PRINTER'S NO. 665
No. 603 Session of 1989
INTRODUCED BY HAGARTY, FEBRUARY 15, 1989
REFERRED TO COMMITTEE ON BUSINESS AND COMMERCE, FEBRUARY 15, 1989
AN ACT 1 Amending the act of January 30, 1974 (P.L.13, No.6), entitled 2 "An act regulating agreements for the loan or use of money; 3 establishing a maximum lawful interest rate in the 4 Commonwealth; providing for a legal rate of interest; 5 detailing exceptions to the maximum lawful interest rate for 6 residential mortgages and for any loans in the principal 7 amount of more than fifty thousand dollars and Federally 8 insured or guaranteed loans and unsecured, noncollateralized 9 loans in excess of thirty-five thousand dollars and business 10 loans in excess of ten thousand dollars; providing 11 protections to debtors to whom loans are made including the 12 provision for disclosure of facts relevant to the making of 13 residential mortgages, providing for notice of intention to 14 foreclose and establishment of a right to cure defaults on 15 residential mortgage obligations, provision for the payment 16 of attorney's fees with regard to residential mortgage 17 obligations and providing for certain interest rates by banks 18 and bank and trust companies; clarifying the substantive law 19 on the filing of and execution on a confessed judgment; 20 prohibiting waiver of provisions of this act, specifying 21 powers and duties of the Secretary of Banking, and 22 establishing remedies and providing penalties for violations 23 of this act," imposing a limitation on service charges and 24 finance charges. 25 The General Assembly of the Commonwealth of Pennsylvania 26 hereby enacts as follows: 27 Section 1. The definition of "actual settlement costs" in 28 section 101 of the act of January 30, 1974 (P.L.13, No.6),
1 referred to as the Loan Interest and Protection Law, is amended 2 to read: 3 Section 101. Definitions.--As used in this act: 4 "Actual settlement costs" means reasonable sums paid for: 5 (a) Any insurance premiums which have been approved by the 6 Insurance Commissioner of the Commonwealth. 7 (b) Title examination and search, and examination of public 8 records. 9 (c) The preparation and recording of any or all documents 10 required by law or custom for settlement. 11 (d) Appraisal and/or survey of property securing the loan. 12 (e) A single service charge, which shall include any 13 consideration paid by the residential mortgage debtor and 14 received and retained by the residential mortgage lender for or 15 related to the acquisition, making, refinancing or modification 16 of a residential mortgage loan, plus any consideration received 17 by the residential mortgage lender for making a mortgage 18 commitment, whether or not an actual loan follows such 19 commitment. 20 The service charge and the finance charge shall not exceed 21 [one per cent of the original bona fide principal amount of the 22 loan, except that in the case of a construction loan, the 23 service charge shall not exceed two per cent of the original 24 bona fide principal amount of the loan] the amount provided for 25 in section 402.1. 26 (f) Charges and fees necessary for or related to the 27 transfer of the property or the closing of the residential 28 mortgage loan, paid by the residential mortgage debtor and 29 received by any party other than the residential mortgage 30 lender, whether or not paid by the residential mortgage debtor 19890H0603B0665 - 2 -
1 directly to the third party or to the residential mortgage 2 lender for payment to the third party. 3 * * * 4 Section 2. The act is amended by adding a section to read: 5 Section 402.1. Limitation on Service Charge and Finance 6 Charge.--(a) A residential mortgage lender shall not charge a 7 single service charge or points or similar fees in connection 8 with the acquisition, making, refinancing or modification of a 9 residential mortgage loan except to the extent that the service 10 charge, points or similar fees constitute: 11 (1) reimbursement for reasonable originating or underwriting 12 expenses, as determined by the Secretary of Banking, incurred by 13 the residential mortgage lender; and 14 (2) reimbursement for any commitment or other fees paid or 15 to be paid by the residential mortgage lender for the intended 16 purposes of selling residential mortgage loans in the secondary 17 mortgage market. 18 (b) Subsection (a) shall not apply to residential mortgages 19 guaranteed or insured in whole or in part by the Federal 20 Government, or agency thereof, as enumerated in section 302. 21 Section 3. This act shall take effect in 60 days. B6L12JRW/19890H0603B0665 - 3 -