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Current Status Bill Number:View additional legislative information at the LPITS web site.996 Type of Legislation:General Bill GB Introducing Body:Senate Introduced Date:20000111 Primary Sponsor:Jackson All Sponsors:Jackson Drafted Document Number:l:\s-res\dj\015mort.kad.doc Residing Body:Senate Current Committee:Banking and Insurance Committee 02 SBI Subject:Predatory Mortgage Lending Prevention Act, Consumer Affairs, Banks and Savings and Loans, Property, Real estate History Body Date Action Description Com Leg Involved ______ ________ ______________________________________ _______ ____________ Senate 20000111 Introduced, read first time, 02 SBI referred to Committee Versions of This Bill
TO AMEND TITLE 37, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CONSUMER PROTECTION CODE, BY ADDING CHAPTER 17, SO AS TO ENACT THE "PREDATORY LENDING PREVENTION ACT" TO ESTABLISH PERMISSIBLE FEES WHICH MAY BE CHARGED IN CONNECTION WITH HOME LOANS SECURED BY FIRST MORTGAGE OR FIRST DEED OF TRUST, TO IMPOSE RESTRICTIONS AND LIMITATIONS ON HIGH-COST HOME LOANS, TO REVISE THE PERMISSIBLE FEES AND CHARGES ON CERTAIN LOANS, TO PROHIBIT UNFAIR OR DECEPTIVE PRACTICES BY MORTGAGE BROKERS AND LENDERS, AND TO PROVIDE FOR PUBLIC EDUCATION AND COUNSELING ON PREDATORY LENDERS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 37 of the 1976 Code is amended by adding:
Section 37-17-10. This chapter shall be designated as the 'Predatory Mortgage Lending Prevention Act.'
Section 37-17-20. (A) Notwithstanding any other provision of law, but subject to the provisions of Section 37-17-30, parties to a home loan may contract in writing as follows:
(1) Where the principal amount is ten thousand dollars or more the parties may contract for the payment of interest as agreed upon by the parties;
(2) Where the principal amount is less than ten thousand dollars the parties may contract for the payment of interest as agreed upon by the parties, if the lender is either:
(a) approved as a mortgagee by the Secretary of Housing and Urban Development, the Federal Housing Administration, the Department of Veterans Affairs, a national mortgage association or any federal agency;
(b) a local or foreign bank, savings and loan association or service corporation wholly owned by one or more savings and loan associations and permitted by law to make home loans, credit union or insurance company; or
(c) a state or federal agency.
(3) Where the principal amount is less than ten thousand dollars and the lender is not a lender described in item (2), the parties may contract for the payment of interest not in excess of sixteen percent per annum.
(4) Notwithstanding any other provision of law, where the lender is an affiliate operating in the same office or subsidiary operating in the same office of a restricted lender or a supervised lender, the lender may charge interest to be computed only on the following basis: monthly on the outstanding principal balance at a rate not to exceed the rate provided in this item.
On the fifteenth day of each month, the Commissioner of Banking shall announce and publish the maximum rate of interest permitted by this item. Such rate shall be the latest published noncompetitive rate for U.S. Treasury bills with a six maturity as of the fifteenth day of the month plus six percent, rounded upward or downward, as the case may be, to the nearest one of one percent or fifteen percent, whichever is greater. If there is no nearest one of one percent, the Commissioner shall round downward to the lower one of one percent . The rate so announced shall be the maximum rate permitted for the term of loans made under this section during the following calendar month when the parties to such loans have agreed that the rate of interest to be charged by the lender and paid by the borrower shall not vary or be adjusted during the term of the loan. The parties to a loan made under this section may agree to a rate of interest which shall vary or be adjusted during the term of the loan in which case the maximum rate of interest permitted on such loans during a month during the term of the loan shall be the rate announced by the Commissioner in the preceding calendar month.
An affiliate operating in the same office or subsidiary operating in the same office of a restricted lender or supervised lender may not make a home loan for a term in excess of six months which provides for a balloon payment. For purposes of this item, a balloon payment means any scheduled payment that is more than twice as large as the average of earlier scheduled payments.
(B)(1) Except as provided in item (2) of this subsection, a lender and a borrower may agree on any terms as to the prepayment of a home loan.
