(REPRINTED WITH ADOPTED AMENDMENTS)

 

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.  It is an unfair lending practice for a lender to:

2-13    1.  Require a borrower, as a condition of obtaining or maintaining a

2-14  home loan 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.  Knowingly or intentionally make a home loan to a borrower based

2-18  solely upon the equity of the borrower in the home property and without

2-19  determining that the borrower has the ability to repay the home loan

2-20  from other assets.

2-21    3.  Finance a prepayment fee or penalty in connection with the

2-22  refinancing of an existing home loan.

2-23    4.  Finance, directly or indirectly in connection with a home loan,

2-24  any credit insurance, life insurance, disability insurance, health

2-25  insurance, involuntary unemployment insurance or any other similar

2-26  form of insurance premiums, unless, before the borrower executes the

2-27  financing documents, the lender completes and executes, and the

2-28  borrower executes, a notice in substantially the following form:

 

2-29  INSURANCE NOTICE TO BORROWERS

 

2-30    You have indicated that you are electing to purchase insurance in

2-31  conjunction with this loan. THE COST OF THIS INSURANCE is being

2-32  PREPAID AND FINANCED AT THE INTEREST RATE PROVIDED

2-33  FOR THIS LOAN. THE INSURANCE IS NOT REQUIRED as a

2-34  condition of closing this loan, but has been included with the loan at

2-35  your request.

2-36    YOU HAVE THE RIGHT TO CANCEL THIS INSURANCE AFTER

2-37  PURCHASE.

2-38  .................. THE COST OF THIS INSURANCE WITHOUT FINANCING

2-39  IS ............. .

2-40  .................. THE COST OF THIS INSURANCE WITH FINANCING

2-41  IS ............. .

2-42  .................. YOUR REGULAR MORTGAGE PAYMENT WITHOUT THIS

2-43  INSURANCE WOULD BE $ .. EACH MONTH, AS

2-44  COMPARED TO A MONTHLY MORTGAGE PAYMENT

2-45  OF $ ......... WHEN THE INSURANCE IS ADDED TO THE

2-46  AMOUNT YOU ARE BORROWING AND FINANCED AS A PART OF

3-1  YOUR MORTGAGE, A DIFFERENCE OF $ …………….. EACH

3-2  MONTH.

3-3                                                                               ...............................

3-4                                                     (Signature of Lender)

 

3-5                                                                               ...............................

3-6                                                        (SignatureofBorrowr)

 

3-7    Sec. 12.  1.  A person who engages in an unfair lending practice

3-8  described in this chapter is guilty of a misdemeanor.

3-9    2.  If, on or after October 1, 2001, a lender engages in any unfair

3-10  lending practice described in this chapter in connection with a home

3-11  loan, the home property for which the mortgage, deed of trust or other

3-12  instrument was given as security for the repayment of the home loan

3-13  shall be deemed to be exempt from:

3-14    (a) Any foreclosure sale, trustee’s sale or other sale to enforce the

3-15  home loan; and

3-16    (b) Any execution issued upon a judgment to enforce the home loan.

3-17    Sec. 13.  A person who engages in an unfair lending practice

3-18  described in this chapter is, in addition to the penalty that may be

3-19  imposed for a misdemeanor, civilly liable at the suit of the attorney

3-20  general, in an amount not to exceed 5 percent of the gross income

3-21  realized from all the home loans provided by that person in this state in

3-22  each year in which the unfair lending activity occurs.

3-23    Sec. 14.  1.  The attorney general has primary jurisdiction to

3-24  investigate and prosecute violations of this chapter.

3-25    2.  When acting pursuant to this section, the attorney general may

3-26  commence his investigation and file a criminal action without leave of

3-27  court, and he has exclusive charge of the conduct of the prosecution.

3-28    Sec. 15. 1.  The attorney general may conduct an investigation to

3-29  determine whether a person, either directly or indirectly, has violated, is

3-30  violating or is about to violate any of the provisions of this chapter.

3-31    2.  If the attorney general has reason to believe that any person,

3-32  either directly or indirectly, has violated, is violating or is about to violate

3-33  any of the provisions of this chapter, the attorney general may:

3-34    (a) Issue a subpoena to require the testimony of any person;

3-35    (b) Issue a subpoena to require the production of any documents; or

3-36    (c) Administer an oath or affirmation to any person providing

3-37  testimony pursuant to a subpoena.

