138.05 Cross-referenceCross-reference: See s. 422.201 regarding finance charges on consumer credit transactions. 138.05 AnnotationA roofing and siding contract with a cash price of $2,660 or 60 payments of $61.72 is time-price differential transaction. Mortgage Associates, Inc. v. Siverhus, 63 Wis. 2d 650, 218 N.W.2d 266 (1974). 138.05 AnnotationAn individual guarantor of a corporate indebtedness cannot interpose the defense of usury if the defense is not available to the corporation as the principal obligor. Sundseth v. Roadmaster Body Corp. 74 Wis. 2d 61, 245 N.W.2d 919 (1976). 138.05 AnnotationThis section did not apply to a loan to a limited partnership whose 2 general partners were an individual and a corporation. Wild, Inc. v. Citizens Mortgage Inv. Trust, 95 Wis. 2d 430, 290 N.W.2d 567 (Ct. App. 1980). 138.05 AnnotationThe sale of an interest-bearing note at a discount is not usurious unless it is found to be a cloak or cover for what is in reality a usurious loan. Val Zimmermann Corp. v. Leffingwell, 107 Wis. 2d 86, 318 N.W.2d 781 (1982). 138.05 AnnotationThis section applies to a loan to a corporation and an individual as coborrowers. Williams v. Security Savings & Loan Ass’n. 120 Wis. 2d 480, 355 N.W.2d 370 (Ct. App. 1984). 138.05 AnnotationWhile a retail seller is not prohibited by s. 138.05 (3), Stats. 1969, from including in a note a provision requiring the payment of 25 percent of the unpaid balance as a fee for collection of the account, such a provision is enforceable only to the extent that it reasonably relates to the actual collection expenses incurred. 59 Atty. Gen. 76.
138.05 AnnotationLoan fees that relate to the amount borrowed rather than to identifiable expenses incurred as a result of the particular transaction must be considered as interest for purposes of ch. 138. These loan fees are to be amortized over the contract term of the loan to determine the actual rate. A subsequent voluntary prepayment will not render an otherwise legal rate usurious, subject to sub. (2). 65 Atty. Gen. 67.
138.05 AnnotationCharges imposed on the seller of property as a condition of granting a loan to the buyer are includable as interest under this section to the extent that the charges are passed on to the buyer. 68 Atty. Gen. 398.
138.05 AnnotationBona fide commitment fees are not interest under this section. 69 Atty. Gen. 28.
138.05 AnnotationA description of the modification of Wisconsin’s usury laws. Brown and Patrick, 65 MLR 309 (1982).
138.051138.051 Residential mortgage loans. 138.051(1)(a)(a) “Contract rate” means the initial rate contracted to be paid on the principal of a loan from time to time. 138.051(1)(b)(b) “Loan” means a loan, other than a loan made by a federally chartered or state-chartered savings and loan association, secured by a first lien real estate mortgage on, or an equivalent security interest in, a one- to 4-family dwelling which the borrower uses as his or her principal place of residence and which is: 138.051(1)(b)1.1. Made on or after April 6, 1980 and prior to November 1, 1981; 138.051(1)(b)2.2. Refinanced, renewed, extended or modified on or after April 6, 1980 and prior to November 1, 1981; or 138.051(1)(b)3.3. Made within 2 years after November 1, 1981, pursuant to a loan commitment made on or after April 6, 1980 and prior to November 1, 1981. 138.051(2)(2) A loan may be prepaid by the borrower at any time in whole or in part without premium or penalty. Upon prepayment of a loan in full by cash, renewal or refinancing, the borrower is entitled to a refund of unearned interest charged determined as follows: 138.051(2)(a)(a) On a loan which is repayable in substantially equal, successive installments at approximately equal intervals of time and the face amount of which includes predetermined interest charges, the amount of such refund shall be as great a proportion of the total interest charged as the sum of the balances scheduled to be outstanding during the full installment periods commencing with the installment date nearest the date of prepayment bears to the sum of the balances scheduled to be outstanding for all installment periods of the loan. 138.051(2)(b)(b) On any other loan, the amount of the refund shall not be less than the difference between the interest charged and interest, at the rate contracted for, computed upon the unpaid principal balance of the loan from time to time outstanding prior to prepayment in full. 138.051(3)(3) For purposes of computing a refund under sub. (2), interest does not include: 138.051(3)(a)(a) Identifiable and separately itemized charges for services incident to the loan if they are bona fide and paid to 3rd parties unrelated to the lender; 138.051(3)(b)(b) Fees, discounts or other sums actually imposed by government national mortgage association, federal national mortgage association, federal home loan mortgage corporation or any other governmentally sponsored or private secondary mortgage market purchaser of a loan from the original lender; and 138.051(3)(c)(c) A loan administration fee charged by a lender, not to exceed 2 percent of the principal amount of any construction loan and one percent of the principal amount of any other loan. 138.051(4)(4) For the purpose of calculating the rate of interest on a loan scheduled to be paid in installments under sub. (2), the parties may agree that any installment paid within 30 days prior to or after the scheduled due date will be considered to have been paid on the due date. 138.051(5)(5) A bank, credit union or savings bank which originates a loan and which requires an escrow to assure the payment of taxes or insurance shall pay interest on the outstanding principal balance of the escrow of not less than 5.25 percent per year. This subsection applies to any refinancing, renewal, extension or modification of the loan on or after November 1, 1981. 