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8000 - Miscellaneous Statutes and Regulations
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SUBCHAPTER GPREEMPTION OF STATE LENDING
RESTRICTIONS
PART 590PREEMPTION OF STATE USURY LAWS
Sec. 590.1
Authority, purpose, and scope.
590.2
Definitions.
590.3
Operation.
590.4
Federally-related residential manufactured housing loansconsumer
protection provisions.
INTERPRETATIONS
590.100
Status of interpretations issued under Public Law 96-161.
590.101
State criminal usury statutes.
AUTHORITY: 12 U.S.C.1735f-7a
SOURCE: The provisions of this Part 590 appear at 54 Fed. Reg.
49715, November 30, 1989, except as otherwise
noted.
§ 590.1 Authority, purpose, and scope.
(a) Authority. This part contains regulations issued
under section 501 of the
Depository Institutions Deregulation and Monetary Control Act of 1980,
Pub. L. No. 96-221, 94 Stat. 161.
(b) Purpose and scope. The purpose of this permanent
preemption of state interest-rate ceilings applicable to
federally-related residential mortgage loans is to ensure that the
availability of such loans is not impeded in states having restrictive
interest limitations. This part applies to loans, mortgages, credit
sales, and advances, secured by first liens on residential real
property, stock in residential cooperative housing corporations, or
residential manufactured homes as defined in § 590.2 of this part.
[Codified to 12 C.F.R.
§ 590.1]
§ 590.2 Definitions.
For the purposes of this part, the following definitions apply:
(a) Loans means any loans, mortgages, credit sales, or
advances.
(b) Federally-related loans include any loan:
(1) Made by any lender whose deposits or accounts are insured by
any agency of the Federal government;
(2) Made by any lender regulated by any agency of the Federal
government;
(3) Made by any lender approved by the Secretary of Housing and
Urban Development for participation in any mortgage insurance program
under the National Housing Act;
(4) Made in whole or in part by the Secretary of Housing and
Urban Development; insured, guaranteed, supplemented, or assisted in
any way by the Secretary or any officer or agency of the Federal
government, or made under or in connection with a housing or urban
development program administered by the Secretary, or a housing or
related program administered by any other such officer or agency;
(5) Eligible for purchase by the Federal National Mortgage
Association, the Government National Mortgage Association, or the
Federal Home Loan Mortgage Corporation, or made by any financial
institution from which the loan could be purchased by the Federal Home
Loan Mortgage Corporation; or
(6) Made in whole or in part by any entity which:
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(i) Regularly extends, or arranges for the extension of, credit
payable by agreement in more than four installments or for which the
payment of a finance charge is or may be required; and
(ii) Makes or invests in residential real property loans,
including loans secured by first liens on residential manufactured
homes that aggregate more then $1,000,000 per year; except
that the latter requirement shall not apply to such an entity
selling residential manufactured homes and providing financing for such
sales through loans or credit sales secured by first liens on
residential manufactured homes, if the entity has an arrangement to
sell such loans or credit sales in whole or in part, or where such
loans or credit sales are sold in whole or in part, to a lender or
other institution otherwise included in this section.
(c) Loans which are secured by first liens on real
estate means loans on the security of any instrument (whether a
mortgage, deed of trust, or land contract) which makes the interest in
real estate (whether in fee, or in a leasehold or subleasehold
extending, or renewable, automatically or at the option of the holder
or the lender, for a period of at least 5 years beyond the maturity of
the loan) specific security for the payment of the obligation secured
by the instrument; Provided That the instrument is of such a
nature that, in the event of default, the real estate described in the
instrument could be subjected to the satisfaction of the obligation
with the same priority as a first mortgage of a first deed of trust in
the jurisdiction where the real estate is located.
(d) Loans secured by first liens on stock in a residential
cooperative housing corporation means loans on the security of:
(1) a first security interest in stock or a membership certificate
issued to a tenant stockholder or resident member by a cooperative
housing organization; and (2) an assignment of the borrower's interest
in the proprietary lease or occupancy agreement issued by such
organization.
(e) Loans secured by first liens on residential manufactured
homes means a loan made pursuant to an agreement by which the
party extending the credit acquires a security interest in the
residential manufactured home which will have priority over any
conflicting security interest.
(f) Residential real property means real estate improved
or to be improved by a structure or structures designed primarily for
dwelling, as opposed to commercial, use.
(g) Residential manufactured home shall mean a
manufactured home as defined in the National Manufactured Home
Construction and Safety Standards Act, 42 U.S.C. 5402(6), which is or
will be used as a residence.
