{"data":{"id":"us-ky/krs-360.100","jurisdiction":"us-ky","citation":"KRS 360.100","heading":"Predatory lending -- Definitions -- Limitations on high -cost home loans --","body":"Conditions -- Penalties.\n(1) The following definitions apply for the purposes of this section:\n(a) \"High-cost home loan\" means a loan other than an open -end credit plan or  a reverse mortgage transaction in which:\n1. The principal amount of the loan is greater than fifteen thousand dollars ($15,000) and does not exceed two hundred thousand dollars ($200,000);\n2. The borrower is a natural person;\n3. The debt is incurred by th e borrower primarily for personal, family, or household purposes;\n4. The loan is secured by a mortgage on residential real property or secured by collateral which has a mortgage lien interest in residential real property, which is or will be occupied by th e borrower as the borrower's principal dwelling; and\n5. The terms of the loan exceed either or both of the following thresholds: a. Without regard to whether the loan transaction is or may be a\n\"residential mortgage transaction\" as defined in 12 C.F.R.\n226.2(a)(24), as amended from time to time, the loan at the time\nthe loan is consummated is such that the loan is considered a\n\"mortgage\" under section 152 of the Home Ownership and Equity\nProtection Act of 1994, Pub. L. No. 103 -325, 15 U.S.C. sec.\n1602(aa), as the same may be amended from time to time, and\nregulations adopted pursuant thereto by the Federal Reserve Board,\nincluding 12 C.F.R. 226.32, as the same may be amended from\ntime to time; or\nb. The total points and fees payable by the borrower at or bef ore the\nloan closing exceed the greater of three thousand dollars ($3,000)\nor six percent (6%) of the total loan amount as shown as the\namount financed on the final Truth-in-Lending Statement;\n(b) \"Lender\" means any person who funds or negotiates the terms  of a high -cost\nhome loan or acts as a mortgage broker or lender, finance company, or retail\ninstallment seller with respect to a high -cost home loan. However, any person\nwho purchases or is otherwise assigned a high-cost home loan shall be subject\nto an a ction for violation of this section only if the violation for which the\naction or proceeding is brought is apparent on the face of the disclosure or the\nunderlying promissory note;\n(c) \"Material change\" means any of the following:\n1. A change in the type o f loan being offered, such as a fixed or variable\nrate loan or a loan with a balloon payment;\n2. A change in the term of the loan, as reflected in the number of monthly\npayments due before a final payment is scheduled to be made;\n3. An increase in the interest rate of more than one -quarter of one percent\n(0.25%), or an equivalent increase in the amount of discount points\ncharged;\n4. A change regarding the requirement of escrow for taxes and insurance;\nand\n5. A change regarding the req uirement or payment, or both, of private\nmortgage insurance; and\n(d) 1. \"Total points and fees payable by the consumer at or before the loan\nclosing\" means all amounts payable by a borrower at or before the\nclosing of a home loan, excluding any interest or  time-price differential\ndue at closing on the loan proceeds and includes:\na. All mortgage broker fees, including fees paid by the consumer\ndirectly to the broker, fees paid by the consumer to the creditor for\ndelivery to the broker, and yield spread premi ums paid by the\ncreditor to the broker;\nb. Any amount payable under an add -on or discount system of\nadditional charges:\nc. Service, transaction, activity, and carrying charges that exceed\nsimilar charges on a noncredit account;\nd. Points, loan fees, assump tion fees, finder's fees, and similar\ncharges;\ne. Appraisal, investigation, and credit report fees when service is\nprovided by the lender or an affiliate and not by a third party;\nf. Charges imposed on a creditor by another person for purchasing or\naccepting the borrower's obligation, if the borrower is required to\npay the charges in cash, as an addition to the loan obligation, or as\na deduction from loan proceeds;\ng. Premiums or other charges for credit life, accident, health, or loss -\nof-income insurance, or debt-cancellation coverage, whether or not\nthe debt -cancellation coverage is insurance under applicable law;\nor\nh. Closing agent fees charged by a third party, but only if the lender\nrequires the particular services for which the borrower is charged\nand the lender requires the imposition of the charge or the lender\nretains a portion of the charge.