(2) No prepayment fees or penalties shall be contracted by the borrower and lender with respect to any home loan in which:
(a) the principal amount borrowed is one hundred fifty thousand dollars or less;
(b) the borrower is a natural person;
(c) the debt is incurred by the borrower primarily for personal, family, or household purposes; and
(d) the loan is secured by a first mortgage or first deed of trust on real estate upon which there is located or there is to be located a structure or structures designed principally for occupancy of from one to four families which is or will be occupied by the borrower as the borrower's principal dwelling.
(3) The limitations on prepayment fees and penalties contained in item (B)(2) of this section shall not apply to the extent state law limitations on prepayment fees and penalties are preempted by federal law or regulation.
(C) If the home loan is one described in item (A)(1) or item (A)(2) of this section, the lender may charge the borrower the following fees and charges in addition to interest and other fees and charges as permitted in this section and late payment charges as otherwise permitted by law:
(1) At or before loan closing, the lender may charge such of the following fees and charges as may be agreed upon by the parties notwithstanding the provisions of any State law, other than Section 37-17-30, limiting the amount of such fees or charges:
(a) loan application, origination, and commitment fees;
(b) discount points, but only to the extent the discount points are paid for the purpose of reducing, and in fact result in a bona fide reduction of the interest rate or time-price differential;
(c) assumption fees to the extent permitted by Section 37-17-70(D);
(d) appraisal fees to the extent permitted Section 37-17-70(F);
(e) to the extent permitted by Section 37-17-50(D), sums for the payment of bona fide loan-related goods, products, and services provided or to be provided by third parties and sums for the payment of taxes, filing fees, recording fees, and other charges, and fees paid or to be paid to public officials; and
(f) additional fees and charges, however denominated, payable to the lender which, in the aggregate, do not exceed the greater of (1) one quarter of one percent of the principal amount of the loan, or (2) one hundred fifty dollars.
(2) Except as provided in subsection (D) of this section with respect to the deferral of loan payments, upon modification, renewal, extension, or amendment of any of the terms of a home loan, the lender may charge such of the following fees and charges as may be agreed upon by the parties notwithstanding the provisions of any State law, other than Section 37-17-30, limiting the amount of such fees or charges:
(a) discount points, but only to the extent the discount points are paid for the purpose of reducing and, in fact, result in a bona fide reduction of the interest rate or time-price differential;
(b) assumption fees to the extent permitted by Section 37-17-70(D);
(c) appraisal fees to the extent permitted by Section 37-17-70(F);
(d) to the extent permitted by Section 37-17-50(D), sums for the payment of bona fide loan-related goods, products, and services provided or to be provided by third parties and sums for the payment of taxes, filing fees, recording fees, and other charges, and fees paid or to be paid to public officials; and
(e) additional fees and charges, however denominated, payable to the lender which, in the aggregate, do not exceed the greater of (1) one quarter of one percent of the balance outstanding at the time of the modification, renewal, extension, or amendment of terms, or (2) one hundred fifty dollars. The fees and charges permitted by this sub-subsection may be charged only pursuant to a written agreement which states the amount of the fee or charge and is made at the time of the specific modification, renewal, extension, or amendment, or at the time the specific modification, renewal, extension, or amendment is requested.
No lender on home loans under subsection (A)(3) of this section
may charge or receive any interest, fees, charges, or discount points other than: (1) to the extent permitted by Section 37-17-50(D), sums for the payment of bona fide loan-related goods, products, and services provided or to be provided by third parties and sums for the payment of taxes, filing fees, recording fees, and other charges and fees, paid or to be paid to public officials; (2) interest as permitted in subsection (A)(3) of this section; and (3) late payment charges to the extent permitted by law.
No lender on home loans under subsection (A)(4) of this section
may charge or receive any interest, fees, charges, or discount points other than: (1) the fees described in Section 37-17-70; (2) to the extent permitted by Section 37-17-50(D), sums for the payment of bona fide loan-related goods, products, and services provided or to be provided by third parties and sums for the payment of taxes, filing fees, recording fees, and other charges and fees, paid or to be paid to public officials; (3) interest as permitted in subsection (A)(4) of this section; and (4) late payment charges to the extent permitted by law.
