Senate Bill No. 335–Senator O’Donnell

March 8, 1999

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Referred to Committee on Commerce and Labor

 

SUMMARY—Requires mortgage company to disclose yield spread premium to potential borrower at time of estimate of interest rate. (BDR 54-1537)

FISCAL NOTE: Effect on Local Government: No.

Effect on the State or on Industrial Insurance: No.

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. Green numbers along left margin indicate location on the printed bill (e.g., 5-15 indicates page 5, line 15).

 

AN ACT relating to mortgage companies; requiring a mortgage company to disclose the yield spread premium to a prospective borrower at the time a mortgage company provides an estimate of an interest rate to the prospective borrower; and providing other matters properly relating thereto.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

1-1 Section 1. Chapter 645B of NRS is hereby amended by adding thereto

1-2 a new section to read as follows:

1-3 1. Except as otherwise provided in subsection 2, if a prospective

1-4 borrower requests an estimate on a loan secured by a lien upon real

1-5 property, a mortgage company shall, at the time the mortgage company

1-6 provides the estimate, provide to the prospective borrower a written

1-7 statement that discloses, for each lender for which an estimate is given:

1-8 (a) The par rate for the lender;

1-9 (b) The interest rate being offered to the prospective buyer; and

1-10 (c) Any yield spread premium that the lender will pay to the mortgage

1-11 company if the prospective borrower accepts a loan at that interest rate.

1-12 2. If an estimate on a loan described in subsection 1 is provided by

1-13 means of a telephone or other oral communication, the mortgage

1-14 company shall make the disclosures required pursuant to subsection 1 by

1-15 telephone or other oral communication at the time the estimate is

1-16 provided. A mortgage company shall provide the written statement

1-17 required pursuant to subsection 1 before the mortgage company obtains

1-18 a loan secured by a lien upon real property for the borrower.

2-1 3. As used in this section:

2-2 (a) "Borrower" means a mortgagor, grantor of a deed of trust or other

2-3 obligor on a loan secured by a lien upon real property.

2-4 (b) "Discount point" means a lump-sum fee, usually expressed as a

2-5 percentage of the total amount of the loan, paid by a borrower to

2-6 decrease the interest rate paid on a loan secured by a lien upon real

2-7 property.

2-8 (c) "Lender" means a mortgagee, beneficiary of a deed of trust or

2-9 other obligee on a loan secured by a lien upon real property, and his

2-10 successor in interest.

2-11 (d) "Par rate" means the lowest interest rate at which a lender will

2-12 make a loan without charging the borrower any discount point.

2-13 (e) "Yield spread premium" means a fee paid by a lender to a

2-14 mortgage company for securing a borrower for a loan secured by a lien

2-15 upon real property at an interest rate above the par rate.

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