Assembly Bill No. 447–Assemblywoman Buckley

 

March 19, 2001

____________

 

Referred to Committee on Commerce and Labor

 

SUMMARY—Prohibits unfair lending practices for home loans. (BDR 52‑440)

 

FISCAL NOTE:            Effect on Local Government: Yes.

                                    Effect on the State: Yes.

 

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to lending practices; prohibiting certain acts by lenders of home loans as unfair lending practices; providing for enforcement by the attorney general; revising related provisions governing credit insurance; providing a penalty; 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. Title 52 of NRS is hereby amended by adding thereto a

1-2  new chapter to consist of the provisions set forth as sections 2 to 15,

1-3  inclusive, of this act.

1-4    Sec. 2.  As used in this chapter, unless the context otherwise

1-5  requires, the words and terms defined in sections 3 to 10, inclusive, of

1-6  this chapter have the meanings ascribed to them in those sections.

1-7    Sec. 3.  “Borrower” means a natural person who is a mortgagor,

1-8  grantor of a deed of trust or other debtor of a home loan.

1-9    Sec. 4.  “Credit insurance” has the meaning ascribed to it in NRS

1-10  690A.015.

1-11    Sec. 5.  “Home” means a dwelling or dwellings for not more than

1-12  four families, the principal use of which is for residential purposes. The

1-13  term includes, without limitation:

1-14    1.  A dwelling on a farm.

1-15    2.  A dwelling unit of a cooperative housing corporation.

1-16    3.  A mobile home, as defined in NRS 489.120, with the wheels

1-17  removed and skirting added, when set on a foundation located on land

1-18  that the owner of the home owns or occupies pursuant to a tenancy with

1-19  a term of 40 years or more.

1-20    Sec. 6.  “Home loan” means a real estate loan secured by home

1-21  property.

1-22    Sec. 7.  “Home property” means real estate on which, pursuant to a

1-23  home loan, there is located or will be located a home.

2-1    Sec. 8.  “Improvement to home property” means a fixture, building

2-2  or other structure attached to home property and intended as a

2-3  permanent addition to the property.

2-4    Sec. 9.  “Lender” means a mortgagee, beneficiary of a deed of trust

2-5  or other creditor who holds a mortgage, deed of trust or other instrument

2-6  that encumbers home property as security for the repayment of a home

2-7  loan.

2-8    Sec. 10.  “Prepayment fee or penalty” means any fee or penalty

2-9  imposed by a lender if a borrower repays the balance of a loan or

2-10  otherwise makes a payment on a loan before the regularly scheduled time

2-11  for repayment.

2-12    Sec. 11.  1.  It is an unfair lending practice for a lender to require a

2-13  borrower, as a condition of obtaining or maintaining a home loan

2-14  secured by home property, to provide property insurance on

2-15  improvements to home property in an amount that exceeds the

2-16  reasonable replacement value of the improvements.

2-17    2.  Except as otherwise provided in this subsection, it is an unfair

2-18  lending practice for a lender to finance, directly or indirectly in

2-19  connection with a home loan, any credit insurance, life insurance,

2-20  disability insurance, health insurance, involuntary unemployment

2-21  insurance or any other similar form of insurance premiums. The

2-22  provisions of this subsection do not apply to insurance premiums that are

2-23  calculated and paid on a monthly basis.

2-24    3.  It is an unfair lending practice for a lender to knowingly or

2-25  intentionally make a home loan to a borrower that refinances an existing

2-26  home loan if the acquisition of the new home loan by the borrower does

2-27  not have a reasonable and tangible net benefit to the borrower in light of

2-28  all the circumstances, including, without limitation, the:

2-29    (a) Terms and conditions of the existing loan and the new loan;

2-30    (b) Total costs of the new loan; and

2-31    (c) Situation of the borrower.

2-32    4.  Except as otherwise provided in this subsection, it is an unfair

2-33  lending practice for a lender to impose a prepayment fee or penalty in

2-34  connection with a home loan if:

2-35    (a) The principal amount borrowed is $150,000 or less; and

2-36    (b) The home loan is acquired by the borrower primarily for personal,

2-37  family or household purposes.

2-38  The limitations on prepayment fees and penalties prescribed in this

2-39  subsection do not apply to the extent that federal law or regulation

2-40  preempts those limitations.

2-41    Sec. 12.  A person who engages in an unfair lending practice

2-42  prohibited by this chapter is guilty of a misdemeanor.

2-43    Sec. 13.  A person who engages in an unfair lending practice

2-44  prohibited by this chapter is, in addition to the penalty that may be

2-45  imposed for a misdemeanor, civilly liable at the suit of the attorney

2-46  general, in an amount not to exceed 5 percent of the gross income

2-47  realized from all the home loans provided by that person in this state in

2-48  each year in which the unfair lending activity occurs.

3-1    Sec. 14.  1.  The attorney general has primary jurisdiction to

3-2  investigate and prosecute violations of this chapter.

3-3    2.  When acting pursuant to this section, the attorney general may

3-4  commence his investigation and file a criminal action without leave of

3-5  court, and he has exclusive charge of the conduct of the prosecution.

3-6    Sec. 15. 1.  The attorney general may conduct an investigation to

3-7  determine whether a person, either directly or indirectly, has violated, is

3-8  violating or is about to violate any of the provisions of this chapter.

3-9    2.  If the attorney general has reason to believe that any person,

3-10  either directly or indirectly, has violated, is violating or is about to violate

3-11  any of the provisions of this chapter, the attorney general may:

3-12    (a) Issue a subpoena to require the testimony of any person;

3-13    (b) Issue a subpoena to require the production of any documents; or

3-14    (c) Administer an oath or affirmation to any person providing

3-15  testimony pursuant to a subpoena.

3-16    3.  A subpoena issued pursuant to subsection 2 must be served in the

3-17  manner provided in the Nevada Rules of Civil Procedure.

3-18    4.  If any person fails to cooperate with an investigation conducted by

3-19  the attorney general or to obey a subpoena, the attorney general may

3-20  apply to any district court for equitable relief. The court may:

3-21    (a) Order the person to testify or to produce the requested documents

3-22  pursuant to the subpoena; and

3-23    (b) Grant other relief necessary to compel compliance by the person.

3-24    Sec. 16.  NRS 690A.100 is hereby amended to read as follows:

3-25    690A.100  [The] Except for an unfair lending practice that is

3-26  prohibited by subsection 2 of section 11 of this act, the premium or other

3-27  identifiable charge for credit insurance may be collected from the insured

3-28  or included in the principal of any loan or other transaction at the time the

3-29  transaction is completed.

3-30    Sec. 17.  NRS 690A.110 is hereby amended to read as follows:

3-31    690A.110  [The] Except for an unfair lending practice that is

3-32  prohibited by subsection 2 of section 11 of this act, the premium or cost of

3-33  credit insurance when issued through any creditor is not subject to NRS

3-34  688B.180 and 689B.060 and shall not be deemed interest or charges, or

3-35  consideration, or an amount in excess of permitted charges in connection

3-36  with the loan or other credit transaction, and any gain or advantage to the

3-37  creditor arising out of the premium or commission or dividend from the

3-38  issuance of such insurance shall not be deemed a violation of any other

3-39  law, general or special, civil or criminal, of this state.  

3-40    Sec. 18.  The provisions of this act do not apply to offenses committed

3-41  before October 1, 2001.

 

3-42  H