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Mortgage Lending: NEW HAMPSHIRE

Legal Interest Rate: N.H. Rev. Stat. Ann. § 336:1

Contract Interest Rate: N.H. Rev. Stat. Ann. § 336:1

Second Mortgage Loans: N.H. Rev. Stat. Ann. § 397-A:16-a

Appraisers: N.H. Rev. Stat. Ann. §§ 310-B:1 to 310-B:25; N.H. Code Admin. R. Ann. RAB 101.01 to 501.03

Mortgage Brokers and Loan Originators: N.H. Rev. Stat. Ann. §§ 397-A:1 to 397-A:23 (licensing of mortgage bankers and brokers); N.H. Rev. Stat. Ann. § 384:16-f (mortgage loan application fees) (repealed eff. Oct. 1, 2015)

Mortgage Lending: NEW MEXICO

Legal Interest Rate: N.M. Stat. Ann. § 56-8-3

Contract Interest Rate: N.M. Stat. Ann. § 56-8-9

Criminal Usury Cap: N.M. Stat. Ann. §§ 56-8-9, 56-8-14

Mortgage Requirements: N.M. Stat. Ann. §§ 48-7-1 to 48-7-24

Appraisers: N.M. Admin. Code §§ 16.62.1 to 16.62.18, 16.65.1 to 16.65.5

Mortgage Brokers and Loan Originators: N.M. Stat. Ann. §§ 58-21-1 to 58-21-32 (Mortgage Loan Company Act); N.M. Stat. Ann. §§ 58-21B-1 to 58-21B-24 (Mortgage Loan Originator Licensing Act)

Mortgage Lending: NEW YORK

Legal Interest Rate: N.Y. Gen. Oblig. Law § 5-501 (McKinney); N.Y. Banking Law § 14-a (McKinney); N.Y. Comp. Codes R. & Regs. tit. 3, §§ 4.1 to 4.7 (Banking Board Regulations—interest rates)

Contract Interest Rate: N.Y. Gen. Oblig. Law § 5-501 (McKinney); N.Y. Banking Law § 108 (McKinney)

Criminal Usury Cap: N.Y. Penal Law § 190.40 (McKinney)

Reverse Mortgage Loans: N.Y. Banking Law § 6-h (McKinney)

Appraisers: N.Y. Exec. Law § 160 (McKinney)

Mortgage Lending: NORTH CAROLINA

Legal Interest Rate: N.C. Gen. Stat. § 24-1

Contract Interest Rate: N.C. Gen. Stat. § 24-1.1

Open-End Loans: N.C. Gen. Stat. § 24-11

Residential Mortgage Loans: N.C. Gen. Stat. § 24-1.1A

Second Mortgage Loans: N.C. Gen. Stat. §§ 24-12 to 24-17 (§ 24-14) (second mortgages); N.C. Gen. Stat. § 24-1.2A (home equity loans)

Reverse Mortgage Loans: N.C. Gen. Stat. §§ 53-255 to 53-272

Appraisers: N.C. Gen. Stat. §§ 93E-1-1 to 93E-2-11; 21 N.C. Admin. Code 57A.0101 to 57D.0403

Mortgage Lending: NORTH DAKOTA

Legal Interest Rate: N.D. Cent. Code § 47-14-05

Contract Interest Rate: N.D. Cent. Code § 47-14-09

Criminal Usury Cap: N.D. Cent. Code §§ 47-14-09, 47-14-11 (cf. N.D. Cent. Code § 12.1-31-02)

Appraisers: N.D. Cent. Code §§ 43-23.3-01 to 43-23.3-24, 43-23.5-01 to 43-23.5-24

Mortgage Brokers and Loan Originators: N.D. Cent. Code §§ 13-04.1-01 to 13-04.1-18, 13-10-01 to 13-10-21

Mortgage Lending: OKLAHOMA

Legal Interest Rate: Okla. Stat. tit. 15, § 266; Okla. Const. art. 14, § 2

Contract Interest Rate: Okla. Stat. tit. 15, § 266 (see rates specified in consumer sections of Oklahoma UCCC); Okla. Const. art. 14, § 2

Criminal Usury Cap: Okla. Stat. tit. 14A, §§ 5-107, 5-301

Uniform Consumer Credit Code (UCCC): Okla. Stat. tit. 14A, §§ 1-101 to 9-101

Mortgage Requirements: Okla. Stat. tit. 46, §§ 1 to 18

Appraisers: Okla. Stat. tit. 59, §§ 858-700 to 858-732

Mortgage Lending: PUERTO RICO

Legal Interest Rate: P.R. Laws Ann. tit. 31, § 4591

Contract Interest Rate: P.R. Laws Ann. tit. 10, §§ 998, 998n; P.R. Laws Ann. tit. 31, § 4591