\n2. \"Total points and fees payable by the consumer at or before the loan\nclosing\" does not include real estate related fees paid to third parties if\nthe charge is reasonable, the creditor receives no direct or indirect\ncompensation in connection with the charge, and the charge is not paid\nto an affiliate of the creditor. Real estate related fees include:\na. Fees for title examination, abstract of title, title ins urance, property\nsurvey, and similar purposes;\nb. Fees for preparing loan -related documents, such as deeds,\nmortgages, and reconveyance or settlement documents;\nc. Notary and credit report fees;\nd. Property appraisal fees or fees for inspections to assess the value or\ncondition of the property if the service is performed prior to\nclosing, including fees related to pest infestation and flood hazard\ndeterminations; and\ne. Amounts required to be paid into escrow or trustee accounts if the\namounts would not otherwise be included in the finance charge.\n(2) A high-cost home loan shall be subject to the following limitations:\n(a) 1. No lender may make, provide, or arrange a high -cost home loan with a\nprepayment penalty unless the lender offers the borrower a loan w ithout\na prepayment penalty, the offer is in writing, and the borrower initials\nthe offer to indicate that the borrower has declined the offer. The lender\nshall disclose the discount in rate received in consideration for a high -\ncost home loan with the prepayment penalty; and\n2. If a borrower declines an offer required in paragraph (a)1. of this\nsubsection, the lender may include a prepayment penalty schedule. No\nprepayment penalty shall be assessed against the borrower following the\nthird anniversary date of the mortgage or sixty (60) days prior to the date\nof the first interest rate reset, whichever is less. No prepayment penalty\nshall exceed three percent (3%) for the first year, two percent (2%) for\nthe second year, and one percent (1%) for the third year  of the\noutstanding balance of the loan; but in no event shall a prepayment\npenalty be assessed against a borrower refinancing with the mortgage\nloan company that funded the mortgage;\n(b) A high-cost home loan may not contain a provision which permits the lender,\nin its sole discretion, to accelerate the indebtedness. This provision does not\napply when repayment of the loan has been accelerated by default, pursuant to\na due -on-sale provision, or pursuant to some other provision of the loan\ndocuments unrelated to the payment schedule;\n(c) A high-cost home loan may not contain a scheduled payment that is more than\ntwice as large as the average of earlier scheduled payments. This provision\ndoes not apply when the payment schedule is adjusted to the seasonal or\nirregular income of the borrower;\n(d) A high -cost home loan may not contain a payment schedule with regular\nperiodic payments that cause the principal balance to increase;\n(e) A high -cost home loan may not contain a provision which increases the\ninterest rate after default. This provision does not apply to interest rate\nchanges in a variable rate loan otherwise consistent with the provisions of the\nloan documents, provided the change in the interest rate is not triggered by the\nevent of default or the acceleration of the indebtedness;\n(f) A high-cost home loan may not include terms under which more than two (2)\nperiodic payments required under the loan are consolidated and paid i n\nadvance from the loan proceeds provided to the borrower;\n(g) A lender may not charge a borrower any fees to modify, renew, extend, or\namend a high-cost home loan or to defer any payment due under the terms of a\nhigh-cost home loan, unless the fees are le ss than one -half (1/2) of any fees\nthat would be charged for a refinance or unless the borrower is in default and\nit is in the borrower’s best interest;\n(h) A lender may not make a high -cost home loan unless the borrower has been\nprovided the following not ice or a substantially similar notice, in writing, not\nlater than the time that notice provided by 12 C.F.R. 226.31(c), as amended\nfrom time to time, is required:\nNOTICE TO BORROWER\nIF YOU OBTAIN THIS LOAN, THE LENDER WILL HAVE A\nMORTGAGE ON YOUR HOME. YOU COULD LOSE YOUR HOME AND\nANY MONEY YOU PUT INTO IT IF YOU DO NOT MEET YOUR\nOBLIGATIONS UNDER THE LOAN.\nMORTGAGE LOAN RATES AND CLOSING COSTS AND FEES VARY\nBASED ON MANY FACTORS, INCLUDING YOUR PARTICULAR\nCREDIT AND FINANCIAL CIRCUMSTANCES, YOUR EMPLOYM ENT\nHISTORY, THE LOAN -TO-VALUE REQUESTED AND THE TYPE OF\nPROPERTY THAT WILL SECURE YOUR LOAN. THE LOAN RATE\nAND FEES COULD ALSO VARY BASED ON WHICH LENDER OR\nBROKER YOU SELECT. YOU SHOULD SHOP AROUND AND\nCOMPARE LOAN RATES AND FEES.\nYOU SHOULD ALSO CONSID ER CONSULTING A QUALIFIED\nINDEPENDENT CREDIT COUNSELOR OR OTHER EXPERIENCED\nFINANCIAL ADVISOR REGARDING THE RATE, FEES, AND\nPROVISIONS OF THIS MORTGAGE LOAN BEFORE YOU PROCEED.\nYOU SHOULD CONTACT THE UNITED STATES DEPARTMENT OF\nHOUSING AND URBAN DEVELOPMEN T FOR A LIST OF CREDIT\nCOUNSELORS AVAILABLE IN YOUR AREA.\nYOU ARE NOT REQUIRED TO COMPLETE THIS LOAN AGREEMENT\nMERELY BECAUSE YOU HAVE RECEIVED THESE DISCLOSURES OR\nHAVE SIGNED A LOAN APPLICATION.