(D) For purposes of this section, the term `home loan' shall mean a loan, other than an open-end credit plan, where the principal amount is less than three hundred thousand dollars secured by a first mortgage or first deed of trust on real estate upon which there is located or there is to be located one or more single dwellings or dwelling units.
(E) Any home loan obligation existing before the effective date of this section shall be construed with regard to the law existing at the time the home loan or commitment to lend was made and this section shall only apply to home loans or loan commitments made from and after the effective date.
(F)(1) The parties to a home loan governed by item (A)(1) or (2) of this section may contract to the payment of all or part of one or more unpaid installments and for payment of interest on deferred interest as agreed upon by the parties. The parties may agree that said deferred interest may be added to the principal balance of the loan. This subsection shall not be construed to limit payment of interest upon interest in connection with other types of loans. Except as restricted by Section 37-17-30, the lender may charge deferral fees as may be agreed upon by the parties to defer the payment of one or more unpaid installments. If the home loan is of a type described in item (2) of this subsection, the deferral fees shall be subject to the limitations set forth in item (3) of this subsection.
(2) A home loan will be subject to the deferral fee limitations set forth in item (3) of this subsection if:
(a) the borrower is a natural person;
(b) the debt is incurred by the borrower primarily for personal, family, or household purposes; and
(c) the loan is secured by a first mortgage or first deed of trust on real estate upon which there is located or there is to be located a structure or structures designed principally for occupancy of from one to four families which is or will be occupied by the borrower as the borrower's principal dwelling.
(3) Deferral fees for home loans identified in item (2) of this subsection shall be subject to the following limitations:
(a) Deferral fees may be charged only pursuant to an agreement which states the amount of the fee and is made at the time of the specific deferral or at the time the specific deferral is requested; provided, that if the agreement relates to an installment which is then past due for fifteen days or more, the agreement must be in writing and signed by at least one of the borrowers. For purposes of this subsection an agreement will be considered a signed writing if the lender receives from at least one of the borrowers a facsimile or computer-generated message confirming or otherwise accepting the agreement.
(b) Deferral fees may not exceed the greater of five percent of each installment deferred or fifty dollars, multiplied by the number of complete months in the deferral period. A month shall be measured from the date an installment is due. The deferral period is that period during which no payment is required or made as measured from the date on which the deferred installment would otherwise have been due to the date the next installment is due under the terms of the note or the deferral agreement.
(c) If a deferral fee has once been imposed with respect to a particular installment, no deferral fee may be imposed with respect to any future payment which would have been timely and sufficient but for the previous deferral.
(d) If a deferral fee is charged pursuant to a deferral agreement, a late charge may be imposed with respect to the deferred payment only if the amount deferred is not paid when due under the terms of the deferral agreement and no new deferral agreement is entered into with respect to that installment.
(e) No lender may charge a deferral fee for modifying or extending the maturity date of a loan or the date a balloon payment is due; provided, however, that any such modification or extension of the loan maturity date or the date a balloon payment is due shall, to the extent applicable, be considered a modification or extension subject to the provisions of subsection (C)(2) of this section.
(G) The parties to a home loan governed by item (A)(1) or (2) of this section may agree in writing to a mortgage or deed of trust which provides that periodic payments may be graduated during parts of or over the entire term of the loan. The parties to such a loan may also agree in writing to a mortgage or deed of trust which provides that periodic disbursements of part of the loan proceeds may be made by the lender over a period of time agreed upon by the parties, or over a period of time agreed upon by the parties ending with the death of the borrower(s). Such mortgages or deeds of trust may include provisions for adding deferred interest to principal or otherwise providing for charging of interest on deferred interest as agreed upon by the parties. This subsection shall not be construed to limit other types of mortgages or deeds of trust or methods or plans of disbursement or repayment of loans that may be agreed upon by the parties.
(H) Nothing in this section shall be construed to authorize or prohibit a lender, a borrower, or any other party to pay compensation to a mortgage broker or a mortgage banker for services provided by the mortgage broker or the mortgage banker in connection with a home loan.
