§ 1735f-7a. — State constitution or laws limiting mortgage interest, discount points, and finance or other charges; exemption for obligations made after March 31, 1980.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1735f-7a]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER V--MISCELLANEOUS
Sec. 1735f-7a. State constitution or laws limiting mortgage
interest, discount points, and finance or other charges;
exemption for obligations made after March 31, 1980
(a) Applicability to loan, mortgage, credit sale, or advance;
applicability to deposit, account, or obligation
(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) of the Truth
in Lending Act [15 U.S.C. 1602(f)], 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).
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\1\ See References in Text note below.
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(b) Applicability to loan, mortgage, credit sale, or advance made in any
State after April 1, 1980
(1) Except as provided in paragraphs (2) and (3), the provisions of
subsection (a)(1) of this section 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) of this section 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) of this section 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) of this section 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) of this section.
(c) Applicability to loan, mortgage, credit sale, or advance secured by
first lien on residential manufactured home
The provisions of subsection (a)(1) of this section 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) Implementation of provisions applicable to residential manufactured
home
The provisions of subsection (c) of this section 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) of this
section take effect, except that the provisions of subsection (c) of
this section 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) of this section 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) Definitions
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 sections 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) Rules, regulations, and interpretations
The Federal Home Loan Bank Board is authorized to issue rules and
regulations and to publish interpretations governing the implementation
of this section.
(g) Effective date
This section takes effect on April 1, 1980.
(Pub. L. 96-221, title V, Sec. 501, Mar. 31, 1980, 94 Stat. 161; Pub. L.
96-221, title II, Sec. 207(b)(11), Mar. 31, 1980, 94 Stat. 144; Pub. L.
96-399, title III, Secs. 308(c)(6), 324(a), (e), Oct. 8, 1980, 94 Stat.
1641, 1647, 1648; Pub. L. 97-35, title III, Sec. 384, Aug. 13, 1981, 95
Stat. 432.)
References in Text
The National Housing Act, referred to in subsec. (a), is act June
27, 1934, ch. 847, 48 Stat. 1246, as amended, which is classified
principally to this chapter (Sec. 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, Sec. 407, Aug. 9, 1989,
103 Stat. 363. For complete classification of this Act to the Code, see
section 1701 of this title and Tables.
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, Sec. 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, Sec. 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, Sec. 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, Sec. 308(c)(6), substituted
``manufactured'' for ``mobile''.
Effective Date of 1980 Amendment
Section 207(b) of Pub. L. 96-221 provided in part that the amendment
made by that section is effective 6 years after Mar. 31, 1980.
Severability
Section 526 of Pub. L. 96-221 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, Sec. 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 sections 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 sections 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''
Section 527 of title V of Pub. L. 96-221, as amended by Pub. L. 96-
221, title II, Sec. 207(b)(12), Mar. 31, 1980, 94 Stat. 144, provided
that: ``For purposes of this title [enacting sections 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 sections 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.''
[Section 207(b) of Pub. L. 96-221 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.]
Section Referred to in Other Sections
This section is referred to in sections 1831u, 3506 of this title.