\nREMEMBER, PROPERTY TAXES AND HOMEOWNER'S INSURANCE\nARE YO UR RESPONSIBILITY. NOT ALL LENDERS PROVIDE\nESCROW SERVICES FOR THESE PAYMENTS. YOU SHOULD ASK\nYOUR LENDER ABOUT THESE SERVICES.\nALSO, YOUR PAYMENTS ON EXISTING DEBTS CONTRIBUTE TO\nYOUR CREDIT RATINGS. YOU SHOULD NOT ACCEPT ANY ADVICE\nTO IGNORE YOUR REGULA R PAYMENTS TO YOUR EXISTING\nCREDITORS;\n(i) A lender may not make a high -cost home loan unless the lender reasonably\nbelieves at the time the loan is consummated that one (1) or more of the\nborrowers, when considered individually or collectively, will be ab le to make\nthe scheduled payments to repay the loan based upon a consideration of their\ncurrent and expected income, current obligations, current employment status,\nand other financial resources, other than the borrower's equity in the dwelling\nwhich secures repayment of the loan. A borrower shall be presumed to be able\nto make the scheduled payments to repay the loan if, at the time the loan is\nconsummated:\n1. The borrower's total monthly debts, including amounts owed under the\nloan, do not exceed fifty pe rcent (50%) of the borrower's monthly gross\nincome as verified by the credit application, the borrower's financial\nstatement, a credit report, financial information provided to the lender by\nor on behalf of the borrower, or any other reasonable means;\n2. The loan has been approved by an automated underwriting service\noffered by FNMA or Freddie MAC;\n3. The lender verifies and documents that the borrower has liquid assets\nequal to fifty percent (50%) of the principal loan amount; or\n4. The borrower has sufficient residual income as defined in the guidelines\nestablished in 38 C.F.R. 36.4337(e) and United States Department of\nVeterans Affairs form 26-6393;\n(j) If the proceeds of the high -cost home loan are used to refinance an existing\nhigh-cost home loan held by the same lender as noteholder, the lender may not\ndirectly or indirectly finance:\n1. Any prepayment fees or penalties payable by the borrower; or\n2. Points and fees, excluding those provided for in 12 C.F.R. 226.4(c)(7),\nwhich in the aggregate are in exc ess of four percent (4%) of the total\namount financed;\n(k) A lender or mortgage loan broker may not, within one (1) year of the\nconsummation of a high-cost home loan, charge a borrower points and fees in\nconnection with a high -cost home loan if the proceed s of the high -cost home\nloan are used to refinance an existing high -cost home loan on which points\nwere charged. A lender may not, at any time, charge a borrower points and\nfees in addition to those allowed by 12 C.F.R. 226.4(c)(7) if the proceeds of\nthe high-cost home loan are used to refinance an existing high-cost home loan,\non which points were charged, held by the same lender as noteholder.\nHowever, points and fees in accordance with this section may be charged on\nany proceeds of a high -cost home loan which are in excess of the amount\nrefinanced on the existing high-cost home loan;\n(l) A lender may not pay a contractor under a home -improvement contract from\nthe proceeds of a high -cost home loan other than by an instrument payable to\nthe borrower or jointly to the borrower and the contractor, or at the election of\nthe borrower, through a third -party escrow agent in accordance with terms\nestablished in a written agreement signed by the borrower, the lender, and the\ncontractor prior to the disbursement;\n(m) A lender shall not refinance, replace, or consolidate a zero interest rate or low\ninterest rate loan made by a governmental or nonprofit lender with a high -cost\nhome loan. For purposes of this paragraph, a low interest rate loan is defined\nas a loan that carries a current interest rate that is two (2) percentage points or\nmore below the current yield on United States Treasury securities with a\ncomparable maturity;\n(n) A lender shall not finance single premium credit life, credit accident, credit\nhealth, credit disability, or credit loss of income insurance in connection with\na high-cost home loan;\n(o) A lender shall not make a high -cost home loan unless the lender has made\navailable to the borrower a videotape, or other similar audio -video media\nformat such  as DVD or CD, approved by the Department of Financial\nInstitutions, which explains the borrower's rights and responsibilities with\nregard to this section or high -cost home loans. A lender shall have available\nfor viewing at least one (1) copy of the video  in the principal office and each\nbranch office of the lender;\n(p) A lender shall not make a high -cost home loan subject to a mandatory\narbitration clause that is oppressive, unfair, unconscionable, or substantially in\nderogation of the rights of consumers . Arbitration clauses that comply with\nthe standards set forth in the Statement of Principles of the National\nConsumer Dispute Advisory Committee of the American