Section 37-17-30. (A) The following definitions apply for the purposes of this section:
(1) `Affiliate' means any company that controls, is controlled by, or is under common control with another company, as set forth in the Bank Holding Company Act of 1956 (12 U.S.C. Section 1841 et seq.), as amended from time to time.
(2) `Annual percentage rate' means the annual percentage rate for the loan calculated according to the provisions of the federal Truth-in-Lending Act (15 U.S.C. Section 1601, et seq.), and the regulations promulgated thereunder by the Federal Reserve Board (as said Act and regulations are amended from time to time).
(3) `Bona fide loan discount points' means loan discount points knowingly paid by the borrower for the purpose of reducing, and which in fact result in a bona fide reduction of, the interest rate or time-price differential applicable to the loan, provided the amount of the interest rate reduction purchased by the discount points is reasonably consistent with established industry norms and practices for secondary mortgage market transactions.
(4) `High-cost home loan' means a loan other than an open-end credit plan or a reverse mortgage transaction in which:
(a) The principal amount of the loan does not exceed the lesser of (i) the conforming loan size limit for a single-family dwelling as established from time to time by the Federal National Mortgage Association, or (ii) three hundred thousand dollars;
(b) The borrower is a natural person;
(c) The debt is incurred by the borrower primarily for personal, family, or household purposes;
(d) The loan is secured by either (i) a security interest in a manufactured home, as defined in Section 40-29-20(9) which is or will be occupied by the borrower as the borrower's principal dwelling, or (ii) a mortgage or deed of trust on real estate upon which there is located or there is to be located a structure or structures designed principally for occupancy of from one to four families which is or will be occupied by the borrower as the borrower's principal dwelling; and
(e) The terms of the loan exceed one or more of the thresholds as defined in item (6) of this subsection.
(5) `Points and fees' means:
(a) all items required to be disclosed under Sections 226.4(a) and 226.4(b) of Title 12 of the Code of Federal Regulations, as amended from time to time, except interest or the time-price differential;
(b) all charges for items listed under Section 226.4(c)(7) of Title 12 of the Code of Federal Regulations, as amended from time to time, but only if the lender receives direct or indirect compensation in connection with the charge or the charge is paid to an affiliate of the lender; otherwise, the charges are not included within the meaning of the phrase .points and fees';
(c) all compensation paid directly by the borrower to a mortgage broker not otherwise included in subsection (a) or (b) of this subsection;
(d) the maximum prepayment fees and penalties which may be charged or collected under the terms of the loan documents; and
(e) `points and fees' shall not include (i) taxes, filing fees,
recording and other charges and fees paid or to be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest; and (ii) fees paid to a person other than a lender or an affiliate of the lender or to the mortgage broker or an affiliate of the mortgage broker for the following: fees for tax payment services; fees for flood certification; fees for pest infestation and flood determinations; appraisal fees; fees for inspections performed prior to closing; credit reports; surveys; attorneys' fees (if the borrower has the right to select the attorney from an approved list or otherwise); notary fees; escrow charges, so long as not otherwise included under sub-subsection a. of this subsection; title insurance premiums; and fire insurance and flood insurance premiums, provided that the conditions in Section 226.4(d)(2) of Title 12 of the Code of Federal Regulations are met.
(6) `Thresholds' means:
(a) without regard to whether the loan transaction is or may be a `residential mortgage transaction' (as the term `residential mortgage transaction' is defined in Section 226.2(a)(24) of Title 12 of the Code of Federal Regulations, as amended from time to time), the annual percentage rate of the loan at the time the loan is consummated is such that the loan is considered a `mortgage' under Section 152 of the Home Ownership and Equity Protection Act of 1994 (Pub. Law 103-25, [15 U.S.C. Section 1602(aa)]), as the same may be amended from time to time, and regulations adopted pursuant thereto by the Federal Reserve Board, including Section 226.32 of Title 12 of the Code of Federal Regulations, as the same may be amended from time to time;
(b) the total points and fees payable by the borrower at or before the loan closing exceed (i) five percent of the total loan amount if the total loan amount is twenty thousand dollars or more, or (ii) the lesser of eight percent of the total loan amount or one thousand dollars, if the total loan amount is less than twenty thousand dollars; provided, the following discount points and prepayment fees and penalties shall be excluded from the calculation of the total points and fees payable by the borrower:
(i) up to and including two bona fide loan discount points payable by the borrower in connection with the loan transaction, but only if the interest rate from which the loan's interest rate will be discounted does not exceed by more than one percentage point the required net yield for a 90-day standard mandatory delivery commitment for a reasonably comparable loan from either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, whichever is greater;
(ii) up to and including one bona fide loan discount point payable by the borrower in connection with the loan transaction, but only if the interest rate from which the loan's interest rate will be discounted does not exceed by more than two percentage points the required net yield for a 90-day standard mandatory delivery commitment for a reasonably comparable loan from either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, whichever is greater;
(iii) prepayment fees and penalties which may be charged or collected under the terms of the loan documents which do not exceed one percent of the amount prepaid, provided the loan documents do not permit the lender to charge or collect any prepayment fees or penalties more than thirty months after the loan closing; or
(c) the loan documents permit the lender to charge or collect prepayment fees or penalties more than thirty months after the loan closing or which exceed, in the aggregate, more than two percent of the amount prepaid.
