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TITLE 4. LOAN
CHAPTER 7.5. MORTGAGE LOANS
California Civil Code Section 1918.5-1921




1918.5.  As used in this chapter:
   (a) "Evidence of debt" means a note or negotiable instrument.
   (b) "Secretary" means the Secretary of the Business,
Transportation and Housing Agency.
   (c) "Secretary's designee" means the director of a department
within the agency that licenses or regulates the institutions,
organizations or persons engaged in a business related to or
affecting compliance with this chapter.
   (d) "Security document" means a mortgage contract, deed of trust,
real estate sales contract, or any note or negotiable instrument
issued in connection therewith, when its purpose is to finance the
purchase or construction of real property occupied or intended to be
occupied by the borrower, containing four or fewer residential units
or on which four or fewer residential units are to be constructed.



1920.  Any mortgage instrument that is made pursuant to the
provisions of this chapter shall meet the following requirements:
   (a) Standards for the adjustment of interest rates or monthly
payments shall consider factors which can reasonably be deemed to
affect the ability of borrowers to meet their mortgage obligations.
   (b) No change in interest provided for in any provision for a
variable interest rate contained in a security document, or evidence
of debt issued in connection therewith, shall be valid unless the
provision is set forth in the security document, and in any evidence
of debt issued in connection therewith, and the document or documents
contain the following provisions:
   (1) A statement attached to the security document and to any
evidence of debt issued in connection therewith printed or written in
a size equal to at least 10-point bold type, consisting of language
authorized by the secretary or the secretary's designee notifying the
borrower that the mortgage may provide for changes in interest,
principal loan balance, payment, or the loan term.
   (2) Before the due date of the first monthly installment following
each change in the interest rate, notice shall be mailed to the
borrower of the following:
   (A) The base index.
   (B) The most recently published index at the date of the change in
the rate.
   (C) The interest rate in effect as a result of the change.
   (D) Any change in the monthly installment.
   (E) The amount of the unpaid principal balance.
   (F) If the interest scheduled to be paid on the due date exceeds
the amount of the installment, a statement to that effect and the
amount of the excess, and the address and telephone number of the
office of the lender to which inquiries may be made.
   (c) The borrower is permitted to prepay the loan in whole or in
part without a prepayment charge at any time, and no fee or other
charge may be required by the lender of the borrower as a result of
any change in the interest rate, the payment, the outstanding
principal loan balance, or the loan term.
   (d) Changes in the rate of interest on the loan shall reflect the
movement of an index, which shall be authorized by the secretary or
the secretary's designee.
   (e) To the extent that any monthly installment is less than the
amount of interest accrued during the month with respect to which the
installment is payable, the borrower shall be notified of such
instance in a form and manner prescribed by the secretary or the
secretary's designee.  Such notice shall include, but not be limited
to, the amount of interest exceeding the monthly installment, and any
borrower options under these circumstances.
   (f) The lender shall provide to the borrower, prior to the
execution by the borrower of any mortgage payment instrument
authorized pursuant to this chapter, full and complete disclosure, as
specified by the secretary or the secretary's designee, of the
nature and effect of the mortgage payment instrument, and all costs
or savings attributed to the mortgage instrument.



1921.  (a) As used in this section:
   (1) "Adjustable-rate residential mortgage loan" means any loan or
credit sale which is primarily for personal, family, or household
purposes which bears interest at a rate subject to change during the
term of the loan, whether predetermined or otherwise, and which is
made upon the security of real property containing not less than one
nor more than four dwelling units.
   (2) "Lender" means any person, association, corporation,
partnership, limited partnership, or other business entity making, in
any 12-month period, more than 10 loans or credit sales upon the
security of residential real property containing not less than one
nor more than four dwelling units.
   (b) Any lender offering adjustable-rate residential mortgage loans
shall provide to prospective borrowers a copy of the most recent
available publication of the Federal Reserve Board that is designed
to provide the public with descriptive information concerning
adjustable-rate mortgages (currently entitled "Consumer Handbook on
Adjustable Rate Mortgages"), either upon the prospective borrower's
request or at the same time the lender first provides written
information, other than direct-mail advertising, concerning any
adjustable-rate residential mortgage loan or credit sale to the
prospective borrower, whichever is earlier.  Any lender who fails to
comply with the requirements of this section may be enjoined by any
court of competent jurisdiction and shall be liable for actual
damages, the costs of the action, and reasonable attorney's fees as
determined by the court.  The court may make those orders as may be
necessary to prevent future violations of this section.
   (c) A lender that makes adjustable-rate mortgage loan disclosures
pursuant to either Part 29 of Chapter I of, or Part 563 of Chapter V
of, Title 12 of the Code of Federal Regulations, may comply with this
section by providing the descriptive information required by
subdivision (b) at the same time and under the same circumstances
that it makes disclosures in accordance with those federal
regulations.  Such a lender shall also display and make the
descriptive information available to the public in an area of the
lender's office that is open to the public.

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