Arbitration\nAssociation in effect on June 24, 2003, shall be presumed not to violate this\nsubsection;\n(q) A lender shall not charge a late payment fee on a high -cost home loan except\nin accordance with the following:\n1. The late payment fee may not be in excess of five percent (5%) of the\namount of the payment past due or ten dollars ($10), whichev er is\ngreater;\n2. The loan documents must specifically authorize the late payment fee;\n3. The late payment fee may only be assessed for a payment past due\nfifteen (15) days or more; and\n4. The late payment fee may only be charged once with respect to a single\nlate payment;\n(r) A lender may not charge a borrower a fee for the first request of each calendar\nyear for a written payoff calculation. Thereafter, for each subsequent request\nin a cal endar year, the lender may charge a reasonable fee not to exceed in\nexcess of ten dollars ($10) or actual costs, whichever is greater, per request for\na written payoff calculation on a high -cost home loan by a borrower in a\ncalendar year;\n(s) A lender shall not initiate a foreclosure or other judicial process to terminate a\nborrower's interest in residential real property subject to a high-cost home loan\nwithout first providing the borrower, at least thirty (30) days prior to the\ninitiation of any process, written notice of default and of the borrower's right\nto cure. The notice shall include a statement of the amount needed to be paid\nby the borrower in order to cure the default and the date by which the payment\nis due to cure the default. If the amount nee ded to be paid will change during\nthe thirty (30) day notice period, the notice shall provide information\nsufficient to enable a calculation of the daily change;\n(t) A lender shall not recommend or encourage default on an existing loan or\nother debt in con nection with the closing of a high -cost home loan that\nrefinances all or a portion of the existing loan or debt;\n(u) A lender shall not make a high-cost home loan that does not require an escrow\naccount for taxes and insurance;\n(v) A lender shall not process the application to make a high-cost home loan if the\nproceeds shall be used, in whole or in part, to repay the principal of an\nexisting loan secured by the borrower's principal dwelling that is not a high -\ncost home loan, without first requiring the borr ower to obtain housing\ncounseling by a HUD-approved counselor;\n(w) A lender shall not make a high -cost home loan that allows the borrower, for\nany part or all of the term of the loan, to make payments that are applied only\nto interest and not to principal;\n(x) A lender shall provide timely notice to the borrower of any material change in\nthe terms of a high -cost home loan if the change is made after an application\nhas been taken but before the closing of the loan. Notice shall be deemed\ntimely if given not later than three (3) days after the lender has learned of the\nchange or twenty -four (24) hours before the high -cost home loan is closed,\nwhichever is earlier. If the lender discloses a material change more than three\n(3) days after learning of the change but still twenty-four (24) hours before the\nhigh-cost home loan is closed, it will not be liable for penalties or forfeitures\nif the lender cures in time for the borrower to avoid any damage;\n(y) A lender shall not make a high -cost home loan without verifyi ng the\nborrower's income and financial resources through tax returns, payroll\nreceipts, bank records, or other similarly reliable documents, whether\nprovided directly by the borrower or through a third party with the borrower’s\npermission; and\n(z) A lender  shall not make a high -cost home loan without verifying the\nborrower's reasonable ability to pay all scheduled payments of principal,\ninterest, real estate taxes, homeowner's insurance, and mortgage insurance\npremiums, as applicable. For loans in which the  interest rate may vary, the\nreasonable ability to repay shall be determined based upon the following:\n1. In the case of a high -cost home loan in which the rate of interest varies\nsolely in accordance with an index, the interest rate determined by\nadding t he index rate in effect on the date of consummation of the\ntransaction to the maximum margin permitted at any time during the\nloan agreement; or\n2. In the case of a high -cost home loan in which the rate may vary at any\ntime during the term of the loan for any reason other than in accordance\nwith an index, the interest charged on the loan at the maximum rate that\nmay be charged during the term of the loan.