Comptroller of the Currency, Treasury § 190.2

[Acquiror] mortgage insurance program under the Office of the Comptroller of the Currency National Housing Act; Date: llllllllllllllllllll (4) Made in whole or in part by the By: lllllllllllllllllllll Secretary of Housing and Urban Devel- opment; insured, guaranteed, supple- PART 190—PREEMPTION OF STATE mented, or assisted in any way by the Secretary or any officer or agency of USURY LAWS the Federal government, or made under or in connection with a housing or Sec. urban development program adminis- 190.1 Authority, purpose, and scope. 190.2 Definitions. tered by the Secretary, or a housing or 190.3 Operation. related program administered by any 190.4 Federally-related residential manufac- other such officer or agency; tured housing loans—consumer protec- (5) Eligible for purchase by the Fed- tion provisions. eral National Mortgage Association, 190.100 Status of Interpretations issued the Government National Mortgage As- under Public Law 96–161. sociation, or the Federal Home Loan 190.101 State criminal usury statutes. Mortgage Corporation, or made by any AUTHORITY: 12 U.S.C. 1735f–7a, 5412(b)(2)(B). financial institution from which the SOURCE: 76 FR 49151, Aug. 9, 2011, unless loan could be purchased by the Federal otherwise noted. Home Loan Mortgage Corporation; or (6) Made in whole or in part by any § 190.1 Authority, purpose, and scope. entity which: (a) Authority. This part contains reg- (i) Regularly extends, or arranges for ulations issued under section 501 of the the extension of, credit payable by Depository Institutions Deregulation agreement in more than four install- and Monetary Control Act of 1980, Pub- ments or for which the payment of a fi- lic Law 96–221, 94 Stat. 161. nance charge is or may be required; (b) Purpose and scope. The purpose of and this permanent preemption of state in- (ii) Makes or invests in residential terest-rate ceilings applicable to Fed- real property loans, including loans se- erally-related residential mortgage cured by first liens on residential man- loans is to ensure that the availability ufactured homes that aggregate more of such loans is not impeded in states than $1,000,000 per year; except that the having restrictive interest limitations. latter requirement shall not apply to This part applies to loans, mortgages, such an entity selling residential man- credit sales, and advances, secured by ufactured homes and providing financ- first liens on residential real property, ing for such sales through loans or stock in residential cooperative hous- credit sales secured by first liens on ing corporations, or residential manu- residential manufactured homes, if the factured homes as defined in § 190.2 of entity has an arrangement to sell such this part. loans or credit sales in whole or in part, or where such loans or credit § 190.2 Definitions. sales are sold in whole or in part, to a For the purposes of this part, the fol- lender or other institution otherwise lowing definitions apply: included in this section. (a) Loans mean any loans, mortgages, (c) Loans which are secured by first credit sales, or advances. liens on real estate means loans on the (b) Federally-related loans include any security of any instrument (whether a loan: mortgage, deed of trust, or land con- (1) Made by any lender whose depos- tract) which makes the interest in real its or accounts are insured by any estate (whether in fee, or in a leasehold agency of the Federal government; or subleasehold extending, or renew- (2) Made by any lender regulated by able, automatically or at the option of any agency of the Federal government; the holder or the lender, for a period of (3) Made by any lender approved by at least 5 years beyond the maturity of the Secretary of Housing and Urban the loan) specific security for the pay- Development for participation in any ment of the obligation secured by the

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instrument: Provided, That the instru- (1) Made after March 31, 1980; and ment is of such a nature that, in the (2) Secured by a first lien on: event of default, the real estate de- (i) Residential real property; scribed in the instrument could be sub- (ii) Stock in a residential cooperative jected to the satisfaction of the obliga- housing corporation when the loan is tion with the same priority as a first used to finance the acquisition of such mortgage of a first deed of trust in the stock; or jurisdiction where the real estate is lo- (iii) A residential manufactured cated. home: Provided, That the loan so se- (d) Loans secured by first liens on stock cured contains the consumer safe- in a residential cooperative housing cor- guards required by § 190.4 of this part; poration means loans on the security (b) The provisions of paragraph (a) of of: (1) A first security interest in stock this section shall apply to loans made or a membership certificate