. Banks and trust companies are further authorized to apply the principles of interest rate adjustment discussed in this section to reverse annuity mortgage loans.(c) Disclosure. Each bank or trust company that offers adjustable rate mortgage loans, graduated payment adjustable mortgage loans, or reverse annuity mortgage loans must give borrowers and prospective borrowers written disclosure notices in accordance with the Oklahoma Consumer Credit Code, the Federal Truth-in-Lending Act and Regulation Z of the Federal Reserve Board to the extent such Federal law is applicable to institutions covered by this section.(d) Index. Adjustments to the interest rate of adjustable rate mortgage loans, graduated payment adjustable mortgage loans and reverse annuity mortgage loans must correspond to the movement of an index specified in the loan documents, subject to such rate adjustment limitations, if any, as agreed by the parties. The documents may specify any interest rate index which is readily verifiable by the borrower and beyond the control of the bank or trust company.(e) Adjustment options. Adjustment of the interest rate may be implemented through changes in the payment amount and/or through adjustments to the rate of amortization (i.e. the amount, if any, allocated to repayment of principal) and/or the loan term. With respect to adjustable rate mortgage loans, adjustments to the rate of amortization are permissible only if the initial payment amount is sufficient to fully amortize the loan at the beginning of the loan term and if the payment amount is adjusted at least every 5 years to a level sufficient to amortize the outstanding principal at the interest rate then in effect over the remainder of the original loan term. With respect to graduated payment adjustable mortgage loans, within ten (10) years of the closing of the loan and at least every five (5) years thereafter, the monthly payment amount must be adjusted to a level sufficient to amortize the loan balance at the then-existing interest rate over the remaining term of the loan.(f) Cost or fees. Borrowers may not be charged any costs or fees in connection with adjustments to an interest rate, payment amount, rate of amortization or loan maturity.(g) Assumption. Banks and trust companies offering, purchasing, or participating in adjustable rate mortgage loans or graduated payment adjustable mortgage loans are not required to allow those loans to be assumed by new purchasers of the mortgaged property or to allow new purchasers to take title to such property subject to the lien of an adjustable rate mortgage loan made pursuant to this section. If a bank or trust company does allow such a loan to be assumed or purchaser to take title to property subject to the lien of an adjustable rate loan or graduated payment adjustable mortgage loan made pursuant to this rule, the interest rate and any other loan terms may be reset as of the date of assumption.