(7) `Total loan amount' means the same as the term `total loan amount' as used in Section 226.32 of Title 12 of the Code of Federal Regulations, and the same shall be calculated in accordance with the Federal Reserve Board's Official Staff Commentary thereto.
(B) A high-cost home loan shall be subject to the following limitations:
(1) No high-cost home loan may contain a provision which permits the lender, in its sole discretion, to accelerate the indebtedness. This provision does not apply when repayment of the loan has been accelerated by default, pursuant to a due-on-sale provision, or pursuant to some other provision of the loan documents unrelated to the payment schedule.
(2) No high-cost home loan may contain a scheduled payment that is more than twice as large as the average of earlier scheduled payments. This provision does not apply when the payment schedule is adjusted to the seasonal or irregular income of the borrower.
(3) No high-cost home loan may contain a payment schedule with regular periodic payments that cause the principal balance to increase.
(4) No high-cost home loan may contain a provision which increases the interest rate after default. This provision does not apply to interest rate changes in a variable rate loan otherwise consistent with the provisions of the loan documents, provided the change in the interest rate is not triggered by the event of default or the acceleration of the indebtedness.
(5) No high-cost home loan may include terms under which more than two periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower.
(6) A lender may not charge a borrower any fees to modify, renew, extend, or amend a high-cost home loan or to defer any payment due under the terms of a high-cost home loan.
(C) The following acts and practices are prohibited in the making of a high-cost home loan:
(1) A lender may not make a high-cost home loan without first receiving certification from a counselor approved by the South Carolina Housing Finance and Development Authority that the borrower has received counseling on the advisability of the loan transaction and the appropriate loan for the borrower. This item shall not apply if the Authority does not approve counselors.
(2) As used in this subsection, the term 'obligor' refers to each borrower, co-borrower, cosigner, or guarantor obligated to repay a loan. A lender may not make a high-cost home loan unless the lender reasonably believes at the time the loan is consummated that one or more of the obligors, when considered individually or collectively, will be able to make the scheduled payments to repay the obligation based upon a consideration of their current and expected income, current obligations, employment status, and other financial resources (other than the borrower's equity in the dwelling which secures repayment of the loan). An obligor shall be presumed to be able to make the scheduled payments to repay the obligation if, at the time the loan is consummated, the obligor's total monthly debts, including amounts owed under the loan, do not exceed fifty percent of the obligor's monthly gross income as verified by the credit application, the obligor's financial statement, a credit report, financial information provided to the lender by or on behalf of the obligor, or any other reasonable means; provided, no presumption of inability to make the scheduled payments to repay the obligation shall arise solely from the fact that, at the time the loan is consummated, the obligor's total monthly debts (including amounts owed under the loan) exceed fifty percent of the obligor's monthly gross income.
(3) In making a high-cost home loan, a lender may not directly or indirectly finance:
(a) any prepayment fees or penalties payable by the borrower in a refinancing transaction if the lender or an affiliate of the lender is the note holder of the note being refinanced;
(b) any points and fees; or
(c) any other charges payable to third parties.
(4) A lender may not charge a borrower points and fees in connection with a high-cost home loan if the proceeds of the high-cost home loan are used to refinance an existing high-cost home loan held by the same lender as note holder.