3-38    3.  A subpoena issued pursuant to subsection 2 must be served in the

3-39  manner provided in the Nevada Rules of Civil Procedure.

3-40    4.  If any person fails to cooperate with an investigation conducted by

3-41  the attorney general or to obey a subpoena, the attorney general may

3-42  apply to any district court for equitable relief. The court may:

3-43    (a) Order the person to testify or to produce the requested documents

3-44  pursuant to the subpoena; and

3-45    (b) Grant other relief necessary to compel compliance by the person.

 

 

4-1    Sec. 16. NRS 21.090 is hereby amended to read as follows:

4-2    21.090  1.  The following property is exempt from execution, except

4-3  as otherwise specifically provided in this section:

4-4    (a) Private libraries not to exceed $1,500 in value, and all family

4-5  pictures and keepsakes.

4-6    (b) Necessary household goods, as defined in 16 C.F.R. § 444.1(i) as

4-7  that section existed on January 1, 1987, and yard equipment, not to exceed

4-8  $3,000 in value, belonging to the judgment debtor to be selected by him.

4-9    (c) Farm trucks, farm stock, farm tools, farm equipment, supplies and

4-10  seed not to exceed $4,500 in value, belonging to the judgment debtor to be

4-11  selected by him.

4-12    (d) Professional libraries, office equipment, office supplies and the

4-13  tools, instruments and materials used to carry on the trade of the judgment

4-14  debtor for the support of himself and his family not to exceed $4,500 in

4-15  value.

4-16    (e) The cabin or dwelling of a miner or prospector, his cars, implements

4-17  and appliances necessary for carrying on any mining operations and his

4-18  mining claim actually worked by him, not exceeding $4,500 in total value.

4-19    (f) Except as otherwise provided in paragraph (o), one vehicle if the

4-20  judgment debtor’s equity does not exceed $4,500 or the creditor is paid an

4-21  amount equal to any excess above that equity.

4-22    (g) For any pay period, 75 percent of the disposable earnings of a

4-23  judgment debtor during that period, or for each week of the period 30 times

4-24  the minimum hourly wage prescribed by section 6(a)(1) of the federal Fair

4-25  Labor Standards Act of 1938 , 29 U.S.C. § 206(a)(1), and in effect at the

4-26  time the earnings are payable, whichever is greater. Except as otherwise

4-27  provided in paragraphs (n), (r) and (s), the exemption provided in this

4-28  paragraph does not apply in the case of any order of a court of competent

4-29  jurisdiction for the support of any person, any order of a court of

4-30  bankruptcy or of any debt due for any state or federal tax. As used in this

4-31  paragraph, “disposable earnings” means that part of the earnings of a

4-32  judgment debtor remaining after the deduction from those earnings of any

4-33  amounts required by law, to be withheld.

4-34    (h) All fire engines, hooks and ladders, with the carts, trucks and

4-35  carriages, hose, buckets, implements and apparatus thereunto appertaining,

4-36  and all furniture and uniforms of any fire company or department

4-37  organized under the laws of this state.

4-38    (i) All arms, uniforms and accouterments required by law to be kept by

4-39  any person, and also one gun, to be selected by the debtor.

4-40    (j) All courthouses, jails, public offices and buildings, lots, grounds and

4-41  personal property, the fixtures, furniture, books, papers and appurtenances

4-42  belonging and pertaining to the courthouse, jail and public offices

4-43  belonging to any county of this state, all cemeteries, public squares, parks

4-44  and places, public buildings, town halls, markets, buildings for the use of

4-45  fire departments and military organizations, and the lots and grounds

4-46  thereto belonging and appertaining, owned or held by any town or

4-47  incorporated city, or dedicated by the town or city to health, ornament or

4-48  public use, or for the use of any fire or military company organized under

5-1  the laws of this state and all lots, buildings and other school property

5-2  owned by a school district and devoted to public school purposes.