Open-End Loans: P.R. Laws. Ann. tit. 10, §§ 998, 998n

Reverse Mortgage Loans: P.R. Laws Ann. tit. 7, §§ 3061 to 3071

Appraisers: P.R. Laws Ann. tit. 20, §§ 2301 to 2322

Mortgage Brokers and Loan Originators: P.R. Laws Ann. tit. 7, §§ 3054 to 3055l (Mortgage Institutions Act)

Mortgage Lending: SOUTH CAROLINA

Legal Interest Rate: S.C. Code Ann. § 37-10-106(1)

Contract Interest Rate: S.C. Code Ann. §§ 37-10-106(1), 34-31-20, 37-3-605

Uniform Consumer Credit Code (UCCC): S.C. Code Ann. §§ 37-1-101 to 37-10-107

Open-End Loans: S.C. Code Ann. § 37-3-201

Reverse Mortgage Loans: S.C. Code Ann. §§ 29-4-10 to 29-4-60

Appraisers: S.C. Code Ann. §§ 40-60-5 to 40-60-560

Mortgage Lending: TENNESSEE

Legal Interest Rate: Tenn. Const. art. XI, § 7; Tenn. Code Ann. § 47-14-103

Contract Interest Rate: Tenn. Code Ann. § 47-14-103 (formula rate defined in Tenn. Code Ann. §§ 47-14-102(7), 47-14-106)

Residential Mortgage Loans: Tenn. Code Ann. §§ 47-15-101 to 47-15-104 (§§ 47-15-102, 47-15-104) (interest on home loans)

Reverse Mortgage Loans: Tenn. Code Ann. §§ 47-30-101 to 47-30-118 (home equity conversion loans)

Open-End Mortgages and Future Advances: Tenn. Code Ann. §§ 47-28-101 to 47-28-110

Mortgage Lending: UTAH

Legal Interest Rate: Utah Code Ann. § 15-1-1 (West)

Contract Interest Rate: Utah Code Ann. §§ 15-1-1, 70C-2-101 (West)

Criminal Usury Cap: Utah Code Ann. § 76-6-520 (West) (usury); Utah Code Ann. § 76-6-1203 (West) (Utah Mortgage Fraud Act)

Uniform Consumer Credit Code (UCCC): Utah Code Ann. §§ 70C-1-101 to 70C-8-203 (West)

Appraisers: Utah Code Ann. §§ 61-2g-101 to 61-2g-505 (West)

Mortgage Lending: VERMONT

Legal Interest Rate: Vt. Stat. Ann. tit. 9, § 41a

Contract Interest Rate: Vt. Stat. Ann. tit. 9, § 41a

Criminal Usury Cap: Vt. Stat. Ann. tit. 9, § 50

Mortgage Requirements: Vt. Stat. Ann. tit. 8, §§ 10101, 10402 to 10506, 14101, 14302; Vt. Stat. Ann. tit. 9, § 45 (prepayment penalties)

Second Mortgage Loans: Vt. Stat. Ann. tit. 9, § 41a(b)(7)

Reverse Mortgage Loans: Vt. Stat. Ann. tit. 8, §§ 10701 to 10704

Appraisers: Vt. Stat. Ann. tit. 26, §§ 3311 to 3325

Mortgage Lending: VIRGIN ISLANDS

Legal Interest Rate: V.I. Code Ann. tit. 11, § 951

Contract Interest Rate: V.I. Code Ann. tit. 11, § 951 (see also V.I. Code Ann. tit. 11, §§ 952 to 958 (usury)); V.I. Code Ann. tit. 21, § 10 (homesteads and home loans)

Open-End Loans: V.I. Code Ann. tit. 9, §§ 141 to 144 (home equity loans); V.I. Code Ann. tit. 9, §§ 181 to 187 (small loans)

Appraisers: V.I. Code Ann. tit. 27, §§ 432 to 450

Mortgage Lending: VIRGINIA

Legal Interest Rate: Va. Code Ann. § 6.2-301

Contract Interest Rate: Va. Code Ann. § 6.2-303 (see also Va. Code Ann. §§ 6.2-304 to 6.2-308 (usury))

Open-End Loans: Va. Code Ann. §§ 6.2-301(C), 6.2-312 to 6.2-313 (open accounts)

Second Mortgage Loans: Va. Code Ann. §§ 6.2-327, 6.2-328

Appraisers: Va. Code Ann. §§ 54.1-2009 to 54.1-2023; 18 Va. Admin. Code §§ 130-20-10 to 130-20-250, 130-30-10 to 130-30-170

Mortgage Lending: WEST VIRGINIA

Legal Interest Rate: W. Va. Code §§ 47-6-5 to 47-6-5c

Contract Interest Rate: W. Va. Code § 47-6-5 (alternative rates for loans and credit sales set by Lending and Credit Rate Board under W. Va. Code § 47A-1-1; alternative bank rate set by Commissioner of Banking under W. Va. Code § 31A-4-30a)

