exempt

      (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.

 

~

 

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 consumer credit transaction that:

1-21    1.  Is secured by a mortgage loan which involves real property located

1-22  within this state; and

2-1    2.  Constitutes a mortgage under § 152 of the Home Ownership and

2-2  Equity Protection Act of 1994, 15 U.S.C. § 1602(aa), and the regulations

2-3  adopted by the Board of Governors of the Federal Reserve System

2-4  pursuant thereto, including, without limitation, 12 C.F.R. § 226.32.

2-5    Secs. 7 and 8.  (Deleted by amendment.)

2-6    Sec. 9.  “Lender” means a mortgagee, beneficiary of a deed of trust

2-7  or other creditor who holds a mortgage, deed of trust or other instrument

2-8  that encumbers home property as security for the repayment of a home

2-9  loan.

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

2-11  imposed by a lender if a borrower repays the balance of a loan or

2-12  otherwise makes a payment on a loan before the regularly scheduled time

2-13  for repayment.

2-14    Sec. 11.  It is an unfair lending practice for a lender to:

2-15    1.  Require a borrower, as a condition of obtaining or maintaining a

2-16  home loan secured by home property, to provide property insurance on

2-17  improvements to home property in an amount that exceeds the

2-18  reasonable replacement value of the improvements.

2-19    2.  Knowingly or intentionally make a home loan to a borrower based

2-20  solely upon the equity of the borrower in the home property and without

2-21  determining that the borrower has the ability to repay the home loan

2-22  from other assets, including, without limitation, income.

2-23    3.  Finance a prepayment fee or penalty in connection with the

2-24  refinancing by the original borrower of a home loan owned by the lender

2-25  or an affiliate of the lender.

2-26    4.  Finance, directly or indirectly in connection with a home loan,

2-27  any credit insurance, life insurance, disability insurance, health

2-28  insurance, involuntary unemployment insurance or any other similar

2-29  form of insurance premiums, unless, before the borrower executes the

2-30  financing documents, the lender completes and executes, and the

2-31  borrower executes, a notice in substantially the following form:

 

2-32  INSURANCE NOTICE TO BORROWERS

 

2-33    You have indicated that you are electing to purchase insurance in

2-34  conjunction with this loan. THE COST OF THIS INSURANCE is being

2-35  PREPAID AND FINANCED AT THE INTEREST RATE PROVIDED

2-36  FOR THIS LOAN. THE INSURANCE IS NOT REQUIRED as a

2-37  condition of closing this loan, but has been included with the loan at

2-38  your request.

2-39    YOU HAVE THE RIGHT TO CANCEL THIS INSURANCE AFTER

2-40  PURCHASE.

2-41  ...... THE COST OF THIS INSURANCE 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                     (Signature of Borrower)

 

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

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

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

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

3-11  home loan, the lender is liable to the borrower in an amount equal to the

3-12  sum of:

3-13  (a) Three times the amount of actual damages sustained by the

3-14  borrower; and

3-15  (b) If an action brought by the borrower is successful in enforcing the

3-16  liability imposed by paragraph (a), the costs of bringing the action and

3-17  reasonable attorney’s fees as determined by the court.

3-18  3.  The borrower has a defense against the unpaid obligation of the

3-19  home loan to the extent of any amount awarded by a court pursuant to

3-20  paragraph (a) of subsection 2, and the court, in addition to any other

3-21  legal or equitable remedy, may cure any existing default of the home

3-22  loan and cancel any pending foreclosure sale, trustee’s sale or other sale

3-23  to enforce the home loan.

3-24    Sec. 13.  A person who willfully engages in an unfair lending

3-25  practice described in this chapter is, in addition to the penalty that may

3-26  be imposed for a misdemeanor, civilly liable at the suit of the attorney

3-27  general in an amount not to exceed $5,000.

3-28    Sec. 14.  1.  The attorney general has primary jurisdiction to

3-29  investigate and prosecute violations of this chapter.

3-30    2.  When acting pursuant to this section, the attorney general may

3-31  commence his investigation and file a criminal action without leave of

3-32  court, and he has exclusive charge of the conduct of the prosecution.

3-33    Secs. 15 and 16. (Deleted by amendment.)

3-34    Sec. 17  NRS 690A.100 is hereby amended to read as follows:

3-35  690A.100  [The] Except as otherwise provided in subsection 4 of section

3-36  11 of this act, the premium or other identifiable charge for credit insurance

3-37  may be collected from the insured or included in the principal of any loan

3-38  or other transaction at the time the transaction is completed.

3-39    Sec. 18.  NRS 690A.110 is hereby amended to read as follows:

3-40     690A.110  690A.110  The premium or cost of credit insurance when

3-41  issued through any creditor is not subject to NRS 688B.180 and 689B.060

3-42  and shall not be deemed interest or charges, or consideration, or an amount

3-43  in excess of permitted charges in connection with the loan or other credit

3-44  transaction, and , except as otherwise provided in sections 2 to 15,

3-45  inclusive, of this act, any gain or advantage to the creditor arising out of

3-46  the premium or commission or dividend from the issuance of such

4-1  insurance shall not be deemed a violation of any other law, general or

4-2  special, civil or criminal, of this state.

4-3    Sec. 18.5.  The provisions of this act apply only to home loans entered

4-4  into on or after October 1, 2001.

4-5    Sec. 19.  The provisions of this act do not apply to offenses committed

4-6  before October 1, 2001.

 

4-7  H