5-3    (k) All money, benefits, privileges or immunities accruing or in any

5-4  manner growing out of any life insurance, if the annual premium paid does

5-5  not exceed $1,000. If the premium exceeds that amount, a similar

5-6  exemption exists which bears the same proportion to the money, benefits,

5-7  privileges and immunities so accruing or growing out of the insurance that

5-8  the $1,000 bears to the whole annual premium paid.

5-9    (l) The homestead as provided for by law, including a homestead for

5-10  which allodial title has been established and not relinquished and for which

5-11  a waiver executed pursuant to NRS 115.010 is not applicable.

5-12    (m) The dwelling of the judgment debtor occupied as a home for

5-13  himself and family, where the amount of equity held by the judgment

5-14  debtor in the home does not exceed $125,000 in value and the dwelling is

5-15  situate upon lands not owned by him.

5-16    (n) All property in this state of the judgment debtor where the judgment

5-17  is in favor of any state for failure to pay that state’s income tax on benefits

5-18  received from a pension or other retirement plan.

5-19    (o) Any vehicle owned by the judgment debtor for use by him or his

5-20  dependent that is equipped or modified to provide mobility for a person

5-21  with a permanent disability.

5-22    (p) Any prosthesis or equipment prescribed by a physician or dentist for

5-23  the judgment debtor or a dependent of the debtor.

5-24    (q) Money, not to exceed $500,000 in present value, held in:

5-25      (1) An individual retirement arrangement which conforms with the

5-26  applicable limitations and requirements of 26 U.S.C. § 408;

5-27      (2) A written simplified employee pension plan which conforms with

5-28  the applicable limitations and requirements of 26 U.S.C. § 408;

5-29      (3) A cash or deferred arrangement which is a qualified plan pursuant

5-30  to the Internal Revenue Code; and

5-31      (4) A trust forming part of a stock bonus, pension or profit-sharing

5-32  plan which is a qualified plan pursuant to sections 401 et seq. of the

5-33  Internal Revenue Code , [(] 26 U.S.C. §§ 401 et seq. [).]

5-34    (r) All money and other benefits paid pursuant to the order of a court of

5-35  competent jurisdiction for the support, education and maintenance of a

5-36  child, whether collected by the judgment debtor or the state.

5-37    (s) All money and other benefits paid pursuant to the order of a court of

5-38  competent jurisdiction for the support and maintenance of a former spouse,

5-39  including the amount of any arrearages in the payment of such support and

5-40  maintenance to which the former spouse may be entitled.

5-41    2.  Except as otherwise provided in NRS 115.010[,] and section 12 of

5-42  this act, no article or species of property mentioned in this section is

5-43  exempt from execution issued upon a judgment to recover for its price, or

5-44  upon a judgment of foreclosure of a mortgage or other lien thereon.

5-45    3.  Any exemptions specified in subsection (d) of section 522 of the

5-46  Bankruptcy Act of 1978 [(92 Stat. 2586)] , 11 U.S.C. § 522(d), do not

5-47  apply to property owned by a resident of this state unless conferred also by

5-48  subsection 1, as limited by subsection 2, of this section.”.

 

6-1    Sec. 17  NRS 690A.100 is hereby amended to read as follows:

6-2  690A.100  [The] Except as otherwise provided in subsection 4 of section

6-3  11 of this act, the premium or other identifiable charge for credit insurance

6-4  may be collected from the insured or included in the principal of any loan

6-5  or other transaction at the time the transaction is completed.

6-6    Sec. 18.  NRS 690A.110 is hereby amended to read as follows:

6-7    690A.110  690A.110  The premium or cost of credit insurance when

6-8  issued through any creditor is not subject to NRS 688B.180 and 689B.060

6-9  and shall not be deemed interest or charges, or consideration, or an amount

6-10  in excess of permitted charges in connection with the loan or other credit

6-11  transaction, and , except as otherwise provided in sections 2 to 15,

6-12  inclusive, of this act, any gain or advantage to the creditor arising out of

6-13  the premium or commission or dividend from the issuance of such

6-14  insurance shall not be deemed a violation of any other law, general or

6-15  special, civil or criminal, of this state.

6-16    Sec. 19.  The provisions of this act do not apply to offenses committed

6-17  before October 1, 2001.

 

6-18  H