138.051(6)(6) Delinquency charges on a loan shall not exceed an amount determined by application of the contract rate to the unpaid amount, including interest accrued and unpaid, until paid or maturity of the obligation, whether by acceleration or otherwise, whichever first occurs. Interest imposed after maturity may not exceed the contract rate applied to the amount due on the date of maturity. 138.051(7)(7) This section does not apply to a loan insured, or committed to be insured, or secured by mortgage or trust deed insured by the U.S. secretary of housing and urban development, insured, guaranteed or committed to be insured or guaranteed under 38 USC 1801 to 1827 or insured or committed to be insured under 7 USC 1921 to 1995. 138.052138.052 Residential mortgage loans. 138.052(1)(a)(a) “Contract rate” means the rate contracted to be paid from time to time on the principal of a loan. 138.052(1)(b)(b) “Loan” means a loan secured by a first lien real estate mortgage on, or an equivalent security interest in, a one-family to 4-family dwelling which the borrower uses as his or her principal place of residence and which is made, refinanced, renewed, extended or modified on or after November 1, 1981, but does not include a manufactured home transaction as defined in s. 138.056 (1) (bg). 138.052(1)(c)(c) “Loan administration” means a lender’s processing of a loan and includes review, underwriting and evaluation of the loan application, document processing and preparation and administration of the loan closing, but does not include appraisals, inspections, surveys, credit reports or other activities incidental to loan origination and normally taking place outside the office of the lender or performed by 3rd persons. 138.052(2)(a)1.1. A loan may be prepaid by the borrower at any time in whole or in part. 138.052(2)(a)2.2. 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 percent of the original amount of the loan. 138.052(2)(a)3.3. If a prepayment is made 5 or more years from the date the loan is made, no premium or penalty may be received by the lender. This subdivision applies notwithstanding any refinancing, renewal, extension or modification of the loan. 138.052(2)(b)(b) Upon prepayment of a loan in full by cash, renewal or refinancing, the borrower is entitled to a refund of unearned interest paid. Unearned interest is that portion of any prepaid charge, excluding amounts permitted under sub. (3), multiplied by the number of unexpired payment periods as of the date of prepayment and divided by the total number of payment periods, plus, at the option of the lender, either: 138.052(2)(b)1.1. The portion of interest which is allocable to all unexpired payment periods as scheduled. Except as otherwise agreed by the parties under sub. (4), a payment period is unexpired if prepayment is made within 15 days after the payment’s due date. The unearned interest is the interest which, assuming all payments are made as scheduled, would be earned for each unexpired payment period by applying to unpaid balances of principal, according to the actuarial method, the contract rate on the date of prepayment. The creditor may decrease the annual interest rate to the next multiple of 0.25 percent. 138.052(2)(b)2.2. The total interest charge less all prepaid interest charges and the amount determined by applying the contract rate, according to the actuarial method, to the unpaid balances for the actual time those balances were unpaid up to the date of prepayment. 138.052(3)(3) For purposes of computing a refund under sub. (2) (b), interest does not include any of the following: 138.052(3)(a)(a) Identifiable and separately itemized charges for services incident to the loan if they are bona fide and paid to 3rd parties. 138.052(3)(b)(b) Fees, discounts or other sums actually imposed by the government national mortgage association, the federal national mortgage association, the federal home loan mortgage corporation or other governmentally sponsored secondary mortgage market purchaser of the loan or any private secondary mortgage market purchaser of the loan who is not a person related to the original lender. 138.052(3)(c)(c) A loan administration fee charged by a lender, including fees paid to 3rd parties for loan administration services, not exceeding 2 percent of the principal amount of any construction loan and 2 percent of the principal amount of any other loan. 138.052(3)(f)(f) Amounts paid to the lender by any person other than the borrower. 