(5) A lender may not pay a contractor under a home-improvement contract from the proceeds of a high-cost home loan other than (i) by an instrument payable to the borrower or jointly to the borrower and the contractor, or (ii) at the election of the borrower, through a third-party escrow agent in accordance with terms established in a written agreement signed by the borrower, the lender, and the contractor prior to the disbursement.
(D) Except as provided in subsection (E) of this section, the making of a high-cost home loan which violates any provisions of subsection (B) or (C) of this section is hereby declared usurious in violation of the provisions of this Chapter and unlawful as an unfair or deceptive act or practice in or affecting commerce in violation of the Section 39-5-20. The provisions of this section shall apply to any person who in bad faith attempts to avoid the application of this section by (i) the structuring of a loan transaction as an open-end credit plan for the purpose and with the intent of evading the provisions of this section when the loan would have been a high-cost home loan if the loan had been structured as a closed-end loan, or (ii) dividing any loan transaction into separate parts for the purpose and with the intent of evading the provisions of this section, or (iii) any other such subterfuge. The Attorney General, the Commissioner of Banks, or any party to a high-cost home loan may enforce the provisions of this section. Any person seeking damages or penalties under the provisions of this section may recover damages under either this chapter or Chapter 5, Title 39 but not both.
(E) A lender in a high-cost home loan who, when acting in good faith, fails to comply with subsections (B) or (C) of this section, will not be deemed to have violated this section if the lender establishes that either:
(1) within thirty days of the loan closing and prior to the institution of any action under this section, the borrower is notified of the compliance failure, appropriate restitution is made, and whatever adjustments are necessary are made to the loan to either, at the choice of the borrower, (i) make the high-cost home loan satisfy the requirements of subsections (B) and (C) of this section, or (ii) change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a high-cost home loan subject to the provisions of this section; or
(2) the compliance failure was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such errors, and within sixty days after the discovery of the compliance failure and prior to the institution of any action under this section or the receipt of written notice of the compliance failure, the borrower is notified of the compliance failure, appropriate restitution is made, and whatever adjustments are necessary are made to the loan to either, at the choice of the borrower, (i) make the high-cost home loan satisfy the requirements of subsections (B) and (C) of this section, or (ii) change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a high-cost home loan subject to the provisions of this section. Examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors. An error of legal judgment with respect to a person's obligations under this section is not a bona fide error.
(F) The provisions of this section shall be severable and if any phrase, clause, sentence, or provision is declared to be invalid or is preempted by federal law or regulation, the validity of the remainder of this section shall not be affected thereby. If any provision of this section is declared to be inapplicable to any specific category, type, or kind of points and fees, the provisions of this section shall nonetheless continue to apply with respect to all other points and fees.
Section 37-17-40. A mortgage broker or a mortgage banker originating a loan in a table-funded loan transaction in which the mortgage broker or mortgage banker is identified as the original payee of the note shall be considered a lender for purposes of this chapter.
Section 37-17-50. (A) If the principal amount of a loan is less than three hundred thousand dollars, no lender shall charge or receive from any borrower or require in connection with any loan any borrower, directly or indirectly, to pay, deliver, transfer, or convey or otherwise confer upon or for the benefit of the lender or any other person, firm, or corporation any sum of money, thing of value, or other consideration other than that which is pledged as security or collateral to secure the repayment of the full principal of the loan, together with fees and interest provided for in this chapter.
(B) Notwithstanding any other provision of state law, if the principal amount of a loan is three hundred thousand dollars or more, any borrower may agree to pay, and any lender or other person may charge and collect from the borrower, interest, fees, and other charges as may be agreed upon between the parties, and the borrower and anyone claiming by or through the borrower is prohibited from asserting usury as a claim or defense.
(C) The provisions of this section shall not prevent a borrower from selling, transferring, or conveying property other than security or collateral to any person, firm, or corporation for a fair consideration so long as such transaction is not made a condition or requirement for any loan.