Criminal Usury Cap: W. Va. Code § 46A-5-103

Mortgage Requirements: W. Va. Code §§ 46A-1-101 to 46A-6-110 (§§ 46A-3-104, 46A-4-107) (Consumer Credit and Protection Act); W. Va. Code § 47A-1-3 (lending and credit rate board)

Mortgage Lending: WISCONSIN

Legal Interest Rate: Wis. Stat. §§ 138.04, 138.05

Contract Interest Rate: Wis. Stat. §§ 138.04, 138.05

Criminal Usury Cap: Wis. Stat. § 943.27

Uniform Consumer Credit Code (UCCC): Wis. Stat. §§ 421.101 to 429.301

Residential Mortgage Loans: Wis. Stat. §§ 138.051 to 138.056; Wis. Stat. §§ 428.101 to 428.106 (first lien real estate loans)

Reverse Mortgage Loans: Wis. Stat. § 138.058

Appraisers: Wis. Stat. §§ 458.01 to 458.48

Home Foreclosures: 7.1 Introduction

Defending against foreclosures often means challenging unfair lending practices used in originating the loan. Unfair lending practices refer both to substantive terms of a contract and to the process by which the contract is struck and enforced. It encompasses excessive cost in relation to the value of goods and services purchased; excessive cost of the credit itself; taking financial advantage of vulnerable or unsophisticated borrowers and buyers; and, engaging in unfair or deceptive conduct at any stage of the mortgage loan transaction.

Home Foreclosures: 7.2.1 Creditor Overreaching

Creditor overreaching is one of the most common types of unfair lending practice. Sometimes credit transactions, especially those secured by the borrower’s home, are made at considerable expense and risk to the consumer, but with little or no true benefit. Some creditor overreaching is substantive, as in gross disparities between the price of a product or service and its value; some is procedural, as in misrepresentation about terms or benefits, or a failure to disclose material information.

Home Foreclosures: 7.2.3 Loan Churning

Loan churning, also known as loan flipping, is a form of equity stripping that refers to repeatedly refinancing the homeowner’s mortgage, often in short succession.14 With each subsequent financing the borrower incurs additional fees that are rolled into the new principal balance. Prepayment penalties from the old loan may also be tacked onto the new loan. Brokers and lenders are enriched by the additional fees, but the refinancing rarely provides any real benefit to the borrower.

Home Foreclosures: 7.2.4.1 Introduction

Another unfair lending practice is “packing” loans with expensive credit insurance or debt protection products that have limited or no benefit to the borrower.19 Sometimes borrowers are signed up and charged for these products without their knowledge. Because these products are so profitable to both the creditor and insurance industry, there is enormous pressure to sell these products. Credit insurance can also cause problems for borrowers that knowingly obtain it.

Home Foreclosures: 7.2.4.2 Credit Insurance Basics

“Credit insurance” refers to a group of insurance products sold in connection with a loan, credit agreement, or credit card account. The credit insurance is ancillary to the main product being sold, the loan itself. The credit insurance agreement is a three party transaction involving the borrower, the lender, and the credit insurer. The credit insurer typically sells a group policy to the lender who, in turn, sells credit insurance in connection with the making of individual loans or credit card accounts with borrowers.

Home Foreclosures: 7.2.4.3 Inappropriate Grounds for Denial of Coverage

Denial of a credit insurance claim often leads to foreclosure. The event triggering the borrower’s insurance claim also causes a significant loss of income (e.g., lost employment because of disability or death), and the denial of insurance coverage means that the loan cannot be repaid.

There are at least four ways that a valid credit insurance claim can be improperly denied; the first three involve the lender:25

Home Foreclosures: 7.2.4.4 Available Legal Claims to Challenge Nonpayment of Credit Insurance

Foreclosure is an equitable action, and equity should deny foreclosure where the lender has unclean hands and could have prevented the foreclosure by acting properly.27 While an appeal to equity based on the handling of a credit insurance claim is appropriate, it is also helpful to raise various legal claims, either as an aid to stop a foreclosure or in an affirmative action before a foreclosure is threatened.

Home Foreclosures: 7.2.4.5 Ban Against Financing of Credit Insurance Premiums

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 amended the Truth in Lending Act to prohibit creditors from directly or indirectly financing single-premium credit insurance and debt cancellation agreements.34 The CFPB issued final regulations implementing this ban which were effective on January 10, 2014.35

Home Foreclosures: 7.12 Fiduciary Duty

Traditionally, a credit transaction has been considered an arm’s length transaction in which there has been no special duty read into the creditor-debtor relationship. Most courts, however, have held that the presence of certain factors in the creditor-debtor relationship may give rise to a fiduciary duty.209 A fiduciary owes its principal a duty of loyalty.210 As the agent in a principal-agent relationship, the fiduciary has a duty to act in the best interests of the principal.