138.052(4)(4) For the purpose of calculating the rate of interest under sub. (2) (b), the parties may agree that any installment paid within 30 days prior to or after the scheduled due date is paid on the due date. 138.052(5)(a)(a) Except as provided in pars. (am) and (b), a bank, credit union, savings bank, savings and loan association or mortgage banker which originates a loan after January 31, 1983, and before January 1, 1994, and which requires an escrow to assure the payment of taxes or insurance shall pay interest on the outstanding principal balance of the escrow of not less than 5.25 percent per year, unless the escrow funds are held by a 3rd party in a noninterest-bearing account. 138.052(5)(am)1.1. Except as provided in par. (b) and unless the escrow funds are held by a 3rd party in a noninterest-bearing account, a bank, credit union, savings bank, savings and loan association or mortgage banker which originates a loan on or after January 1, 1994, and before April 18, 2018, or a loan subject to subd. 3., and which requires an escrow to assure the payment of taxes or insurance shall pay interest on the outstanding principal balance of the escrow at the variable interest rate established under subd. 2. 138.052(5)(am)2.a.a. Annually, the division of banking for banks, savings and loan associations, and savings banks, and the office of credit unions for credit unions, shall determine the interest rate that is the average of the interest rates paid, rounded to the nearest one-hundredth of a percent, on regular passbook deposit accounts by institutions under the division’s or office’s jurisdiction at the close of the last quarterly reporting period that ended at least 30 days before the determination is made. 138.052(5)(am)2.b.b. Within 5 days after the date on which the determination is made, the division of banking shall calculate the average, rounded to the nearest one-hundredth of a percent, of the rates determined by the division of banking and the office of credit unions and report that interest rate to the legislative reference bureau within 5 days after the date on which the determination is made. 138.052(5)(am)2.c.c. The legislative reference bureau shall publish the average rate in the next publication of the Wisconsin administrative register. The published interest rate shall take effect on the first day of the first month following its publication and shall be the interest rate used to calculate interest on escrow accounts that are subject to this subdivision until the next year’s interest rate is published under this subd. 2. c. 138.052(5)(am)3.3. The interest rate published under subd. 2. c. also applies to loans originated after January 31, 1983, and before January 1, 1994, if an interest rate is not specified in the loan agreement. 138.052(5)(b)(b) The parties may agree to waive payment of all or part of the interest required under par. (a) or (am) if more than 75 percent of the lender’s interest in the loan is sold to a 3rd party who is not a person related to the lender and the escrow funds are held by the 3rd party. 138.052(5m)(a)(a) In this subsection, “escrow agent” means a person who receives escrow payments on behalf of itself or another person. 138.052(5m)(b)1.1. Except as provided in par. (e), if an escrow is required to assure the payment of property taxes, a bank, credit union, savings bank, savings and loan association or mortgage banker which originates a loan on or after July 1, 1988, shall, before the loan closing, provide the borrower with a written notice clearly stating that the borrower may require the escrow agent to make payments in any manner specified in subd. 3. from the amount escrowed to pay property taxes and the responsibilities of the borrower and escrow agent as provided in subds. 4. and 5. 138.052(5m)(b)2.2. Except as provided in par. (e), if an escrow is required to assure the payment of property taxes for a loan originated before July 1, 1988, the escrow agent shall send, by November 15, 1988, written notice to the borrower clearly stating that the borrower may require the escrow agent to make payments in any manner specified in subd. 3. from the amount escrowed to pay property taxes and the responsibilities of the borrower and escrow agent as provided in subds. 4. and 5. 138.052(5m)(b)3.3. Except as provided in par. (e), a borrower may require an escrow agent who receives escrow payments to assure the payment of the borrower’s property taxes to do any of the following, if the borrower notifies the escrow agent as provided in subd. 4. and if the borrower is current in his or her loan payments: 138.052(5m)(b)3.a.a. Except as provided in subd. 3m., by December 20, send to the borrower a check in the amount of the funds held in escrow for the payment of property taxes, made payable to the borrower and the town, city or village treasurer authorized to collect the tax. 138.052(5m)(b)3.b.b. Pay the property taxes by December 31, if the escrow agent has received a tax statement for that property by December 20. 138.052(5m)(b)3m.3m. In its sole discretion, an escrow agent may send a check under subd. 3. a. that is made payable only to the borrower. 