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Indiana Department of Financial Institutions

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DFI > Policies > Clarification of IC 24-4.5-5-204 Clarification of IC 24-4.5-5-204

IC 24-4.5-5-204 states that “(1) A violation by a creditor of Section 125 of the Federal Consumer Credit Protection Act (IC 24-4.5-1-302) concerning the debtor’s right to rescind a transaction that is a consumer credit sale or a consumer loan constitutes a violation of IC 24-4.5. A creditor may not accrue interest during the period when a consumer loan may be rescinded under Section 125 of the Federal Consumer Protection Act (15 U.S.C. 1635).

(2) A creditor must make available for disbursement the proceeds of a transaction subject to subsection (1) on the later of:

(A) the date the creditor is reasonably satisfied that the consumer has not rescinded the transaction; or

(B) the first business day after the expiration of the rescission period under subsection (1).

This statute applies to refinanced first lien and second lien mortgage transactions. Mortgage transactions as defined by IC 24-4.5-1-301(17) means a transaction in which a first mortgage or a land contract which constitutes a first lien is created or retained against land.

Mortgage transactions made in Indiana must comply with IC 24-4.5-3-105“ Definition; “loan primarily secured by in interest in land” Sec. 105. Unless the loan is made subject to IC 24-4.5-3 by agreement (IC 24-4.5-3-601), and except with respect to disclosure (IC 24-4.5-3-301), debtor’s remedies (IC 24-4.5-5-201), providing payoff amounts (IC 24-4.5-3-209), and powers and functions of the department (IC 24-4.5-6-101), “consumer loan” does not include a loan primarily secured by an interest in land which is a mortgage transaction (as defined in IC 24-4.5-1-301(17).”

Mortgage transactions made in Indiana must, therefore, comply with IC 24-4.5-5-201 which states: “Interests in land Sec. 201. For purposes of the provisions on civil liability for violation of disclosure provisions (IC 24-4.5-5-203) and on debtor’s right to rescind certain transactions (IC 24-4.5-5-204): (1) consumer credit sale includes a sale of an interest in land which is a mortgage transaction if the sale is otherwise a consumer credit sale (IC 24-4.5-2-104); and (2) consumer loan includes a loan primarily secured by an interest in land which is a mortgage transaction if the loan is otherwise a consumer loan (IC 24-4.5-3-105).”