AB792-ASA1,1,6
1An Act to amend 138.052 (2) (a) 2., 138.052 (9), 138.056 (3) (a), chapter 428
2(title), 428.101 (intro.), 428.101 (3), 428.102 (intro.), 428.102 (2), 428.103 (1)
3(intro.) and 428.106; and
to create subchapter I (title) of chapter 428 [precedes
4428.101] and subchapter II of chapter 428 [precedes 428.202] of the statutes;
5relating to: regulating certain consumer mortgage lenders, granting
6rule-making authority, and providing a penalty.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB792-ASA1, s. 1
7Section
1. 138.052 (2) (a) 2. of the statutes is amended to read:
AB792-ASA1,1,128
138.052
(2) (a) 2.
The Except as provided in s. 428.207, the parties may agree
9that if a prepayment is made within 5 years of the date of the loan, then the lender
10shall receive an amount not exceeding 60 days' interest at the contract rate on the
11amount by which the aggregate principal prepayments for a 12-month period
12exceeds 20% of the original amount of the loan.
AB792-ASA1,2,52
138.052
(9) Chapters 421 to
428 427 and subch. I of ch. 428 do not apply to the
3refinancing, modification, extension, renewal or assumption of a loan which had an
4original principal balance in excess of $25,000 if the unpaid principal balance of the
5loan has been reduced to $25,000 or less.
AB792-ASA1, s. 3
6Section
3. 138.056 (3) (a) of the statutes is amended to read:
AB792-ASA1,2,137
138.056
(3) (a) A variable rate loan involving a mobile home transaction or
8using an approved index may be prepaid at any time in whole or in part without
9penalty. Other variable rate loans may be prepaid in whole or part without penalty
10within 30 days after notice of an increase in the interest rate and
, except as provided
11in s. 428.207, with the prepayment penalty under s. 138.052 (2) (a) 2. and 3. if
12prepayment is made before or after the 30-day period. This paragraph controls if
13there is a conflict with s. 138.052 (2) (a).
AB792-ASA1, s. 4
14Section
4. Chapter 428 (title) of the statutes is amended to read:
AB792-ASA1,2,1715
chapter 428
16
first lien real estate
17and other mortgage loans
AB792-ASA1, s. 5
18Section
5. Subchapter I (title) of chapter 428 [precedes 428.101] of the statutes
19is created to read:
AB792-ASA1,2,2221
Subchapter i
22
first lien real estate loans
AB792-ASA1, s. 6
23Section
6. 428.101 (intro.) of the statutes is amended to read:
AB792-ASA1,2,24
24428.101 Applicability. (intro.) This
chapter subchapter applies to:
AB792-ASA1,3,4
1428.101
(3) Loans made on or after November 1, 1981, by a creditor to a
2customer and which are secured by a first lien real estate mortgage or equivalent
3security interest if the amount financed is $25,000 or less
and if the loan is not subject
4to subch. II.
AB792-ASA1, s. 8
5Section
8. 428.102 (intro.) of the statutes is amended to read:
AB792-ASA1,3,6
6428.102 Definitions. (intro.) In this
chapter subchapter:
AB792-ASA1,3,98
428.102
(2) "Creditor" means a person who regularly engages in, arranges for
9or procures from 3rd persons, loans within the scope of this
chapter subchapter.
AB792-ASA1, s. 10
10Section
10. 428.103 (1) (intro.) of the statutes is amended to read:
AB792-ASA1,3,1211
428.103
(1) (intro.) The following limitations shall apply to all loans subject to
12this
chapter subchapter:
AB792-ASA1,3,15
14428.106 Remedies. (1) Violations of this
chapter subchapter may be enforced
15by a customer subject to this section and ss. 425.308 to 425.311.
AB792-ASA1,3,22
16(2) With respect to a loan subject to this
chapter subchapter, if the court as a
17matter of law finds that any aspect of the transaction, any conduct directed against
18the customer, by the creditor, or any result of the transaction is unconscionable, the
19court shall, in addition to the remedies and penalties set forth in this
chapter 20subchapter, and a penalty not to exceed that specified in s. 428.103 (2), refuse to
21enforce the unconscionable aspect of the transaction or so limit the application of any
22unconscionable aspect or conduct to avoid any unconscionable result.
AB792-ASA1,4,3
23(3) Notwithstanding other provisions of this
chapter subchapter, a customer
24shall not be entitled to recover the specific penalties provided in ss. 428.103 (2) (a)
25and 428.104 (2) (a) if the person violating this
chapter subchapter shows by a
1preponderance of the evidence that the violation was not intentional and resulted
2from a bona fide error notwithstanding the maintenance of procedures reasonably
3adapted to avoid such error.