138.052(5m)(b)4.4. To require the escrow agent to make payments in any of the manners specified in subd. 3., the borrower shall send, by November 1, written notice to the escrow agent specifying the manner, from the 3 choices under subd. 3., that the borrower wants the escrow agent to make payments. Except as provided in subd. 5. b., once notified, the escrow agent shall annually make payments in that manner unless the borrower is not current in his or her loan payments or unless otherwise notified in writing by the borrower by November 1. 138.052(5m)(b)5.a.a. If the borrower chooses to receive payments as provided in subd. 3. a. or receives payment under subd. 3m., the borrower shall annually, by March 31, send to the person to whom the borrower makes his or her loan payments a copy of the receipt for paid property taxes. 138.052(5m)(b)5.b.b. If the borrower fails to comply with subd. 5. a., the borrower loses the option of receiving payments that year in the manner specified in subd. 3. a. During the next year, the borrower may again receive payments under subd. 3. a. if the borrower renotifies the escrow agent by sending written notice to the escrow agent by November 1 of the next year and if the borrower is current in his or her loan payments. 138.052(5m)(b)6.6. If the borrower sends the check received under subd. 3. a. to the town, city or village treasurer after the county has assumed responsibility for collecting property taxes, the town, city or village treasurer shall accept the check and pay over to the county treasurer the amount of the check. If the amount of the check sent by the borrower to the town, city or village treasurer exceeds the amount of property taxes owed by the borrower, the town, city or village treasurer shall refund the excess amount to the borrower and, if the county has assumed responsibility for collecting property taxes, pay over to the county treasurer the remaining amount of the check. 138.052(5m)(c)(c) A borrower may establish an escrow account required for the payment of taxes and insurance in a financial institution, as defined in s. 710.05 (1) (c), of the borrower’s choice if the escrow agent fails to comply with par. (b) 3., unless the lender or person to whom the loan is sold or released demonstrates that the financial institution is incapable of servicing the escrow account. 138.052(5m)(d)(d) If a borrower establishes an escrow account under par. (c), the borrower shall annually, by March 31, send to the person to whom the borrower makes his or her loan payments verification of the amounts which the borrower deposited in the escrow account during the previous 12 months and copies of receipts for taxes and insurance paid during the previous 12 months. 138.052(5m)(e)(e) Paragraphs (b) to (d) do not apply to an escrow required in connection with a loan to assure the payment of property taxes, whether the loan is originated before, on or after May 3, 1988, if it is the practice of the escrow agent to, by December 20, pay to the borrower the amount held in escrow for the payment of property taxes or to send the borrower a check in the amount of the funds held in escrow for the payment of property taxes, made payable to the borrower and the treasurer authorized to collect the tax. If the escrow agent in any year chooses not to make the payment by December 20 for any reason other than because the borrower is not current in his or her loan payments, the escrow agent shall send, by October 15 of that year, written notice to the borrower clearly stating that the borrower may require the escrow agent to make payments in any manner specified in par. (b) 3. from the amount escrowed to pay property taxes and the responsibilities of the borrower and escrow agent as provided in par. (b) 4. and 5. 138.052(6)(6) The parties may agree to imposition of a late payment charge not exceeding 5 percent of the unpaid amount of any installment not paid on or before the 15th day after its due date. For purposes of this subsection, payments are applied first to current installments and then to delinquent installments. A delinquency charge may be imposed only once on any installment. 138.052(7)(7) Interest imposed on the amount due after acceleration or maturity of a loan may not exceed the contract rate. 138.052(7s)(7s) A person who receives loan or escrow payments on behalf of itself or another person shall do all of the following: 138.052(7s)(a)(a) Respond to a borrower’s inquiry within 15 days after receiving the inquiry. 138.052(7s)(b)(b) Consider that a loan payment by check, or other negotiable or transferable instrument, is made on the date on which the check or instrument is physically received, except that the person may charge back an uncollected loan payment. 138.052(8)(8) This section does not apply to a loan insured, or committed to be insured, or secured by mortgage or trust deed insured by the U.S. secretary of housing and urban development, insured, guaranteed or committed to be insured or guaranteed under 38 USC 3701 to 3727 or insured or committed to be insured under 7 USC 1921 to 1995. 138.052(9)(9) Chapters 421 to 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. 138.052(10)(10) This section does not apply to any of the following:
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