issued to a in any state on or before the date (after tenant stockholder or resident member April 1, 1980 and prior to April l, 1983) by a cooperative housing organization; on which the state adopts a law or cer- and tifies that the voters of such state have (2) An assignment of the borrower’s voted in favor of any law, constitu- interest in the proprietary lease or oc- tional or otherwise, which states ex- cupancy agreement issued by such or- plicitly and by its terms that such ganization. state does not want the provisions of (e) Loans secured by first liens on resi- paragraph (a) of this section to apply dential manufactured homes means a with respect to loans made in such loan made pursuant to an agreement state, except that— by which the party extending the cred- (1) The provisions of paragraph (a) of it acquires a security interest in the this section shall apply to any loan residential manufactured home which which is made after such date pursuant will have priority over any conflicting to a commitment therefore which was security interest. entered into during the period begin- (f) Residential real property means real ning on April 1, 1980, and ending on the estate improved or to be improved by a date the state takes such action; structure or structures designed pri- (2) The provisions of paragraph (a) of marily for dwelling, as opposed to com- this section shall apply to any rollover mercial use. of a loan which loan was made, or com- (g) Residential manufactured home mitted to be made, during the period shall mean a manufactured home as de- beginning on April 1, 1980, and ending fined in the National Manufactured on the date the state takes such ac- Home Construction and Safety Stand- tion, if the mortgage document or loan ards Act, 42 U.S.C. 5402(6), which is or note provided that the interest rate to will be used as a residence. the original borrower could be changed (h) State means the several states, through the use of such a rollover; and Puerto Rico, the District of Columbia, (3) At any time after the date of Guam, the Trust Territories of the Pa- adoption of these regulations, any cific Islands, the Northern Mariana Is- state may adopt a provision of law lands, and the Virgin Islands, except as placing limitations on discount points provided in section 501(a)(2)(B) of the or such other charges on any loan de- Depository Institutions Deregulation scribed in this part. and Monetary Control Act of 1980, Pub- (c) Nothing in this section preempts lic Law 96–221, 94 Stat. 161. limitations in state laws on prepay- ment charges, attorneys’ fees, late § 190.3 Operation. charges or other provisions designed to (a) The provisions of the constitution protect borrowers. or law of any state expressly limiting the rate or amount of interest, dis- § 190.4 Federally-related residential count points, finance charges, or other manufactured housing loans—con- charges which may be charged, taken, sumer protection provisions. received, or reserved shall not apply to (a) Definitions. As used in this sec- any Federally-related loan: tion:

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(1) Prepayment. A ‘‘prepayment’’ oc- (B) State law regulating matters covered curs upon— by this section. Creditors need comply (i) Refinancing or consolidation of only with the provisions of this sec- the indebtedness; tion, unless the OCC determines that (ii) Actual prepayment of the indebt- an otherwise applicable state law regu- edness by the debtor, whether volun- lating matters covered by this section tarily or following acceleration of the provides greater protection to con- payment obligation by the creditor; or sumers. Such determinations shall be (iii) The entry of a judgment for the published in the FEDERAL REGISTER indebtedness in favor of the creditor. and shall operate prospectively. (2) Actuarial method. The term actu- (ii) Any interested party may peti- arial method means the method of allo- tion the OCC for a determination that cating payments made on a debt be- state law requirements are more pro- tween the outstanding balance of the tective of consumers than the provi- obligation and the finance charge pur- sions of this section. Petitions shall in- suant to which a payment is applied clude: first to the accumulated finance charge (A) A copy of the state law to be con- and any remainder is subtracted from, sidered; or any deficiency is added to, the out- (B) Copies of any relevant judicial, standing balance of the obligation. regulatory, or administrative interpre- (3) Precomputed Finance Charge. The tations of the state law; and term precomputed finance charge means (C) An opinion or memorandum from interest or a time/price differential as the state Attorney General or other ap- computed by the add-on or discount propriate state official having primary method. Precomputed finance charges enforcement responsibilities for the do not include loan