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Mortgage Lending: Introduction and Listing of Provisions

The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010) (Dodd-Frank Act) added new provisions regarding preemption, which are reprinted below. Section 1048 of the Dodd-Frank Act makes these provisions effective on the transfer date, which has been designated as July 21, 2011 (see 75 Fed. Reg. 57,252 (Sept. 20, 2010)).

Title 12—Banks and Banking

Chapter 2—National Banks

Mortgage Lending: 12 U.S.C. § 5553. Preservation of existing contracts

This subchapter, and regulations, orders, guidance, and interpretations prescribed, issued, or established by the Bureau, shall not be construed to alter or affect the applicability of any regulation, order, guidance, or interpretation prescribed, issued, and established by the Comptroller of the Currency or the Director of the Office of Thrift Supervision regarding the applicability of State law under Federal banking law to any contract entered into on or before July 21, 2010, by national banks, Federal savings associations, or subsidiaries thereof that are regulated

Mortgage Lending: Introduction

On July 21, 2011 the Office of the Comptroller of the Currency (OCC) amended certain of its regulations concerning mortgage lending, effective on that date. See 76 Fed. Reg. 43,549 (July 21, 2011). The OCC considers its earlier regulations to apply to loans extended before that date. The current version of selected OCC regulations (12 C.F.R. §§ 7.4000 to 7.4002, 7.4007, 7.4008, 7.4010; 12 C.F.R. §§ 34.1 to 34.62) is reprinted below.

Mortgage Lending: Listing of Provisions

Title 12—Banks and Banking

Chapter I—Comptroller of the Currency, Department of the Treasury

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Part 7—Bank Activities and Operations

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Subpart D—Preemption

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Sec.

7.4000 Visitorial powers with respect to national banks.

Mortgage Lending: § 7.4002 National bank charges.

(a) Authority to impose charges and fees. A national bank may charge its customers non-interest charges and fees, including deposit account service charges.

(b) Considerations.

(1) All charges and fees should be arrived at by each bank on a competitive basis and not on the basis of any agreement, arrangement, undertaking, understanding, or discussion with other banks or their officers.

Mortgage Lending: Listing of Provisions

Title 12—Banks and Banking

Chapter I—Comptroller of the Currency, Department of the Treasury

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Part 34—Real Estate Lending and Appraisals

Subpart A—General

Sec.

34.1 Purpose and scope.

34.2 Definitions.

34.3 General rule.

34.4 Applicability of State law.

34.5 Due-on-sale clauses.

34.6 Applicability of state law to Federal savings associations and subsidiaries.

Mortgage Lending: § 34.2 Definitions.

(a) Due-on-sale clause means any clause that gives the lender or any assignee or transferee of the lender the power to declare the entire debt payable if all or part of the legal or equitable title or an equivalent contractual interest in the property securing the loan is transferred to another person, whether by deed, contract, or otherwise.

(b) State means any State of the United States of America, the District of Columbia, Puerto Rico, the Virgin Islands, the Northern Mariana Islands, American Samoa, and Guam.

Mortgage Lending: § 34.3 General rule.

(a) A national bank may make, arrange, purchase, or sell loans or extensions of credit, or interests therein, that are secured by liens on, or interests in, real estate (real estate loans), subject to 12 U.S.C. 1828(o) and such restrictions and requirements as the Comptroller of the Currency may prescribe by regulation or order.

Mortgage Lending: § 34.5 Due-on-sale clauses.

A national bank may make or acquire a loan or interest therein, secured by a lien on real property, that includes a due-on-sale clause. Except as set forth in 12 U.S.C. 1701j-3(d) (which contains a list of transactions in which due-on-sale clauses may not be enforced), due-on-sale clauses in loans, whenever originated, will be valid and enforceable, notwithstanding any State law limitations to the contrary.

Mortgage Lending: § 34.20 Definitions.

Adjustable-rate mortgage (ARM) loan means an extension of credit made to finance or refinance the purchase of, and secured by a lien on, a one-to-four family dwelling, including a condominium unit, cooperative housing unit, or residential manufactured home, where the lender, pursuant to an agreement with the borrower, may adjust the rate of interest from time to time.

Mortgage Lending: § 34.21 General rule.

(a) Authorization. A national bank and its subsidiaries may make, sell, purchase, participate in, or otherwise deal in ARM loans and interests therein without regard to any State law limitations on those activities.

Mortgage Lending: § 34.22 Index.

(a) In general. If a national bank makes an ARM loan to which 12 CFR 226.19(b) applies (i.e., the annual percentage rate of a loan may increase after consummation, the term exceeds one year, and the consumer’s principal dwelling secures the indebtedness), the loan documents must specify an index or combination of indices to which changes in the interest rate will be linked. This index must be readily available to, and verifiable by, the borrower and beyond the control of the bank.

Mortgage Lending: § 34.23 Prepayment fees.

A national bank offering or purchasing ARM loans may impose fees for prepayments notwithstanding any State law limitations to the contrary. For purposes of this section, prepayments do not include:

(a) Payments that exceed the required payment amount to avoid or reduce negative amortization; or

Mortgage Lending: § 34.25 Transition rule.

If, on October 1, 1988, a national bank had made a loan or binding commitment to lend under an ARM loan program that complied with the requirements of 12 CFR part 29 in effect prior to October 1, 1988 (see 12 CFR Parts 1 to 199, revised as of January 1, 1988) but would have violated any of the provisions of this subpart, the national bank may continue to administer the loan or binding commitment to lend in accordance with that loan program.

Mortgage Lending: § 34.41 Authority, purpose, and scope.

(a) Authority. This subpart is issued by the Office of the Comptroller of the Currency (the OCC) under 12 U.S.C. 1, 93a, 1462a, 1463, 1464, 1828(m), 5412(b)(2)(B), and title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) (Pub. L. 101-73, 103 Stat. 183 (1989)), 12 U.S.C. 3331 et seq.

(b) Purpose and scope.

Mortgage Lending: § 34.45 Appraiser independence.

(a) Staff appraisers. If an appraisal is prepared by a staff appraiser, that appraiser must be independent of the lending, investment, and collection functions and not involved, except as an appraiser, in the federally related transaction, and have no direct or indirect interest, financial or otherwise, in the property.

Mortgage Lending: § 34.47 Enforcement.

Institutions and institution-affiliated parties, including staff appraisers and fee appraisers, may be subject to removal and/or prohibition orders, cease and desist orders, and the imposition of civil money penalties pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq., as amended, or other applicable law.

Mortgage Lending: § 34.61 Purpose and scope.

This subpart, issued pursuant to section 304 of the Federal Deposit Insurance Corporation Improvement Act of 1991, 12 U.S.C. 1828(o), prescribes standards for real estate lending to be used by national banks in adopting internal real estate lending policies.

Mortgage Lending: § 34.62 Real estate lending standards.

(a) Each national bank shall adopt and maintain written policies that establish appropriate limits and standards for extensions of credit that are secured by liens on or interests in real estate, or that are made for the purpose of financing permanent improvements to real estate.

(b) (1) Real estate lending policies adopted pursuant to this section must:

(i) Be consistent with safe and sound banking practices;