Title 12, Banks and BankingRelease 119-73not60
§1735f–7a State Constitution or Laws Limiting Mortgage Interest, Discount Points, and Finance or Other Charges; Exemption for Obligations Made After March 31, 1980
Title 12 › Chapter 13— NATIONAL HOUSING › Subchapter V— MISCELLANEOUS › § 1735f–7a
Summary
Stops States from using their own interest-rate caps for certain home loans and some bank accounts. If a loan or credit sale is made after March 31, 1980, is secured by a first lien on a house, co-op stock for a dwelling, or a residential manufactured home, and otherwise meets the federal rules for “federally related” mortgages (with some changes listed below), then a State’s constitutional or statutory limits on interest, points, finance charges, or similar fees do not apply. The federal rule is adjusted to: drop the one-to-four family limit, include loans secured by co-op stock and manufactured homes, treat credit sales of manufactured homes as federally related, loosen the $1,000,000 annual activity rule for certain sellers who sell loans to approved lenders, and let HUD-approved lenders and people who finance the sale of their own residence count as lenders. State limits also do not apply to deposits, accounts, or other obligations of certain depository institutions (insured banks, mutual savings banks, savings banks, insured credit unions, Federal Home Loan Bank members, and insured housing institutions). States could opt out by passing a law or voter-approved measure between April 1, 1980 and before April 1, 1983; if they do, the federal exemption stops for loans made after that date, except loans based on commitments made between April 1, 1980 and the opt-out date, and certain rollovers remain covered. Loans on manufactured homes must meet consumer protections in rules the Federal Home Loan Bank Board issues. Those rules must cover balloon payments, prepayment penalties, late charges, deferral fees, require 30 days’ notice before repossession or foreclosure (except abandonment), and give a fair refund on precomputed finance charges on full prepayment (not less than the actuarial amount and not less than $1). The Board must publish these rules no later than 120 days after March 31, 1980 and they take effect at least 30 days after publication. Key defined terms: “prepayment” (refinancing, paying early, acceleration, or judgment), “actuarial method” (how refunds are calculated), “precomputed finance charge” (add-on or discount interest), and “residential manufactured home” (manufactured home used as a residence). The Federal Home Loan Bank Board can issue needed rules. The rule took effect April 1, 1980.
Full Legal Text
Title 12, §1735f–7a
Banks and Banking, Source: USLM XML via OLRC
(a)(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—
(A)secured by a first lien on residential real property, by a first lien on all stock allocated to a dwelling unit in a residential cooperative housing corporation, or by a first lien on a residential manufactured home;
(B)made after March 31, 1980; and
(C)described in section 527(b) of the National Housing Act (12 U.S.C. 1735f–5(b)), except that for the purpose of this section—
(i)the limitation described in section 527(b)(1) of such Act that the property must be designed principally for the occupancy of from one to four families shall not apply;
(ii)the requirement contained in section 527(b)(1) of such Act that the loan be secured by residential real property shall not apply to a loan secured by stock in a residential cooperative housing corporation or to a loan or credit sale secured by a first lien on a residential manufactured home;
(iii)the term “federally related mortgage loan” in section 527(b) of such Act shall include a credit sale which is secured by a first lien on a residential manufactured home and which otherwise meets the definitional requirements of section 527(b) of such Act, as those requirements are modified by this section;
(iv)the term “residential loans” in section 527(b)(2)(D) of such Act shall also include loans or credit sales secured by a first lien on a residential manufactured home;
(v)the requirement contained in section 527(b)(2)(D) of such Act that a creditor make or invest in loans aggregating more than $1,000,000 per year shall not apply to a creditor selling residential manufactured homes financed by loans or credit sales secured by first liens on residential manufactured homes if the creditor has an arrangement to sell such loans or credit sales in whole or in part, or if such loans or credit sales are sold in whole or in part to a lender, institution, or creditor described in section 527(b) of such Act or in this section or a creditor, as defined in section 103(f) 11 See References in Text note below. of the Truth in Lending Act, as such section was in effect on the day preceding March 31, 1980, if such creditor makes or invests in residential real estate loans or loans or credit sales secured by first liens on residential manufactured homes aggregating more than $1,000,000 per year; and
(vi)the term “lender” in section 527(b)(2)(A) of such Act shall also be deemed to include any lender approved by the Secretary of Housing and Urban Development for participation in any mortgage insurance program under the National Housing Act [12 U.S.C. 1701 et seq.], and any individual who finances the sale or exchange of residential real property or a residential manufactured home which such individual owns and which such individual occupies or has occupied as his principal residence.