fees, points, find- subject state law provision, indicating er’s fees, or similar charges. how the state law to be considered of- (4) Creditor. The term creditor means fers greater protection to consumers any entity covered by this part, includ- than the OCC’s regulation. ing those which regularly extend or ar- (c) Refund of precomputed finance range for the extension of credit and charge. In the event the entire indebt- assignees that are creditors under sec- edness is prepaid, the unearned portion tion 501(a)(1)(C)(v) of the Depository of the precomputed finance charge Institutions Deregulation and Mone- shall be refunded to the debtor. This tary Control Act of 1980. refund shall be in an amount not less (b) General. (1) The provisions of the than the amount which would be re- constitution or the laws of any state funded if the unearned precomputed fi- expressly limiting the rate or amount nance charge were calculated in ac- of interest, discount points, finance cordance with the actuarial method, charges, or other charges which may be except that the debtor shall not be en- charged, taken, received, or reserved titled to a refund which, is less than shall not apply to any loan, mortgage, one dollar. The unearned portion of the credit sale, or advance which is secured precomputed finance charge is, at the by a first lien on a residential mobile option of the creditor, either: home if a creditor covered by this part (1) That portion of the precomputed complies with the consumer protection finance charge which is allocable to all regulations of this section. unexpired payment periods as origi- (2) Relation to state law. (i) In making nally scheduled, or if deferred, as de- loans or credit sales subject to this sec- ferred. A payment period shall be tion, creditors shall comply with state deemed unexpired if prepayment is and Federal law in accordance with the made within 15 days after the payment following: period’s scheduled due date. The un- (A) State law regulating matters not earned precomputed finance charge is covered by this section. When state law the total of that which would have regulating matters not covered by this been earned for each such period had section is otherwise applicable to a the loan not been precomputed, by ap- loan or credit sale subject to this sec- plying to unpaid balances of principal, tion, creditors shall comply with such according to the actuarial method, an state law provisions. annual percentage rate based on those

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charges which are considered even though an earlier maturing in- precomputed finance charges in this stallment or a late charge on an earlier section, assuming that all payments installment may not have been paid in were made as originally scheduled, or full. For purposes of assessing late as deferred, if deferred. The creditor, at charges, payments received are deemed its option, may round this annual per- to be applied first to current install- centage rate to the nearest one-quarter ments. of one percent; or (3) A late charge may be imposed (2) The total precomputed finance only once on an installment; however, charge less the earned precomputed fi- no such charge may be collected for a nance charge. The earned precomputed late installment which has been de- finance charge shall be determined by ferred. applying an annual percentage rate (4) To the extent that applicable based on the total precomputed finance state law does not provide for a lower charge (as that term is defined in this charge or a longer grace period, a late section), under the actuarial method, charge on any installment not paid in to the unpaid balances for the actual full on or before the 15th day after its time those balances were unpaid up to scheduled or deferred due date may not the date of prepayment. If a late exceed five percent of the unpaid charge or deferral fee has been col- amount of the installment. lected, it shall be treated as a pay- (5) If, at any time after imposition of ment. a late charge, the lender provides the (d) Prepayment penalties. A debtor borrower with written notice regarding may prepay in full or in part the un- amounts claimed to be due but unpaid, paid balance of the loan at any time the notice shall separately state the without penalty. The right to prepay total of all late charges claimed. shall be disclosed in the loan contract in type larger than that used for the (6) Interest after the final scheduled body of the document. maturity date may not exceed the (e) Balloon payments— (1) Federal sav- maximum rate otherwise allowable ings associations. Federal savings asso- under state law for such contracts, and ciation creditors may enter into agree- if such interest is charged, no separate ments with debtors which provide for late charge may be made on the final non-amortized and partially-amortized scheduled installment. loans on residential manufactured (g) Deferral fees. (1) With respect to homes, and such loans shall be gov- mobile home credit transactions con- erned by the provisions of this section taining precomputed finance charges, and 12 CFR 560.220 until superseding agreements providing for deferral of all regulations are issued by the Consumer or part of one or more installments Financial Protection Bureau regarding shall be in writing, signed by the par- the Alternative Mortgage Transactions ties, and Parity Act. (i) Provide, to the extent that appli- (2) Other creditors. All other creditors cable state law does not provide for a may enter into agreements with debt- lower charge, for a charge not exceed- ors which provide for non-amortized ing one percent of each installment or and partially-amortized loans on resi- part thereof for each month from the dential manufactured homes to the ex- date when such installment was due to tent authorized by applicable Federal the date when it is agreed to become or state law or regulation. payable and proportionately for a part (f) Late charges. (1) No late charge of each month, counting each day as 1/ may be assessed, imposed, or collected 30th of a month; unless provided for by written contract (ii) Incorporate by reference the between the creditor and debtor. transaction to which the deferral ap- (2) To the extent that applicable plied; state law does not provide for a longer (iii) Disclose each installment or part period of time, no late charge may be thereof in the amount to be deferred, collected on an installment which is the date or dates originally payable, paid in full on or before the 15th day and the date or dates agreed to become after its scheduled or deferred due date payable: and

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(iv) Set forth the fact of the deferral To: charge, the dollar amount of the Date: , 20 charge for each installment to be de- Notice of Default and Right To Cure ferred, and the total dollar amount to Default be paid by the debtor for the privilege Name, address, and telephone number of deferring payment. of creditor (2) No term of a writing executed by Account number, if any the debtor shall constitute authority Brief identification of credit trans- for a creditor unilaterally to grant a action deferral with respect to which a charge You are now in default on this credit is to be imposed or collected. transaction. You have a right to cor- (3) The deferral period is that period rect this default within 30 days from of time in which no payment is re- the postmarked date of this notice. quired or made by reason of the defer- If you correct the default, you may ral. continue with the contract as though (4) Payments received with respect to you did not default. Your default con- deferred installments shall be deemed sists of: to be applied first to deferred install- Describe default alleged ments. Cure of default: Within 30 days from (5) A charge may not be collected for the postmarked date of this notice, you the deferral of an installment or any may cure your default by (describe the part thereof if, with respect to that in- acts necessary for cure, including, if stallment, a refinancing or consolida- applicable, the amount of payment re- tion agreement is concluded by the quired, including itemized delinquency parties, or a late charge has been im- or deferral charges). posed or collected, unless such late Creditor’s rights: If you do not cor- charge is refunded to the borrower or rect your default in the time allowed, credited to the deferral charge. we may exercise our rights against you (h) Notice before repossession, fore- under the law by (describe action cred- closure, or acceleration. (1) Except in the itor intends to take). case of abandonment or other extreme If you have any questions, write (the circumstances, no action to repossess creditor) at the above address or call or foreclose, or to accelerate payment (creditor’s designated employee) at of the entire outstanding balance of (telephone number) between the hours the obligation, may be taken against of and on (state days of week). the debtor until 30 days after the cred- If this default was caused by your itor sends the debtor a notice of default failure to make a payment or pay- in the form set forth in paragraph ments, and you want to pay by mail, (h)(2) of this section. Such notice shall please send a check or money order; do be sent by registered or certified mail not send cash. with return receipt requested. In the case of default on payments, the sum § 190.100 Status of Interpretations stated in the notice may only include issued under Public Law 96–161. payments in default and applicable late The OCC continues to adhere to the or deferral charges. If the debtor cures views expressed in the formal Interpre- the default within 30 days of the post- tations issued under the authority of mark of the notice and subsequently section 105(c) of Public Law 96–161, 93 defaults a second time, the creditor Stat. 1233 (1979). These interpretations, shall again give notice as described in which relate to the temporary preemp- this paragraph (h)(1). The debtor is not tion of state interest ceilings contained entitled to notice of default more than in Public Law 96–161, may be found at twice in any one-year period. 