§1735f–7a State Constitution or Laws Limiting Mortgage Interest, Discount Points, and Finance or Other Charges; Exemption for Obligations Made After March 31, 1980

Summary

State limits on interest, discount points, or other finance charges do not apply to certain loans, mortgages, credit sales, or advances if three things are true: the loan is secured by a first lien on a home, a cooperative housing unit, or a residential manufactured home; it was made after March 31, 1980; and it fits the kind of federally related loan described in the National Housing Act with some changes. The changes remove the rule that the property must be for 1–4 families, let co-op stock and manufactured homes count, let credit sales of manufactured homes count, and change some lender and loan-volume rules (including a $1,000,000 annual aggregation rule with exceptions for sellers who arrange to sell loans). State rules that limit interest also do not apply to deposits, accounts, or other obligations of depository institutions. Depository institutions include insured banks, mutual savings banks, savings banks, insured credit unions, members of the Federal Home Loan Bank system, and insured institutions under the National Housing Act. These exemptions generally apply to loans made on or after April 1, 1980. A State can opt out by passing a law or certifying a voter-approved provision between April 1, 1980 and April 1, 1983; if a State opts out, loans made under commitments entered before the opt-out date or certain rollovers still keep the exemption. For loans secured by a first lien on a residential manufactured home, the exemption only applies if the loan follows consumer protection rules the Federal Home Loan Bank Board must write. Those rules must cover balloon payments, prepayment penalties, late charges, deferral fees, require a 30-day notice before repossession or foreclosure (except in extreme cases), and require a fair refund of any precomputed finance charge on full prepayment (not less than $1). The Board can add other protections, must publish rules, and the rules take effect at least 30 days after Federal Register notice and no later than 120 days from March 31, 1980. Definitions: prepayment (when a debt is paid off or refinanced), actuarial method (how refund amounts are calculated), precomputed finance charge (interest computed by add-on or discount methods), and residential manufactured home (a manufactured home used as a residence). The rule took effect April 1, 1980.