(2)The provisions of the constitution or law of any State expressly limiting the rate or amount of interest which may be charged, taken, received, or reserved shall not apply to any deposit or account held by, or other obligation of a depository institution. For purposes of this paragraph, the term “depository institution” means—
(i)any insured bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
(ii)any mutual savings bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
(iii)any savings bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
(iv)any insured credit union as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752);
(v)any member as defined in section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422); and
(vi)any insured institution as defined in section 408 1 of the National Housing Act (12 U.S.C. 1730a).
(b)(1)Except as provided in paragraphs (2) and (3), the provisions of subsection (a)(1) shall apply to any loan, mortgage, credit sale, or advance made in any State on or after April 1, 1980.
(2)Except as provided in paragraph (3), the provisions of subsection (a)(1) shall not apply to any loan, mortgage, credit sale, or advance made in any State after the date (on or after April 1, 1980, and before April 1, 1983) on which such State adopts a law or certifies that the voters of such State have voted in favor of any provision, constitutional or otherwise, which states explicitly and by its terms that such State does not want the provisions of subsection (a)(1) to apply with respect to loans, mortgages, credit sales, and advances made in such State.
(3)In any case in which a State takes an action described in paragraph (2), the provisions of subsection (a)(1) shall continue to apply to—
(A)any loan, mortgage, credit sale, or advance which is made after the date such action was taken pursuant to a commitment therefor which was entered during the period beginning on April 1, 1980, and ending on the date on which such State takes such action; and
(B)any loan, mortgage, or advance which is a rollover of a loan, mortgage, or advance, as described in regulations of the Federal Home Loan Bank Board, which was made or committed to be made during the period beginning on April 1, 1980, and ending on the date on which such State takes any action described in paragraph (2).
(4)At any time after March 31, 1980, any State may adopt a provision of law placing limitations on discount points or such other charges on any loan, mortgage, credit sale, or advance described in subsection (a)(1).
(c)The provisions of subsection (a)(1) shall not apply to a loan, mortgage, credit sale, or advance which is secured by a first lien on a residential manufactured home unless the terms and conditions relating to such loan, mortgage, credit sale, or advance comply with consumer protection provisions specified in regulations prescribed by the Federal Home Loan Bank Board. Such regulations shall—
(1)include consumer protection provisions with respect to balloon payments, prepayment penalties, late charges, and deferral fees;
(2)require a 30-day notice prior to instituting any action leading to repossession or foreclosure (except in the case of abandonment or other extreme circumstances);
(3)require that upon prepayment in full, the debtor shall be entitled to a refund of the unearned portion of the precomputed finance charge in an amount not less than the amount which would be calculated by the actuarial method, except that the debtor shall not be entitled to a refund which is less than $1; and
(4)include such other provisions as the Federal Home Loan Bank Board may prescribe after a finding that additional protections are required.
(d)The provisions of subsection (c) shall not apply to a loan, mortgage, credit sale, or advance secured by a first lien on a residential manufactured home until regulations required to be issued pursuant to paragraphs (1), (2), and (3) of subsection (c) take effect, except that the provisions of subsection (c) shall apply in the case of such a loan, mortgage, credit sale, or advance made prior to the date on which such regulations take effect if the loan, mortgage, credit sale, or advance includes a precomputed finance charge and does not provide that, upon prepayment in full, the refund of the unearned portion of the precomputed finance charge is in an amount not less the amount which would be calculated by the actuarial method, except that the debtor shall not be entitled to a refund which is less than $1. The Federal Home Loan Bank Board shall issue regulations pursuant to the provisions of paragraphs (1), (2), and (3) of subsection (c) that shall take effect prospectively not less than 30 days after publication in the Federal Register and not later than 120 days from March 31, 1980.
(e)For the purpose of this section—
(1)a “prepayment” occurs upon—
(A)the refinancing or consolidation of the indebtedness;
(B)the actual prepayment of the indebtedness by the consumer whether voluntarily or following acceleration of the payment obligation by the creditor; or
(C)the entry of a judgment for the indebtedness in favor of the creditor;
(2)the term “actuarial method” means the method of allocating payments made on a debt between the outstanding balance of the obligation and the precomputed finance charge pursuant to which a payment is applied first to the accrued precomputed finance charge and any remainder is subtracted from, or any deficiency is added to, the outstanding balance of the obligation;
(3)the term “precomputed finance charge” means interest or a time price differential within the meaning of section 106(a)(1) and (2) of the Truth in Lending Act (15 U.S.C. 1605(a)(1) and (2)) as computed by an add-on or discount method; and
(4)the term “residential manufactured home” means a manufactured home as defined in section 603(6) of the National Mobile Home Construction and Safety Standards Act of 1974 [42 U.S.C. 5402(6)] which is used as a residence.
(f)The Federal Home Loan Bank Board is authorized to issue rules and regulations and to publish interpretations governing the implementation of this section.