AB792-ASA1,4,8
4(4) Any action brought by a customer to enforce rights under sub. (1) shall be
5commenced within one year after the date of the last violation of this
chapter 6subchapter, 2 years after consummation of the agreement or one year after the last
7payment, whichever is later. But in no event shall an action be commenced more
8than 6 years after the date of the last violation.
AB792-ASA1,4,15
9(5) The administrator specified in s. 426.103, solely through the department
10of justice, may on behalf of any customer institute an action to enforce this
chapter 11subchapter and to recover the damages and penalties provided for this
chapter 12subchapter. In such action the administrator may obtain an order restraining by
13temporary or permanent injunctions any violation of this
chapter subchapter. This
14subsection shall not be construed to incorporate or grant to the administrator with
15respect to the enforcement of this
chapter subchapter, any of the provisions of ch. 426.
AB792-ASA1, s. 12
16Section
12. Subchapter II of chapter 428 [precedes 428.202] of the statutes is
17created to read:
AB792-ASA1,4,1919
subchapter ii
AB792-ASA1,4,2120
responsible high cost
21
mortgage lending
AB792-ASA1,4,22
22428.202 Definitions. In this subchapter:
AB792-ASA1,4,24
23(1) "Bridge loan" means a loan with a maturity of less than 18 months which
24requires only payments of interest until the time that the unpaid balance is due.
AB792-ASA1,5,2
1(1m) "Business day" has the meaning that is specified under
12 CFR 226.2 (a)
2(6) for purposes of
12 CFR 226.31.
AB792-ASA1,5,4
3(2) "Covered loan" means a consumer credit mortgage loan transaction other
4than an open-end credit plan or reverse mortgage in which all of the following apply:
AB792-ASA1,5,55
(a) The customer is a natural person.
AB792-ASA1,5,76
(b) The debt is incurred by the customer primarily for personal, family, or
7household purposes.
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(c) The loan is secured by a mortgage on, or an equivalent security interest in,
9residential real property, and the residential real property is or will be occupied by
10the customer as the customer's principal dwelling.
AB792-ASA1,5,1111
(d) The terms of the loan provide any of the following:
AB792-ASA1,5,1412
1. That the loan transaction, at the time that the loan is consummated, is
13considered a mortgage under
15 USC 1602 (aa) and regulations adopted thereunder,
14including
12 CFR 226.32.
AB792-ASA1,5,1615
2. That total points and fees payable by the customer at or before the loan
16closing exceed 6 percent of the total loan amount.
AB792-ASA1,5,18
17(3) "Customer" means an individual to whom a covered loan is offered or made.
18"Customer" does not include a surety, guarantor, cosigner, or endorser.
AB792-ASA1,5,19
19(4) "Department" means the department of financial institutions.
AB792-ASA1,5,23
20(5) "Lender" means any person who originates a covered loan and to whom the
21covered loan is initially payable, except that "lender" does not include an assignee
22of a covered loan or any person who, for at least 12 consecutive months, has failed
23to originate any covered loans.
AB792-ASA1,5,24
24(5m) "Licensed lender" means a person licensed under s. 138.09.
AB792-ASA1,5,25
25(6) "Loan originator" has the meaning given in s. 224.71 (1r).
AB792-ASA1,6,1
1(6m) "Local governmental unit" has the meaning given in s. 16.97 (7).
AB792-ASA1,6,2
2(7) "Mortgage banker" has the meaning given in s. 224.71 (3).
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3(8) "Mortgage broker" has the meaning given in s. 224.71 (4).
AB792-ASA1,6,4
4(10) "Servicer" has the meaning given in
12 USC 2605 (i) (2).
AB792-ASA1,6,13
5428.203 Prohibitions on and requirements of lenders and assignees. 6(1) Balloon payments. Except as otherwise provided in this subsection, no lender
7may make a covered loan to a customer that requires, or that permits the lender to
8require, a payment that is more than twice as large as the average of all earlier
9scheduled payments. This subsection does not apply to a loan under which the
10payment schedule is adjusted to account for seasonal or irregular income of the
11customer or to a bridge loan with a maturity of less than one year that the customer
12obtains for the purpose of facilitating the acquisition or construction of a dwelling as
13the customer's principal dwelling.
AB792-ASA1,6,17
14(2) Call provision. No lender may make a covered loan to a customer that
15permits the lender or an assignee of the loan to demand payment of the outstanding
16balance before the original maturity date, except that a covered loan may permit a
17lender or assignee to so demand as a result of any of the following:
AB792-ASA1,6,1818
(a) The customer's failure to make payments required under the loan.
AB792-ASA1,6,2019
(b) A provision in the loan agreement permitting the lender or assignee to make
20such a demand after the sale of real property that is pledged as security for the loan.