(h) State means the several states, Puerto Rico, the
District of Columbia, Guam, the Trust Territories of the Pacific
Islands, the Northern Mariana Islands, and the Virgin Islands
except as provided in
§ 501(a)(2)(B) of the
Depository Institutions Deregulation and Monetary Control Act of 1980,
Pub. L. No. 96-221, 94 Stat. 161.
[Codified to 12 C.F.R.
§ 590.2]
§ 590.3 Operation.
(a) The provisions of the constitution or law of any state
expressly limiting the rate or amount of interest, discount points,
finance charges, or other charges which may be charged, taken,
received, or reserved shall not apply to any federally-related loan:
(1) Made after March 31, 1980; and
(2) Secured by a first lien on:
(i) Residential real property;
(ii) Stock in a residential cooperative housing corporation when
the loan is used to finance the acquisition of such stock;
or
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(iii) A residential manufactured home: Provided that
the loan so secured contains the consumer safeguards required by
§ 590.4 of this part;
(b) The provisions of paragraph (a) shall apply to loans made in
any state on or before the date (after April 1, 1980 and prior to April
1, 1983) on which the state adopts a law or certifies that the voters
of such state have voted in favor of any law, constitutional or
otherwise, which states explicitly and by its terms that such state
does not want the provisions of paragraph (a) of this section to apply
with respect to loans made in such state, except that--
(1) The provisions of paragraph (a) of this section shall apply
to any loan which is made after such date pursuant to a commitment
therefor which was entered into during the period beginning on April 1,
1980, and ending on the date the state takes such action;
(2) The provisions of paragraph (a) of this section shall apply
to any rollover of a loan which loan was made, or committed to be made,
during the period beginning on April 1, 1980, and ending on the date
the state takes such action, if the mortgage document or loan note
provided that the interest rate to the original borrower could be
changed through the use of such a rollover; and
(3) At any time after the date of adoption of these regulations,
any state may adopt a provision of law placing limitations on discount
points or such other charges on any loan described in this part.
(c) Nothing in this section preempts limitations in state laws on
prepayment charges, attorneys' fees, late charges or other provisions
designed to protect borrowers.
[Codified to 12 C.F.R. § 590.3]
[Section 590.3 amended at 66 Fed. Reg. 65822, December 21,
2001]
§ 590.4 Federally-related residential manufactured housing
loans--consumer protection provisions.
(a) Definitions. As used in this section:
(1) Prepayment. A "prepayment" occurs upon--
(i) Refinancing or consolidation of the indebtedness;
(ii) Actual prepayment of the indebtedness by the debtor, whether
voluntarily or following acceleration of the payment obligation by the
creditor; or
(iii) the entry of a judgment for the indebtedness in favor of
the creditor.
(2) Actuarial method.--The term "actuarial
method" means the method of allocating payments made on a debt
between the outstanding balance of the obligation and the finance
charge pursuant to which a payment is applied first to the accumulated
finance charge and any remainder is subtracted from, or any deficiency
is added to, the outstanding balance of the obligation.
(3) Precomputed Finance Charge. The term
"precomputed finance charge" means interest or a time/price
differential as computed by the add-on or discount method. Precomputed
finance charges do not include loan fees, points, finder's fees, or
similar charges.
(4) Creditor. The term creditor means any
entity covered by this part, including those which regularly extend or
arrange for the extension of credit and assignees that are creditors
under § 501(a)(1)(C)(v) of the Depository Institutions Deregulation
and Monetary Control Act of 1980.
(b) General. (1) The provisions of the constitution or
the laws of any state expressly limiting the rate or amount of
interest, discount points, finance charges, or other charges which may
be charged, taken, received, or reserved shall not apply to any loan,
mortgage, credit sale, or advance which is secured by a first lien on a
residential mobile home if a creditor covered by this part complies
with the consumer protection regulations of this section.
(2) Relation to State Law. (i) In making loans or
credit sales subject to this section, creditors shall comply with State
and Federal law in accordance with the following:
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(A) State law regulating matters not covered by this
section. When state law regulating matters not covered by this
section is otherwise applicable to a loan or credit sale subject to
this section, creditors shall comply with such State law provisions.
(B) State law regulating matters covered by this
section. Creditors need comply only with the provisions of this
section, unless the Board determines that an otherwise applicable state
law regulating matters covered by this section provides greater
protection to consumers. Such determinations shall be published in the
FEDERAL REGISTER and shall operate prospectively.
