PUBLIC LAW 103-325—SEPT. 23, 1994 108 STAT. 2193 and Community Development Act of 1992 for the transaction in question) if— "(A) at the time the mortgage is consummated— "(i) the consumer is not liable for an amount of monthly indebtedness payments (including the amount of credit extended or to be extended under the transaction) that is greater than 50 percent of the monthly gross income of the consumer; and "(ii) the income and expenses of the consumer are verified by a financial statement signed by the consumer, by a credit report, and in the case of employ- ment income, by payment records or by verification from the employer of the consumer (which verification maybeintheform ofacopyofapaystub orother payment record supplied by the consumer); "(B) the penalty applies only to a prepayment made with amounts obtained by the consumer by means other than a refinancing by the creditor under the mortgage, or an affiliate of that creditor; "(C) the penalty does not apply after the end of the 5-year period beginning on the date on which the mortgage is consummated; and "(D) the penalty is not prohibited under other applicable law. "(d) LIMITATIONS AFTER DEFAULT.— A mortgage referred to in section 103(aa) may not provide for an interest rate applicable after default that is higher than the interest rate that applies before default. If the date of maturity of a mortgage referred to in subsection 103(aa) is accelerated due to default and the consumer is entitled to a rebate of interest, that rebate shall be computed by any method that is not less favorable than the actuarial method (as that term is defined in section 933(d) of the Housing and Community Development Act of 1992). "(e) No BALLOON PAYMENTS.—^A mortgage referred to in section 103(aa) having a term of less than 5 years may not include terms under which the aggregate amount of the regular periodic payments would not fully amortize the outstanding principal balance. "(f) No NEGATIVE AMORTIZATION. —A mortgage referred to in section 103(aa) may not include terms under which the outstanding principal balance will increase at any time over the course of the loan because the regular periodic payments do not cover the full amount of interest due. "(g) No PREPAID PAYMENTS.— ^A mortgage referred to in section 103(aa) may not include terms under which more than 2 periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the consumer. "(h) PROHIBITION ON EXTENDING CREDIT WITHOUT REGARD TO PAYMENT ABILITY OF CONSUMER.— ^A creditor shall not engage in a pattern or practice of extending credit to consumers under mortgages referred to in section 103(aa) based on the consumers' collateral without regard to the consumers' repayment ability, including the consumers' current and expected income, current obligations, and employment. "(i) REQUIREMENTS FOR PAYMENTS UNDER HOME IMPROVEMENT CONTRACTS. —^A creditor shall not make a payment to a contractor under a home improvement contract from amounts extended as credit under a mortgage referred to in section 103(aa), other than—
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