Amendment ASA1-AB792

LRBs0358/2

ARG:kmg:jf

2003 - 2004 LEGISLATURE

ASSEMBLY SUBSTITUTE AMENDMENT 1, TO 2003 ASSEMBLY BILL 792

February 25, 2004 - Offered by Representative Montgomery.

AB792-ASA1,1,6 An Act to amend 138.052 (2) (a) 2., 138.052 (9), 138.056 (3) (a), chapter 428 (title), 428.101 (intro.), 428.101 (3), 428.102 (intro.), 428.102 (2), 428.103 (1) (intro.) and 428.106; and to create subchapter I (title) of chapter 428 [precedes 428.101] and subchapter II of chapter 428 [precedes 428.202] of the statutes; relating to: regulating certain consumer mortgage lenders, granting rule-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 Section 1. 138.052 (2) (a) 2. of the statutes is amended to read:

AB792-ASA1,1,12 138.052 (2) (a) 2. The Except as provided in s. 428.207, the parties may agree that if a prepayment is made within 5 years of the date of the loan, then the lender shall receive an amount not exceeding 60 days' interest at the contract rate on the amount by which the aggregate principal prepayments for a 12-month period exceeds 20% of the original amount of the loan.

AB792-ASA1, s. 2 Section 2. 138.052 (9) of the statutes is amended to read:

AB792-ASA1,2,5 138.052 (9) Chapters 421 to 428 427 and subch. I of ch. 428 do not apply to the refinancing, modification, extension, renewal or assumption of a loan which had an original principal balance in excess of $25,000 if the unpaid principal balance of the loan has been reduced to $25,000 or less.

AB792-ASA1, s. 3 Section 3. 138.056 (3) (a) of the statutes is amended to read:

AB792-ASA1,2,13 138.056 (3) (a) A variable rate loan involving a mobile home transaction or using an approved index may be prepaid at any time in whole or in part without penalty. Other variable rate loans may be prepaid in whole or part without penalty within 30 days after notice of an increase in the interest rate and , except as provided in s. 428.207, with the prepayment penalty under s. 138.052 (2) (a) 2. and 3. if prepayment is made before or after the 30-day period. This paragraph controls if there is a conflict with s. 138.052 (2) (a).

AB792-ASA1, s. 4 Section 4. Chapter 428 (title) of the statutes is amended to read:

AB792-ASA1,2,17 chapter 428 first lien real estate and other mortgage loans

AB792-ASA1, s. 5 Section 5. Subchapter I (title) of chapter 428 [precedes 428.101] of the statutes is created to read:

AB792-ASA1,2,20 chapter 428

AB792-ASA1,2,22 Subchapter i first lien real estate loans

AB792-ASA1, s. 6 Section 6. 428.101 (intro.) of the statutes is amended to read:

AB792-ASA1,2,24 428.101 Applicability. (intro.) This chapter subchapter applies to:

AB792-ASA1, s. 7 Section 7. 428.101 (3) of the statutes is amended to read:

AB792-ASA1,3,4 428.101 (3) Loans made on or after November 1, 1981, by a creditor to a customer and which are secured by a first lien real estate mortgage or equivalent security interest if the amount financed is $25,000 or less and if the loan is not subject to subch. II.

AB792-ASA1, s. 8 Section 8. 428.102 (intro.) of the statutes is amended to read:

AB792-ASA1,3,6 428.102 Definitions. (intro.) In this chapter subchapter:

AB792-ASA1, s. 9 Section 9. 428.102 (2) of the statutes is amended to read:

AB792-ASA1,3,9 428.102 (2) "Creditor" means a person who regularly engages in, arranges for or procures from 3rd persons, loans within the scope of this chapter subchapter.