\n(3) Except as provided in paragraph (e) of subsection (2) of this section, the making of\na high -cost ho me loan which violates any provisions of subsection (2) of this\nsection is usurious, subject to the penalties of this chapter, and unlawful as an unfair\nand deceptive act or practice in or affecting commerce in violation of the provisions\nof KRS 367.170. T he provisions of this section shall apply to any person who in\nbad faith attempts to avoid the application of this section by:\n(a) The structuring of a loan transaction as an open -end credit plan for the\npurpose and with the intent of evading the provision s of this section when the\nloan would have been a high-cost home loan if the loan had been structured as\na closed-end loan; or\n(b) Dividing any loan transaction into separate parts for the purpose and with the\nintent of evading the provisions of this section; or\n(c) Any other such subterfuge.\nThe Attorney General, the commissioner of the Department of Financial\nInstitutions, or any party to a high-cost home loan may enforce the provisions of this\nsection. Any person seeking damages or penalties under the p rovisions of this\nsection may recover damages under either this chapter or KRS Chapter 367, but not\nboth.\n(4) A lender of a high -cost home loan who, when acting in good faith, fails to comply\nwith subsection (2) of this section, will not be deemed to have violated this section\nif the lender establishes that either:\n(a) Within thirty (30) days of the loan closing the borrower is notified of the\ncompliance failure, appropriate restitution is made, and whatever adjustments\nare necessary are made, at the choice of the borrower, to the loan to either:\n1. Make the high-cost home loan satisfy the requirements of subsection (2)\nof this section; or\n2. Change the terms of the loan in a manner beneficial to the borrower so\nthat the loan will no longer be considered a h igh-cost home loan subject\nto the provisions of this section; or\n(b) The compliance failure was not intentional and resulted from a bona fide error\nnotwithstanding the maintenance of procedures reasonably adopted to avoid\nsuch errors, and within sixty (60)  days after the discovery of the compliance\nfailure, the borrower is notified of the compliance failure, appropriate\nrestitution is made, and whatever adjustments are necessary are made to the\nloan to either, at the choice of the borrower, make the high -cost home loan\nsatisfy the requirements of subsection (2) of this section or change the terms\nof the loan in a manner beneficial to the borrower so that the loan will no\nlonger be considered a high -cost home loan subject to the provisions of this\nsection. Examples of a bona fide error include clerical, calculation, computer\nmalfunction and programming, and printing errors.\n(c) For purposes of this subsection, \"appropriate restitution\" means the\nreimbursement by the lender of any points, fees, interest, or oth er charges\nmade by the lender and received from the borrower necessary to put the\nborrower in the same position as he or she would have been had the loan, as\nadjusted in accordance with paragraphs (a) and (b) of this subsection, been\noriginally made in accordance therewith.\n(5) For purposes of this section, any extension of credit shall be deemed to have been\nmade in the Commonwealth of Kentucky, and therefore subject to the provisions of\nthis section, if the lender offers or agrees in Kentucky to lend mone y to a borrower,\nwho is a resident of Kentucky, on real property located within the Commonwealth\nof Kentucky, or if such borrower accepts or makes the offer in Kentucky to borrow,\nregardless of the situs of the contract as specified therein. Any oral or wr itten\nsolicitation or communication to lend originating outside of Kentucky, but\nforwarded to and received in Kentucky by a borrower who is a resident of\nKentucky, shall be deemed to be an offer or agreement to lend in Kentucky and,\ntherefore, subject to t his section. Any oral or written solicitation or communication\nto borrow originating within Kentucky, from a borrower who is a resident of\nKentucky, but forwarded to and received by a lender outside of Kentucky, shall be\ndeemed to be an acceptance or offer  to borrow in Kentucky. Any oral or written\noffer, acceptance, solicitation, or communication to lend or borrow, made in\nKentucky to, or received in Kentucky from, a borrower who is not a resident of\nKentucky, shall be subject to the provisions of this sec tion, applicable federal law,\nlaw of the situs of the contract, or law of the residence of the borrower, as the\nparties may elect. The provisions of this section shall be severable and if any phrase,\nclause, sentence, or provision is declared to be invalid , the validity of the remainder\nof this section shall not be affected thereby.","path":["KRS Chapter 360"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=34181","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:58:53Z","sha256":"bf9beaab24fb27ce0e576b50f9f224b630daa21b19c736f9e027d581be60202d","source_id":"us-ky","stale":false,"prev":"us-ky/krs-360.080","next":"us-ky/krs-360.150"},"notice":"GroundRules: Original legal text. Not legal advice."}