(ii) Any interested party may petition the Office for a
determination that State law requirements are more protective of
consumers than the provisions of this section. Petitions shall be sent
to: Secretary to the Office of Thrift Supervision, 1700 G Street, NW.,
Washington, D.C. 20552, and shall include:
(A) A copy of the state law to be considered;
(B) Copies of any relevant judicial, regulatory, or
administrative interpretations of the state law; and
(C) An opinion or memorandum from the State Attorney General or
other appropriate state official having primary enforcement
responsibilities for the subject state law provision, indicating how
the State law to be considered offers greater protection to consumers
than the Board's regulation.
(c) Refund of precomputed finance charge. In the event
the entire indebtedness is prepaid, the unearned portion of the
precomputed finance charge shall be refunded to the debtor. This refund
shall be in an amount not less than the amount which would be refunded
if the unearned precomputed finance charge were calculated in
accordance with the actuarial method, except that the debtor shall not
be entitled to a refund which, is less than one dollar. The unearned
portion of the precomputed finance charge is, at the option of the
creditor, either:
(1) that portion of the precomputed finance charge which is
allocable to all unexpired payment periods as originally scheduled, or
if deferred, as deferred. A payment period shall be deemed unexpired if
prepayment is made within 15 days after the payment period's scheduled
due date. The unearned precomputed finance charge is the total of that
which would have been earned for each such period had the loan not been
precomputed, by applying to unpaid balances of principal, according to
the actuarial method, an annual percentage rate based on those charges
which are considered precomputed finance charges in this section,
assuming that all payments were made as originally scheduled, or as
deferred, if deferred. The creditor, at its option, may round this
annual percentage rate to the nearest one-quarter of one percent; or
(2) the total precomputed finance charge less the earned
precomputed finance charge. The earned precomputed finance charge shall
be determined by applying an annual percentage rate based on the total
precomputed finance charge (as that term is defined in this section),
under the actuarial method, to the unpaid balances for the actual time
those balances were unpaid up to the date of prepayment. If a late
charge or deferral fee has been collected, it shall be treated as a
payment.
(d) Prepayment penalties. A debtor may prepay in full
or in part the unpaid balance of the loan at any time without penalty.
The right to prepay shall be disclosed in the loan contract in type
larger than that used for the body of the document.
(e) Balloon payments.--(1) Federal savings
associations. Federal association creditors may enter into
agreements with debtors which provide for nonamortized and partially
amortized loans on residential manufactured homes, and such loans shall
be governed by the provisions of this section and § 560.220 of this
chapter.
(2) Other creditors. All other creditors may enter
into agreements with debtors which provide for non-amortized and
partially amortized loans on residential manufactured homes to the
extent authorized by applicable Federal or state law or regulation.
(f) Late charges. (1) No late charge may be assessed,
imposed, or collected unless provided for by written contract between
the creditor and debtor.
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(2) To the extent that applicable state law does not provide for
a longer period of time, no late charge may be collected on an
installment which is paid in full on or before the 15th day after its
scheduled or deferred due date even though an earlier maturing
installment or a late charge on an earlier installment may not have
been paid in full. For purposes of assessing late charges, payments
received are deemed to be applied first to current installments.
(3) A late charge may be imposed only once on an installment;
however, no such charge may be collected for a late installment which
has been deferred.
(4) To the extent that applicable state law does not provide for
a lower charge or longer grace period, a late charge on any installment
not paid in full on or before the 15th day after its scheduled or
deferred due date may not exceed five percent of the unpaid amount of
the installment.
(5) If, at any time after imposition of a late charge, the lender
provides the borrower with written notice regarding amounts claimed to
be due but unpaid, the notice shall separately state the total of all
late charges claimed.
(6) Interest after the final scheduled maturity date may not
exceed the maximum rate otherwise allowable under State law for such
contracts, and if such interest is charged, no separate late charge may
be made on the final scheduled installment.
(g) Deferral fees. (1) With respect to mobile home
credit transactions containing precomputed finance charges, agreements
providing for deferral of all or part of one or more installments shall
be in writing, signed by the parties, and
(i) Provide, to the extent that applicable state law does not
provide for a lower charge, for a charge not exceeding one percent of
each installment or part thereof for each month from the date when such
installment was due to the date when it is agreed to become payable and
proportionately for a part of each month, counting each day as
1/30th of a month;
(ii) Incorporate by reference the transaction to which the
deferral applied;
(iii) Disclose each installment or part thereof in the amount to
be deferred, the date or dates originally payable, and the date or
dates agreed to become payable; and
(iv) Set forth the fact of the deferral charge, the dollar amount
of the charge for each installment to be deferred, and the total dollar
amount to be paid by the debtor for the privilege of deferring payment.