(D) Notwithstanding any contrary provision of state law, any lender may collect money from the borrower for the payment of (i) bona fide loan-related goods, products, and services provided or to be provided by third parties, and (ii) taxes, filing fees, recording fees, and other charges and fees paid or to be paid to public officials. No third party shall charge or receive (i) any unreasonable compensation for loan-related goods, products, and services, or (ii) any compensation for which no loan-related goods and products are provided or for which no or only nominal loan-related services are performed. Loan-related goods, products, and services include fees for tax payment services, fees for flood certification, fees for pest-infestation determinations, mortgage brokers' fees, appraisal fees, inspection fees, environmental assessment fees, fees for credit report services, assessments, costs of upkeep, surveys, attorneys' fees, notary fees, escrow charges, and insurance premiums (including, for example, fire, title, life, accident and health, disability, unemployment, flood, and mortgage insurance).
(E) Notwithstanding any other provision of state law, any lender may receive the proceeds from any insurance policies where loss occurs under the terms of such policies.
(F) This section shall not be applicable to any corporation licensed as a `Small Business Investment Company' under the provisions of the United States Code Annotated, Title 15, Section 66, et seq., nor shall it be applicable to the sale or purchase of convertible debentures, nor to the sale or purchase of any debt security with accompanying warrants, nor to the sale or purchase of other securities through an organized securities exchange.
Section 37-17-60. (A) For purposes of this section, the term `consumer home loan' shall mean a loan in which (i) the borrower is a natural person, (ii) the debt is incurred by the borrower primarily for personal, family, or household purposes, and (iii) the loan is secured by a mortgage or deed of trust upon real estate upon which there is located or there is to be located a structure or structures designed principally for occupancy of from one to four families which is or will be occupied by the borrower as the borrower's principal dwelling.
(B) Notwithstanding any other provision of law, it shall be unlawful for any lender in a consumer home loan to finance, directly or indirectly, any credit life, disability, or unemployment insurance, or any other life or health insurance premiums; provided, that insurance premiums calculated and paid on a monthly basis shall not be considered financed by the lender.
(C) No lender may knowingly or intentionally engage in the unfair actor practice of `flipping' a consumer home loan. `Flipping' a consumer loan is the making of a consumer home loan to a borrower which refinances an existing consumer home loan when the new loan does not have reasonable, tangible net benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan, and the borrower's circumstances. This provision shall apply regardless of whether the interest rate, points, fees, and charges paid or payable by the borrower in connection with the refinancing exceed those thresholds specified in Section 37-17-30(A)(6).
(D) No lender shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a consumer home loan that refinances all or any portion of such existing loan or debt.
(E) The making of a consumer home loan which violates the provisions of this section is hereby declared usurious in violation of the provisions of this chapter and unlawful as an unfair or deceptive act or practice in or affecting commerce in violation of the provisions of Section 39-5-20. The Attorney General, the Commissioner of Banking, or any party to a consumer home loan may enforce the provisions of this section. Any person seeking damages or penalties under the provisions of this section may recover damages under either this chapter or Chapter 5, Title 39 but not both.
(F) In any suit instituted by a borrower who alleges that the defendant violated this section, the presiding judge may, in the judge's discretion, allow reasonable attorneys fees to the attorney representing the prevailing party, such attorneys fees to be taxed as a part of the court costs and payable by the losing party, upon a finding by the presiding judge that:
(1) the party charged with the violation has willfully engaged in the act or practice, and there was unwarranted refusal by such party to fully resolve the matter which constitutes the basis of such suit; or
(2) the party instituting the action knew, or should have known, that the action was frivolous and malicious.
(G) This section establishes specific consumer protections in consumer home loans in addition to other consumer protections that may be otherwise available by law.
Section 37-17-70. (A) No lender on loans described in Section 37-17-20(D) shall charge or receive from any borrower or any agent for a borrower, any fees or discounts unless otherwise allowed where the principal amount is less than three hundred thousand dollars and is secured by real property, which fees or discounts in the aggregate shall exceed two percent if a construction loan on other than a one or two family dwelling, and one percent on any other type of loan; provided, however, if a single lender makes both the construction loan and a permanent loan utilizing one note, the lender may collect the fees as if they were two separate loans. Except as provided herein or otherwise allowed, no party shall pay for the benefit of the lender any other fees or discounts.