45 FR 2840 (Jan. 15, 1980); 45 FR 6165 (2) The notice in the following form (Jan. 25, 1980); 45 FR 8000 (Feb. 6, 1980); shall state the nature of the default, 45 FR 15921 (Mar. 12, 1980). the action the debtor must take to cure the default, the creditor’s in- § 190.101 State criminal usury statutes. tended actions upon failure of the debt- (a) Section 501 provides that ‘‘the or to cure the default, and the debtor’s provisions of the constitution or laws right to redeem under state law. of any state expressly limiting the rate

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or amount of interest, discount points, sale clauses by all lenders, whether finance charges, or other charges shall Federally- or state-chartered, is to re- not apply to any’’ Federally-related affirm the authority of Federal savings loan secured by a first lien on residen- associations to enforce due-on-sale tial real property, a residential manu- clauses, and to confer on other lenders factured home, or all the stock allo- generally comparable authority with cated to a dwelling unit in a residential respect to the exercise of such clauses. housing cooperative. 12 U.S.C. 1735f–7 This part applies to all real property note (Supp. IV 1980). The question has loans, and all lenders making such arisen as to whether the Federal stat- loans, as those terms are defined in ute preempts a state law which deems § 191.2 of this part. it a criminal offense to charge interest at a rate in excess of that specified in § 191.2 Definitions. the state law. For the purposes of this part, the fol- (b) Section 501 preempts all state lowing definitions apply: laws which expressly limit the rate or (a) Assumed includes transfers of real amount of interest chargeable on a property subject to a real property Federally-related residential first loan by assumptions, installment land mortgage. It does not matter whether sales contracts, wraparound loans, con- the statute in question imposes crimi- tracts for deed, transfers subject to the nal or civil sanctions; section 501, by mortgage or similar lien, and other its terms, preempts ‘‘any’’ state law like transfers. ‘‘Completed credit appli- which imposes a ceiling on interest cation’’ has the same meaning as com- rates. The wording of the Federal stat- pleted application for credit as pro- ute clearly expresses an intent to dis- vided in § 202.2(f) of this title. place all direct state law restraints on (b) Due-on-sale clause means a con- interest. Any state law that conflicts tract provision which authorizes the with this Congressional purpose must lender, at its option, to declare imme- yield. diately due and payable sums secured by the lender’s security instrument PART 191—PREEMPTION OF STATE upon a sale of transfer of all or any DUE-ON-SALE LAWS part of the real property securing the loan without the lender’s prior written Sec. consent. For purposes of this defini- 191.1 Authority, purpose, and scope. tion, a sale or transfer means the con- 191.2 Definitions. veyance of real property of any right, 191.3 Loans originated by Federal savings associations. title or interest therein, whether legal 191.4 Loans originated by lenders other or equitable, whether voluntary or in- than Federal savings associations. voluntary, by outright sale, deed, in- 191.5 Limitation on exercise of due-on-sale stallment sale contract, land contract, clauses. contract for deed, leasehold interest 191.6 Interpretations. with a term greater than three years, AUTHORITY: 12 U.S.C. 1464, 1701j–3, and lease-option contract or any other 5412(b)(2)(B). method of conveyance of real property interests. SOURCE: 76 FR 49154’, Aug. 9, 2011, unless otherwise noted. (c) Federal savings association has the same meaning as provided in § 141.11 of § 191.1 Authority, purpose, and scope. this chapter. (a) Authority. This part contains reg- (d) Federal credit union means a credit ulations issued under section 5 of the union chartered under the Federal Home Owners’ Loan Act of 1933, as Credit Union Act. amended, and under section 341 of the (e) Home has the same meaning as Garn-St Germain Depository Institu- provided in § 141.14 of this chapter. tions Act of 1982, Public Law 97–320, 96 (f) Savings association has the same Stat. 1469, 1505–1507. meaning as provided in § 161.43 of this (b) Purpose and scope. The purpose of chapter. this permanent preemption of state (g) Lender means a person or govern- prohibitions on the exercise of due-on- ment agency making a real property

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