Senate File 541 - Reprinted SENATE FILE BY COMMITTEE ON COMMERCE (SUCCESSOR TO SF 313) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to consumer protection in specified home loans. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2528SV 82 4 rn/gg/14 PAG LIN 1 1 Section 1. NEW SECTION. 714C.1 DEFINITIONS. 1 2 As used in this chapter, unless the context otherwise 1 3 requires: 1 4 1. "Consumer home loan" means a loan, including a home 1 5 equity line of credit as defined in section 535.10, in which 1 6 the borrower is a natural person, the loan proceeds are to be 1 7 used primarily for personal, family, or household purposes, 1 8 and the loan is secured by a mortgage or deed of trust upon 1 9 residential real property as defined in section 535B.1. 1 10 Consumer home loan includes a loan used to purchase 1 11 residential real property and a refinancing of an existing 1 12 consumer home loan, but specifically excludes reverse mortgage 1 13 transactions. 1 14 2. "Lender" means a person who makes a loan. 1 15 3. "Mortgage banker" means the same as defined in section 1 16 535B.1, and includes natural persons required to be registered 1 17 under section 535B.4A. 1 18 4. "Mortgage broker" means the same as defined in section 1 19 535B.1, and includes natural persons required to be registered 1 20 under section 535B.4A. 1 21 5. "Person" means the same as defined in section 535B.1. 1 22 6. "Reverse mortgage transaction" means a loan for a 1 23 definite or indefinite term secured by a first mortgage or 1 24 first deed of trust on the principal residence of the 1 25 mortgagor located in Iowa, the proceeds of which are disbursed 1 26 to the mortgagor in one or more lump sums, or in equal or 1 27 unequal installments, either directly by the lender or the 1 28 lender's agent, and that requires no repayment until a future 1 29 time, upon the earliest occurrence of one or more events 1 30 specified in the reverse mortgage loan contract such as the 1 31 sale of the property or the death of the borrower. 1 32 Sec. 2. NEW SECTION. 714C.2 CONSUMER PROTECTIONS IN 1 33 CERTAIN HOME LOANS. 1 34 In any consumer home loan, a lender, mortgage banker, or 1 35 mortgage broker, shall not: 2 1 1. Recommend or encourage default on an existing loan or 2 2 other debt prior to and in connection with the closing or 2 3 planned closing of a consumer home loan that refinances all or 2 4 any portion of such existing loan or debt. 2 5 2. Knowingly misrepresent to a borrower the borrower's 2 6 credit rating or credit status. 2 7 3. Knowingly misrepresent, inflate, or fabricate, or 2 8 encourage a borrower to misrepresent, inflate, or fabricate, 2 9 the source or amount of a borrower's actual income or assets 2 10 in the application or underwriting process of a consumer home 2 11 loan. 2 12 4. Knowingly misrepresent or conceal material facts or 2 13 make false promises likely to influence, persuade, or induce a 2 14 borrower to enter into a consumer home loan. 2 15 5. Fail to disburse funds in accordance with a written 2 16 commitment or agreement to make a consumer home loan. 2 17 6. Knowingly engage in any transaction, practice, or 2 18 course of business in connection with a consumer home loan 2 19 that is not in good faith or that constitutes a fraud upon any 2 20 person. 2 21 Sec. 3. NEW SECTION. 714C.3 WAIVER PROHIBITED. 2 22 The terms of this chapter cannot be waived or modified by 2 23 contract or otherwise. 2 24 Sec. 4. NEW SECTION. 714C.4 EXEMPTION == CLAIMS AGAINST 2 25 ASSIGNEES OR PURCHASERS OF LOANS. 2 26 The provisions of this chapter shall not apply to federally 2 27 insured depository institutions or their subsidiaries or 2 28 affiliates, or to loans originated by federally insured 2 29 depository institutions or their subsidiaries or affiliates. 2 30 No claim or defense under this chapter may be asserted by the 2 31 attorney general or any consumer against an assignee or 2 32 purchaser of a mortgage loan for value unless one of the 2 33 following applies: 2 34 1. The violation was committed by the assignee or 2 35 purchaser. 3 1 2. The assignee or purchaser is affiliated by common 3 2 control with the seller of the loan at the time of such 3 3 assignment or purchase. 3 4 Sec. 5. NEW SECTION. 714C.5 REMEDIES. 3 5 1. A violation of this chapter is an unlawful practice 3 6 pursuant to section 714.16, subsection 2, paragraph "a". 3 7 2. A borrower who suffers damage or injury as the result 3 8 of a practice which violates this chapter, acting only in an 3 9 individual capacity, may bring an action at law to recover 3 10 actual damages. The court may order such equitable relief as 3 11 it deems necessary to protect the public from further 3 12 violations, including temporary and permanent injunctive 3 13 relief. In an action in which it is found that a person has 3 14 violated this chapter, the court shall award to the borrower 3 15 the costs of the action and to the borrower's attorneys their 3 16 reasonable fees. Reasonable attorney fees shall be determined 3 17 by the value of the time reasonably expended by the attorney 3 18 including but not limited to consideration of the following 3 19 factors: 3 20 a. The time and labor required. 3 21 b. The novelty and difficulty of the issues in the case. 3 22 c. The skills required to perform the legal services 3 23 properly. 3 24 d. The preclusion of other employment by the attorney due 3 25 to the attorney's acceptance of the case. 3 26 e. The customary fee. 3 27 f. Whether the fee is fixed or contingent. 3 28 g. The time limitations imposed by the client or the 3 29 circumstances of the case. 3 30 h. The amount of money involved in the case and the 3 31 results obtained. 3 32 i. The experience, reputation, and ability of the 3 33 attorney. 3 34 j. The undesirability of the case. 3 35 k. The nature and length of the professional relationship 4 1 between the attorney and the client. 4 2 l. Damage awards in similar cases. 4 3 3. In order to recover damages, a claim under this section 4 4 shall be proved by a preponderance of the evidence. 4 5 4. If the finder of fact finds that a prohibited practice 4 6 in violation of this chapter constitutes willful and wanton 4 7 disregard for the rights or safety of another, in addition to 4 8 an award of actual damages, statutory damages up to three 4 9 times the amount of actual damages may be awarded to a 4 10 prevailing borrower. 4 11 5. This section shall not affect a borrower's right to 4 12 seek relief under any other theory of law. 4 13 6. A lender, mortgage banker, or mortgage broker in a 4 14 consumer home loan who, when acting in good faith, fails to 4 15 comply with the provisions of this chapter does not violate 4 16 this chapter if, within sixty days of receiving notice of the 4 17 failure to comply, the lender, mortgage banker, or mortgage 4 18 broker makes appropriate restitution and whatever adjustments 4 19 are necessary to correct the violation. 4 20 Sec. 6. NEW SECTION. 714C.6 APPLICABILITY OF OTHER LAW. 4 21 This chapter establishes specific consumer protections in 4 22 consumer home loans that are in addition to other consumer 4 23 protections that may be otherwise available under state or 4 24 federal law. 4 25 Sec. 7. NEW SECTION. 535B.12A APPLICABILITY OF OTHER 4 26 LAW. 4 27 A violation of chapter 714C is a violation of this chapter. 4 28 Sec. 8. NEW SECTION. 536.19A APPLICABILITY OF OTHER LAW. 4 29 A violation of chapter 714C is a violation of this chapter. 4 30 Sec. 9. NEW SECTION. 536A.27A APPLICABILITY OF OTHER 4 31 LAW. 4 32 A violation of chapter 714C is a violation of this chapter. 4 33 SF 541 4 34 rn:nh/cc/26