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(c) Fraud or material misrepresentation by the customer in connection with the
22loan.
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(d) Any act or omission by the customer that adversely affects the lender's or
24assignee's security for the loan or any right of the lender or assignee in such security.
AB792-ASA1,7,4
1(3) Negative amortization. No lender may make a covered loan to a customer
2with a payment schedule that causes the principal balance to increase, except that
3this subsection does not prohibit such a payment schedule as a result of a temporary
4forbearance or loan restructuring consented to by the customer.
AB792-ASA1,7,7
5(4) Increased interest rate. No lender may make a covered loan to a customer
6that imposes or permits the lender or an assignee of the loan to impose an increase
7in the interest rate as a result of the customer's default.
AB792-ASA1,7,10
8(5) Advance payments. No lender may make a covered loan to a customer that
9includes a payment schedule that consolidates more than 2 scheduled payments and
10pays them in advance out of the proceeds of the loan.
AB792-ASA1,7,16
11(6) Repayment ability. No lender may engage in a pattern or practice of making
12covered loans to customers based on the customer's collateral without regard to the
13customer's ability to repay, including the customer's current or expected income,
14current obligations, and employment. A lender is presumed to have violated this
15subsection if the lender engages in a pattern or practice of making covered loans
16without verifying and documenting the customer's repayment ability.
AB792-ASA1,8,2
17(7) Refinancing of existing covered loan. No lender may make a covered loan
18that refinances an existing covered loan that the lender made to the same customer,
19unless the refinancing takes place at least one year after the date on which the loan
20being refinanced was made or the refinancing is in the interest of the customer. No
21assignee or servicer of a covered loan may make a covered loan that refinances the
22covered loan, unless the refinancing takes place at least one year after the date on
23which the loan being refinanced was made or the refinancing is in the interest of the
24customer. No lender, assignee of a covered loan, or servicer may engage in a pattern
25or practice of arranging for the refinancing of covered loans by affiliates or
1unaffiliated creditors, modifying covered loans, or any other acts for the purpose of
2evading this subsection. This subsection does not apply to bridge loans.
AB792-ASA1,8,9
3(8) Payments to home improvement contractors. No lender under a covered
4loan made to a customer may pay proceeds of the loan to a person who is under
5contract to make improvements to an existing dwelling, unless the payment is made
6by an instrument that is payable to the customer or jointly to the customer and the
7person who is under contract or, with the consent of the customer, the payment is
8made through a 3rd party in accordance with a written agreement signed by the
9customer, the lender, and the person under contract.
AB792-ASA1,8,19
10(8g) Single premium credit insurance products. A lender may not finance,
11directly or indirectly, through a covered loan, or finance to the same customer within
1230 days of making a covered loan, any individual or group credit life, credit accident
13and health, credit disability, or credit unemployment insurance product on a prepaid
14single premium basis sold in conjunction with a covered loan. This prohibition does
15not include contracts issued by a government agency or private mortgage insurance
16company to insure the lender against loss caused by a customer's default and does
17not apply to individual or group credit life, credit accident and health, credit
18disability, or credit unemployment insurance premium calculated and paid on a
19monthly or other periodic basis.
AB792-ASA1,9,2
20(8m) Refinancing of subsidized low-rate loans. (a) In this subsection,
21"subsidized low-rate loan" means a loan that carries a current interest rate at least
222 percentage points below the then current yield on treasury securities with a
23comparable maturity. If the loan's current interest rate is either a discounted
24introductory rate or a rate that automatically steps up over time, the fully indexed
1rate or the fully stepped-up rate, as applicable, shall be used instead of the current
2rate to determine whether a loan is a subsidized low-rate loan.
AB792-ASA1,9,73
(b) A lender may not knowingly replace or consolidate a zero-interest rate or
4other subsidized low-rate loan made by a governmental or nonprofit lender with a
5covered loan within the first 10 years of the zero-interest rate or other subsidized
6low-rate loan unless the current holder of the loan consents in writing to the
7refinancing.
AB792-ASA1,9,9
8(9) Unregistered mortgage bankers and brokers. No lender may knowingly
9contract with any person for the performance of duties in violation of s. 224.72 (1m).
AB792-ASA1,9,13
10428.204 False statements. No lender, licensed lender, loan originator,
11mortgage banker, or mortgage broker may knowingly make, propose, or solicit
12fraudulent, false, or misleading statements on any document relating to a covered
13loan.
AB792-ASA1,9,18
14428.206 Recommending default. No lender, licensed lender, loan originator,
15mortgage banker, or mortgage broker may recommend or encourage an individual
16to default on an existing loan or other obligation before and in connection with the
17making of a covered loan that refinances all or any portion of that existing loan or
18obligation.