(2) No term of a writing executed by the debtor shall constitute
authority for a creditor unilaterally to grant a deferral with respect
to which a charge is to be imposed or collected.
(3) The deferral period is that period of time in which no
payment is required or made by reason of the deferral.
(4) Payments received with respect to deferred installments shall
be deemed to be applied first to deferred installments.
(5) A charge may not be collected for the deferral of an
installment or any part thereof if, with respect to that installment, a
refinancing or consolidation agreement is concluded by the parties, or
a late charge has been imposed or collected, unless such late charge is
refunded to the borrower or credited to the deferral charge.
(h) Notice before repossession, foreclosure, or
acceleration. (1) Except in the case of abandonment or other
extreme circumstances, no action to repossess or foreclose, or to
accelerate payment of the entire outstanding balance of the obligation,
may be taken against the debtor until 30 days after the creditor sends
the debtor a notice of default in the form set forth in paragraph
(h)(2) of this section. Such notice shall be sent by registered or
certified mail with return receipt requested. In the case of default on
payments, the sum stated in the notice may only include payments in
default and applicable late or deferral charges. If the debtor cures
the default within 30 days of the postmark of the notice and
subsequently defaults a second time, the creditor shall again give
notice as described in this paragraph (h)(1). The debtor is not
entitled to notice of default more than twice in any one-year period.
(2) The notice in the following form shall state the nature of
the default, the action the debtor must take to cure the default, the
creditor's intended actions upon failure of the debtor to cure the
default, and the debtor's right to redeem under state law.
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To:
Date: , 19
Notice of Default and Right To Cure Default
Name, address, and telephone number of creditor
Account number, if any
Brief identification of credit transaction
You are now in default on this credit transaction. You have a right
to correct this default within 30 days from the postmarked date of this
notice.
If you correct the default, you may continue with the contract as
though you did not default. Your default consists of:
Describe default alleged
Cure of default: Within 30 days from the postmarked date
of this notice, you may cure your default by (describe the acts
necessary for cure, including, if applicable, the amount of payment
required, including itemized delinquency or deferral charges).
Creditor's rights: If you do not correct your default in
the time allowed, we may exercise our rights against you under the law
by (describe action creditor intends to take).
If you have any questions, write (the creditor) at the above address
or call (creditor's designated employee) at (telephone number)between
the hours of and on (state days of week).
If this default was caused by your failure to make a payment or
payments, and you want to pay by mail, please send a check or money
order; do not send cash.
[Codified to 12 C.F.R. § 590.4]
[Section 590.4 amended at 61, May 13, 1983; 61 Fed. Reg. 50984,
September 30, 1996, effective October 30, 1996; 67 Fed. Reg. 60554,
September 26, 2002]
§ 590.100 Status of interpretations issued under Public Law
96-161.
The Board continues to adhere to the views expressed in the formal
interpretations issued under the authority of section 105(c) of Pub. L.
96-161, 93 Stat. 1233 (1979). These interpretations, which relate to
the temporary preemption of state interest ceilings contained in Pub.
L. 96-161, may be found at 45 FR 2840 (Jan. 15, 1980); 45 FR 6165 (Jan.
25, 1980); 45 FR 8000 (Feb. 6, 1980); 45 FR 15921 (Mar. 12, 1980).
[Codified to 12 C.F.R. § 590.100]
§ 590.101 State criminal usury statutes.
(a) Section 501 provides that "the provisions of the
constitution or laws of any state expressly limiting the rate or amount
of interest, discount points, finance charges, or other charges shall
not apply to any" federally-related loan secured by a first lien on
residential real property, a residential manufactured home, or all the
stock allocated to a dwelling unit in a residential housing
cooperative, 12 U.S.C. 1735f-7
note (Supp. IV 1980). The question has arisen as to whether the
federal statute preempts a state law which deems it a criminal offense
to charge interest at a rate in excess of that specified in the state
law.
(b) In the Office's view, section 501 preempts all state laws which
expressly limit the rate or amount of interest chargeable on a
federally-related residential first mortgage. It does not matter
whether the statute in question imposes criminal or civil sanctions;
section 501, by its terms, preempts "any" state law which imposes
a ceiling on interest rates. The wording of the federal statute clearly
expresses an intent to displace all direct state law restraints on
interest. Any state law that conflicts with this Congressional purpose
must yield.
[Codified to 12 C.F.R. § 590.101]
[The page following this is 9535.]
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