California real estate disclosure laws California Real Estate Disclosures | Page 55

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Consummation of the loan transaction;

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Delivery of all material truth-in-lending disclosures; or

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Delivery of the notice of the right to cancel.

Certain real estate loan transactions are exempt from rescission under
Regulation Z, including a residential mortgage funded for the purpose of
purchasing the intended security property; refinancing or consolidation by
the same lender who currently holds the loan secured by the borrower’s
principal dwelling, provided no “new” money is advanced; any transaction
in which a state agency is the creditor/lender; loans for vacant lots or
vacation and retirement homes which are not the principal residence of the
borrower; and a business-purpose line of credit even though secured by the
borrower’s dwelling.
(15 U.S.C. § 1601, et. seq.; 12 C.F.R. PART 226 (REG. Z, TRUTH IN
LENDING))

H. High Cost Loans (Federal)
The Truth-in-Lending Act (TILA) was amended in 1994 with respect to
certain loans, other than purchase money loans, secured by the borrower’s
principal dwelling. In these “high rate/high cost loan transactions, also
known as “Section 32” loans, further restrictions are placed on
creditors/lenders, including additional disclosures and cancellation rights.
The amendment defines a creditor/lender as someone who, in any 12-month
period, originates more than one high-rate/high-cost loan, i.e., two or more.
Also, any such loan (one or more) arranged by a real estate broker acting as
a mortgage broker is subject to these requirements.
A “high-rate loan” is one in which the annual percentage rate (APR) exceeds
by 10 points or more the yield on Treasury Securities having a similar term.
A high-rate loan is defined as:
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For a senior loan/mortgage, the APR exceeds by more than 8 percentage
points the rates on Treasury Securities of comparable maturity;

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For a junior loan/mortgage, the APR exceeds by more than 10
percentage points the rates on Treasury Securities of comparable
maturity.

A “high-cost loan” is one in which the total points and fees exceed the
greater of 8% of the loan amount or, as of January 1, 2005, $510.00
(adjusted annually as of each January 1 thereafter based on the change in the
applicable Consumer Price Index).

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