Section 030-250-4 - AUTHORIZATIONS AND LIMITATIONS1.Authorizations and limitationsA.Authorization to make alternative mortgages. A creditor or financial institutionmay engage in an alternative mortgage transaction subject to the requirements and limitations of this rule. B.Mortgages with adjustable rates or finance charges. A creditor or financial institutionthat makes an alternative mortgage transaction with an adjustable rate or finance charge may only increase the interest rate or finance charge as follows: (1) The creditor or financial institution shall use either: a. An index to which changes in the interest rate are tied that is readily available to and verifiable by the borrower and beyond the control of the creditor or financial institution: orb. A formula or schedule identifying the amount that the interest rate or finance charge may increase and the times at which, or circumstances under which, a change may be made.C.Renegotiable rates for renewable balloon-payment mortgages. A creditor or financial institution that makes an alternative mortgage transaction with payments based on an amortization period and a large final payment due after a shorter term may negotiate an increase or decrease in the interest rate when the transaction is renewed only if the creditor or financial institution makes a written commitment to renew the transaction at specified intervals throughout the amortization period. However, the creditor or financial institution is not required to renew the transaction if: (1) Any action or inaction by the consumer materially and adversely affects the creditor's or financial institution's security for the transaction or any right of the creditor or financial institution in such security;(2) There is a material failure by the consumer to meet the repayment terms of the transaction;(3) There is fraud or willful or knowing material misrepresentation by the consumer in connection with the transaction; or(4) Federal or State law dealing with credit extended by a financial institution to its executive officers specifically requires that as a condition of the extension the credit shall become due and payable on demand, provided that the financial institution includes such a provision in the initial agreement.D.Other requirements for and limitation on alternative mortgage transactions. Other requirements for and limitation on alternative mortgage transactions include, for creditors and financial institutions, applicable truth-in-lending laws found in the Maine Consumer Credit Code - Truth-in-Lending, 9-A M.R.S. Article VIII-A. E.Reductions in interest rate or finance charge. Nothing in this section prohibits a creditor or financial institution from decreasing the interest rate or finance charge on an alternative mortgage transaction.F.Right to prepay. Acreditoror financial institution must allow borrowers to prepay in whole or in part without penalty at any time. Prepayments are a direct reduction on loan principal, unless otherwise agreed upon by the creditoror financial institutionand borrower.02-030 C.M.R. ch. 250, § 4