AB792-ASA1,9,23
19428.207 Prepayment. (1) A customer may prepay a covered loan at any time
20without penalty if the payment is made in the context of a refinancing of the covered
21loan and if the covered loan is held by the refinancing lender. This subsection does
22not prohibit the servicer of a covered loan from imposing a prepayment penalty,
23unless the servicer is also the lender and holds the loan at the time of the refinancing.
AB792-ASA1,9,25
24(2) Any prepayment penalty under this section is subject to all of the following
25limitations:
AB792-ASA1,10,2
1(a) A prepayment penalty is permitted only during the 36 months immediately
2following the date of consummation of a covered loan.
AB792-ASA1,10,73
(b) A lender may not include a prepayment penalty in a covered loan unless the
4lender offers the customer the option of choosing a loan product without a
5prepayment penalty. The terms of the offer shall be in writing and initialed by the
6customer. The offer shall be in a clear and conspicuous format and include the
7following disclosure:
AB792-ASA1,10,88
LOAN PRODUCT CHOICE DISCLOSURE
AB792-ASA1,10,119
I was provided with an offer to accept a product both with and without a
10prepayment penalty provision. I have chosen to accept the product with a
11prepayment penalty.
AB792-ASA1,10,1512
(c) A prepayment penalty may not exceed 60 days' interest at the contract rate
13on the amount prepaid on fixed-rate covered loans over $25,000 if the borrower
14prepays more than 20 percent of the original loan amount within 36 months
15immediately following the date of consummation of the covered loan.
AB792-ASA1,10,1816
(d) A prepayment penalty may not be collected on fixed-rate covered loans of
17$25,000 or less, on adjustable rate loans, or on those fixed-rate covered loans over
18$25,000 not specified in par. (c).
AB792-ASA1,10,21
19428.208 Disclosure to customers. At least 3 business days before making
20a covered loan to a customer, a lender shall ensure that the customer has been given
21the following notice, in writing and in a clear and conspicuous format:
AB792-ASA1,10,2222
DISCLOSURE TO BORROWER
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A. If you obtain this loan, the lender will have a mortgage on your home. You
24could lose your home and any money that you have put into it if you do not meet your
25obligations under this loan. Mortgage loan rates and closing costs and fees vary
1based on many factors, including your particular credit and financial circumstances,
2your earnings history, your employment status, the loan-to-value ratio of the
3requested loan, and the type of property that will secure your loan. The loan rate and
4fees could also vary based on which lender you select.
AB792-ASA1,11,85
B. As a consumer you should shop around and compare loan rates and fees.
6You should also consider consulting a qualified independent credit counselor or other
7experienced financial adviser regarding the rate, fees, and provisions of this
8mortgage loan before you proceed.
AB792-ASA1,11,169
C. You are not required to complete this loan agreement merely because you
10have received these disclosures or have signed a loan application. If you proceed with
11this mortgage loan, you should also remember that you may face serious financial
12risks if you use this loan to pay off credit card debts or other debts in connection with
13this transaction and then subsequently incur significant new debt. If you continue
14to accumulate debt after this loan is made and then experience financial difficulties,
15you could lose your home and any equity that you have in it if you do not meet your
16mortgage loan obligations.
AB792-ASA1,11,2017
D. Property taxes and homeowner's insurance are your responsibility. Some
18lenders may require you to escrow money for these payments. However, not all
19lenders provide escrow services for these payments. You should ask your lender
20about these services.
AB792-ASA1,11,2321
E. Your payments on existing debts contribute to your credit ratings. You
22should not accept any advice to ignore your regular payments to your existing
23creditors.
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24428.209 Exclusive state regulation authority. The state shall have sole
25authority, except as provided under federal law, to regulate any matter governed by
1this subchapter or by a rule promulgated under this subchapter. No local
2governmental unit may attempt to regulate, directly or indirectly, any matter
3governed by this subchapter or by a rule promulgated under this subchapter,
4including enacting an ordinance or adopting a resolution or imposing reporting
5requirements.
AB792-ASA1,12,10
6428.2095 Property exempt from debt collection. Except to the extent that
7the lender has a valid security interest permitted under this subchapter or has a lien
8under ch. 779 in the property, all of the following personal property of the customer
9is exempt from levy, execution, sale, and other similar process in satisfaction of a
10judgment for an obligation arising from a covered loan:
AB792-ASA1,12,11
11(1) Clothing of the customer or his or her dependents.
AB792-ASA1,12,13
12(2) Dining table and chairs, refrigerator, heating stove, cooking stove, radio,
13beds and bedding, couch and chairs, cooking utensils, and kitchenware.