(g)This section takes effect on April 1, 1980.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
The National Housing Act, referred to in subsec. (a), is act
June 27, 1934, ch. 847, 48 Stat. 1246, which is classified principally to this chapter (§ 1701 et seq.). section 408 of the National Housing Act, which was classified to section 1730a of this title, was repealed by Pub. L. 101–73, title IV, § 407, Aug. 9, 1989, 103 Stat. 363. For complete classification of this Act to the Code, see section 1701 of this title and Tables. section 103(f) of the Truth in Lending Act, referred to in subsec. (a)(1)(C)(v), was redesignated section 103(g) of the Truth in Lending Act by Pub. L. 111–203, title X, § 1100A(1)(A),
July 21, 2010, 124 Stat. 2107, and is classified to section 1602(g) of Title 15, Commerce and Trade. Codification Section was enacted as part of the Depository Institutions Deregulation and Monetary Control Act of 1980, and not as part of the National Housing Act which comprises this chapter.
Amendments
1981—Subsec. (a)(1)(C)(vi). Pub. L. 97–35 inserted reference to a residential manufactured home. 1980—Subsec. (a)(1)(A). Pub. L. 96–399, § 324(a), substituted “all stock allocated to a dwelling unit” for first reference to “stock” and struck out “where the loan, mortgage, or advance is used to finance the acquisition of such stock” after “housing corporation”. Subsec. (a)(1)(C)(vi). Pub. L. 96–399, § 324(e), inserted reference to any person who finances the sale or exchange of residential real property which such individual owns and which such individual occupies or has occupied as his principal residence. Subsec. (a)(2). Pub. L. 96–221, § 207(b)(11), struck out “(A)” after “(2)” and struck out subpar. (B) which provided that this paragraph shall not apply to any such deposit, account, or obligation which is payable only at an office of an insured bank, as defined in section 3 of the Federal Deposit Insurance Act, located in the Commonwealth of Puerto Rico. Subsec. (e)(4). Pub. L. 96–399, § 308(c)(6), substituted “manufactured” for “mobile”.
Statutory Notes and Related Subsidiaries
Effective Date
of 1980 Amendment Pub. L. 96–221, title II, § 207(b), Mar. 31, 1980, 94 Stat. 144, provided in part that the amendment made by that section is effective 6 years after Mar. 31, 1980.
Severability
Pub. L. 96–221, title V, § 526, Mar. 31, 1980, 94 Stat. 167, provided that: “If any provision of this Act [for classification of Act to the Code, see
Short Title
of 1980 Amendment note set out under section 226 of this title and Tables] or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Act and the application of such provision to any person or circumstance other than that as to which it is held invalid shall not be affected thereby.”
Transfer of Functions
Federal Home Loan Bank Board abolished and functions transferred, see sections 401 to 406 of Pub. L. 101–73, set out as a note under section 1437 of this title. Choice of Highest Applicable Interest Rate Pub. L. 96–221, title V, § 528, Mar. 31, 1980, 94 Stat. 168, provided that: “In any case in which one or more provisions of, or
Amendments
made by, this title [enacting section 86a, 1730g, 1735f–7a, and 1831d of this title, amending section 1785 of this title and section 687 of Title 15, Commerce and Trade, and enacting provisions set out as notes under section 86a, 1730g, and 1735f–7 of this title], section 529 of the National Housing Act [section 1735f–7 of this title], or any other provision of law, including section 5197 of the Revised Statutes (12 U.S.C. 85), apply with respect to the same loan, mortgage, credit sale, or advance, such loan, mortgage, credit sale, or advance may be made at the highest applicable rate.” Definition of “State” Pub. L. 96–221, title V, § 527, Mar. 31, 1980, 94 Stat. 168, as amended by Pub. L. 96–221, title II, § 207(b)(12), Mar. 31, 1980, 94 Stat. 144, provided that: “For purposes of this title [enacting section 86a, 1730g, 1735f–7a, and 1831d of this title, amending section 1785 of this title and section 687 of Title 15, Commerce and Trade, and enacting provisions set out as notes under section 86a, 1730g, 1735f–7, and 1735f–7a of this title] the term ‘State’ includes the several States, the Commonwealth of Puerto Rico, the District of Columbia, Guam, the Trust Territories of the Pacific Islands, the Northern Mariana Islands, and the Virgin Islands.” [Pub. L. 96–221, title II, § 207(b), Mar. 31, 1980, 94 Stat. 144, provided that the amendment of above note made by that section is effective 6 years after Mar. 31, 1980.] [For termination of Trust Territory of the Pacific Islands, see note set out preceding section 1681 of Title 48, Territories and Insular Possessions.]
Reference
Citations & Metadata
Citation
12 U.S.C. § 1735f–7a
Title 12, Banks and Banking
Last Updated
Apr 3, 2026
Release point: 119-73not60