NORTH CAROLINA GENERAL ASSEMBLY

1965 SESSION

 

 

CHAPTER 1061

SENATE BILL 81

 

 

AN ACT TO REGULATE CHARGES MADE IN CONNECTION WITH LOANS SECURED BY SECONDARY OR JUNIOR MORTGAGES ON CERTAIN IMPROVED RESIDENTIAL PROPERTY SUBJECT TO A PRIOR LIEN OR MORTGAGE.

 

The General Assembly of North Carolina do enact:

 

Section 1.  (a) No person, copartnership, association, trust, corporation or any other legal entity shall directly or indirectly charge, take or receive for a loan secured in whole or in part by a mortgage, other than a first mortgage, on residential real estate improved by the construction thereon of housing consisting of four or less family dwelling units, a rate of charge, as herein defined, excluding interest at the rate of six per cent (6%) per annum, whether payable directly to the lender or to a third party in connection with such loan, which in the aggregate is greater than ten per cent (10%) of the principal indebtedness. Provided that where the stated principal sum of the indebtedness is one thousand five hundred dollars ($1,500.00) or less, the rate of charge may exceed said ten per cent (10%) but shall not be greater than one hundred fifty dollars ($150.00). Provided further that the said rates of charge shall not be made more often than once each thirty-six months by a renewal or additional loan, and shall not be made a second or subsequent time on a new loan within a period of three months from the full payment and satisfaction of the original loan. The borrower shall have the right to anticipate payment of his debt in whole or in part at any time without being required to pay any prepayment or other fee to the lender. The aggregate of the amount or value actually received or held at the time of the loan, plus the sum of all existing indebtedness received of the borrower to the lender, shall be deemed the amount of the loan.

(b)        The word "charge", as used in this Act, shall include any and every type of charge for compensation, consideration or expense, or for any other purpose whatsoever, including by whatsoever name called, but not by way of limitation, title searches, title reports, title opinions, title guarantees, credit reports, investigation costs, preparation of instruments, placement or discount fees, brokerage fees, recordings, appraisals, insurance of any nature except as provided in paragraph "(c)" below, and closing costs, but not including interest at the lawful rate of six per cent (6%) per annum.

(c)        Evidence of hazard insurance may be required by the lender of the borrower and the premium shall not be considered as a charge. Decreasing term life insurance, in an amount not exceeding the amount of the loan and for a period not exceeding the term of the loan, may also be required by the lender of the borrower but the premium therefor, if included in the loan, shall not bear interest, shall not be included in computing the rate of charge, and shall not exceed the standard rate approved by the Commissioner of Insurance for such insurance. Proof of all insurance issued in connection with loans subject to this Act shall be furnished to the borrower within ten days from the date of application therefor by said borrower.

(d)        No charge for or application fee may be allowed whether or not the loan is consummated.

(e)        Nothing in this Act shall be construed as authorizing or making lawful the charging of interest on any loan at any greater rate than six per cent (6%) per annum or the making of loans in violation of the North Carolina Consumer Finance Act (53 164 et seq.).

Sec. 2.  (a) Any loan made in violation of this Act shall be discharged upon payment or tender by the debtor, or by any person, copartnership, association, trust, corporation or any other legal entity succeeding to his interest in such real estate, of the principal sum remaining due without interest.

(b)        Any agreement whereby the borrower waives the benefits of this Act or releases any rights he may have acquired by virtue thereof shall be deemed to be against public policy and void.

Sec. 3.  Any person, copartnership, association, trust, corporation or any other legal entity making on its own behalf, or as agent, broker, or in other representative capacity on behalf of any other person, copartnership, association, trust, corporation, or any other legal entity, a loan or real property financing transaction within the regulatory authority of this Act, whether lawfully or unlawfully, at the time of the closing shall furnish the debtor or borrower or grantor in the mortgage, deed of trust or any other security instrument, a complete and itemized closing statement which shall show in detail all costs which are defined as a "charge" in Section 1(b) of this Act, together with any interest charges, and the disposition of the principal of the loan or security transaction, and the said detailed closing statement shall be signed by the lending agency or a representative of the lending agency, or a responsible officer, in its behalf, and a completed and signed additional copy retained in the files of the lending agency involved and available at all reasonable times to the borrower, the borrower's successor in interest to the security real property, or the authorized agent of the borrower or the borrower's successor, until such time as the security instrument shall be satisfied in full.

Sec. 4.  This Act shall not apply to loans made by banks, insurance companies, or their duly designated agents compensated directly by the lender, duly licensed credit unions, production credit associations authorized by the Farm Credit Act of 1933, or savings and loan associations authorized to do business in this State, or to loans made by any other lender licensed by, and under the supervision of, the Commissioner of Banks and the State Banking Commission, under the provisions of Chapter 53 of the General Statutes, or the Commissioner of Insurance, under the provisions of Chapter 58 of the General Statutes.

Sec. 5.  Violation of this Act is hereby made a misdemeanor punishable by fine or imprisonment, or both, in the discretion of the court.

Sec. 6.  All laws and clauses of laws in conflict with this Act are hereby repealed.

Sec. 7.  This Act shall become effective upon its ratification.

In the General Assembly read three times and ratified, this the 16th day of June, 1965.