(B) Any loan described in Section 37-17-20 in an original principal amount of one hundred thousand dollars or less may be prepaid in part or in full, after thirty days notice to the lender, with a maximum prepayment fee of two percent of the outstanding balance at any time within three years after the first payment of principal and thereafter there shall be no prepayment fee, provided that there shall be no prepayment fee charged or received in connection with any repayment of a construction loan; and except as herein provided, any lender and any borrower may agree on any terms as to prepayment of a loan.
(C) `Construction loan' means a loan which is obtained for the purpose of financing fully, or in part, the cost of constructing buildings or other improvements upon real property and the proceeds of which, under the terms of a written contract between a lender and a borrower, are to be disbursed periodically as such construction work progresses; and such loan shall be payable in full not later than eighteen months in case of a loan described in Section 37-17-20(D) or thirty months in case of any other construction loan made after the execution of the note by the borrower. A construction loan may include advances for the purchase price of the property upon which such improvements are to be constructed.
(D)(1) Any lender may charge to any person, firm or corporation that assumes a loan, secured by real property, the following fee:
(a) Where the mortgage or deed of trust contains a due on sale clause, a fee not to exceed four hundred dollars; provided, however, that if the original obligor is not released from liability on the obligation, the fee shall not exceed one hundred twenty-five dollars.
(b) Where the mortgage or deed of trust does not contain a due on sale clause, a fee not to exceed one hundred twenty-five dollars.
The fees authorized by this subsection may be paid in whole or in part by any party but the total shall not exceed the maximum fees set forth herein.
(2) For purposes of this subsection, the term `due on sale clause' means a contract provision that authorizes a lender to declare immediately due and payable all sums secured by the lender's security instrument if all or any part of the secured property, or an interest therein, is sold or transferred without the lender's prior written consent or contrary to the requirements of the mortgage or the deed of trust. For purposes of this subsection, no lender shall exercise its rights under the due on sale clause if prohibited by federal law as of the date of execution of the contract containing the clause.
(E) Notwithstanding the limitations contained in subsection (A) of this section, a lender described in Section 37-17-20(A)(2) may charge or receive from any borrower or any agent for a borrower, fees or discounts which in the aggregate do not exceed two percent on loans described in Section 37-17-20(D) when such loans are secured by a second or junior lien on real property. The fees or discounts are fully earned when the loan is made and are not a prepayment penalty under this chapter or any other law of this State.
(F) A bank, savings and loan association, savings bank, or credit union, or any subsidiary or affiliate thereof organized under the laws of this State or the United States, may charge a party to a loan secured by real property a reasonable fee as may be agreed upon by the parties for an appraisal performed by an employee of the bank, savings and loan association, savings bank, or credit union, or any subsidiary or affiliate thereof. Upon the request of the borrower, the lender shall provide at no additional charge to the borrower a copy of any appraisal for which the lender has collected a fee under this subsection. Provision of the copy of an appraisal shall not be construed to create or imply any warranty which does not otherwise exist by the lender as to the accuracy of the appraisal."
SECTION 2. Of the funds appropriated to the Department of Consumer Affairs for the 2000-2001 fiscal year, the sum of one hundred thousand dollars shall be used to develop and implement a program of consumer counseling or awareness designed to inform the public about the methods by which predatory lenders impose unconscionable and noncompetitive fees and charges as part of complex home mortgage transactions, to protect the public from incurring such fees and charges, and otherwise to encourage the informed and responsible use of credit.
SECTION 3. The Department of Consumer Affairs shall study the implementation and enforcement of this act including:
(1) whether the provisions of this act have a measurable effect on the availability of credit in the State; and
(2) whether the act is successfully reducing the predatory lending practices proscribed by the act.
The department shall report its findings and recommendations to the General Assembly by the first day of the 2001 session of the General Assembly and shall make a final report by the first day of the 2002 session of the General Assembly.
SECTION 4. Section 37-17-30 and Section 37-17-60(B) become effective July 1, 2000, and apply to loans made or entered into on or after that date. Section 2 of this act becomes effective July 1, 2000. Section 3 of this act is effective upon approval by the Governor. The remainder of this act becomes effective October 1, 2000, and applies to loans made or entered into, payments deferred, and loans modified, renewed, extended, or amended on or after that date.
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