AB792-ASA1, s. 10 Section 10. 428.103 (1) (intro.) of the statutes is amended to read:

AB792-ASA1,3,12 428.103 (1) (intro.) The following limitations shall apply to all loans subject to this chapter subchapter:

AB792-ASA1, s. 11 Section 11. 428.106 of the statutes is amended to read:

AB792-ASA1,3,15 428.106 Remedies. (1) Violations of this chapter subchapter may be enforced by a customer subject to this section and ss. 425.308 to 425.311.

AB792-ASA1,3,22 (2) With respect to a loan subject to this chapter subchapter, if the court as a matter of law finds that any aspect of the transaction, any conduct directed against the customer, by the creditor, or any result of the transaction is unconscionable, the court shall, in addition to the remedies and penalties set forth in this chapter subchapter, and a penalty not to exceed that specified in s. 428.103 (2), refuse to enforce the unconscionable aspect of the transaction or so limit the application of any unconscionable aspect or conduct to avoid any unconscionable result.

AB792-ASA1,4,3 (3) Notwithstanding other provisions of this chapter subchapter, a customer shall not be entitled to recover the specific penalties provided in ss. 428.103 (2) (a) and 428.104 (2) (a) if the person violating this chapter subchapter shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such error.

AB792-ASA1,4,8 (4) Any action brought by a customer to enforce rights under sub. (1) shall be commenced within one year after the date of the last violation of this chapter subchapter, 2 years after consummation of the agreement or one year after the last payment, whichever is later. But in no event shall an action be commenced more than 6 years after the date of the last violation.

AB792-ASA1,4,15 (5) The administrator specified in s. 426.103, solely through the department of justice, may on behalf of any customer institute an action to enforce this chapter subchapter and to recover the damages and penalties provided for this chapter subchapter. In such action the administrator may obtain an order restraining by temporary or permanent injunctions any violation of this chapter subchapter. This subsection shall not be construed to incorporate or grant to the administrator with respect to the enforcement of this chapter subchapter, any of the provisions of ch. 426.

AB792-ASA1, s. 12 Section 12. Subchapter II of chapter 428 [precedes 428.202] of the statutes is created to read:

AB792-ASA1,4,18 chapter 428

AB792-ASA1,4,19 subchapter ii

AB792-ASA1,4,21 responsible high cost mortgage lending

AB792-ASA1,4,22 428.202 Definitions. In this subchapter:

AB792-ASA1,4,24 (1) "Bridge loan" means a loan with a maturity of less than 18 months which requires only payments of interest until the time that the unpaid balance is due.

AB792-ASA1,5,2 (1m) "Business day" has the meaning that is specified under 12 CFR 226.2 (a) (6) for purposes of 12 CFR 226.31.

AB792-ASA1,5,4 (2) "Covered loan" means a consumer credit mortgage loan transaction other than an open-end credit plan or reverse mortgage in which all of the following apply:

AB792-ASA1,5,5 (a) The customer is a natural person.

AB792-ASA1,5,7 (b) The debt is incurred by the customer primarily for personal, family, or household purposes.

AB792-ASA1,5,10 (c) The loan is secured by a mortgage on, or an equivalent security interest in, residential real property, and the residential real property is or will be occupied by the customer as the customer's principal dwelling.

AB792-ASA1,5,11 (d) The terms of the loan provide any of the following:

AB792-ASA1,5,14 1. That the loan transaction, at the time that the loan is consummated, is considered a mortgage under 15 USC 1602 (aa) and regulations adopted thereunder, including 12 CFR 226.32.

AB792-ASA1,5,16 2. That total points and fees payable by the customer at or before the loan closing exceed 6 percent of the total loan amount.

AB792-ASA1,5,18 (3) "Customer" means an individual to whom a covered loan is offered or made. "Customer" does not include a surety, guarantor, cosigner, or endorser.

AB792-ASA1,5,19 (4) "Department" means the department of financial institutions.

AB792-ASA1,5,23 (5) "Lender" means any person who originates a covered loan and to whom the covered loan is initially payable, except that "lender" does not include an assignee of a covered loan or any person who, for at least 12 consecutive months, has failed to originate any covered loans.