535.8 - LOAN CHARGES LIMITED.

        535.8  LOAN CHARGES LIMITED.         1.  Definitions.  For purposes of this section, unless the      context otherwise requires:         a.  "Lender" means a person who makes or originates a loan; a      person who is identified as a lender on the loan documents; a person      who arranges, negotiates, or brokers a loan; and a person who      provides any goods or services as an incident to or as a condition      required for the making or closing of the loan.  "Lender" does      not include a licensed attorney admitted to practice in this state      acting solely as an incident to the practice of law.         b.  "Loan" means a loan of money which is wholly or in part to      be used for the purpose of purchasing real property which is a      single-family or two-family dwelling occupied or to be occupied by      the borrower.  A loan includes the refinancing of a contract of sale,      and the refinancing of a prior loan, whether or not the borrower also      was the borrower under the prior loan, and the assumption of a prior      loan.         2. a.  A borrower may be charged by a lender, in connection      with a loan made pursuant to a written agreement executed by the      borrower on or after July 1, 1983, or in connection with a loan made      pursuant to a written commitment by the lender mailed or delivered to      the borrower on or after that date, a loan origination or processing      fee, a broker fee, or both, which together do not exceed two percent      of an amount which is equal to the loan principal; except that to the      extent of an assumption by a new borrower of the obligation to make      payments under a prior loan, or to the extent that the loan principal      is used to refinance a prior loan between the same borrower and the      same lender, the borrower may be charged by a lender a loan      origination or processing fee, a broker fee, or both, which together      do not exceed an amount which is a reasonable estimate of the      expenses of processing the loan assumption or refinancing but which      does not exceed one percent of the unpaid balance of the loan that is      assumed or refinanced.  In addition, a borrower may be charged by a      lender, in contemplation of or in connection with a loan, a      commitment fee, closing fee, or both, that is agreed to in writing by      the lender and the borrower.  A loan fee paid by a borrower to a      lender under this paragraph is compensation to the lender solely for      the use of money, notwithstanding any provision of the agreement to      the contrary.  However, a loan fee collected under this paragraph      shall be disregarded for purposes of determining the maximum charge      permitted by section 535.2 or 535.9, subsection 2.  A lender is      prohibited from charging a borrower in connection with a loan a loan      origination or processing fee, broker fee, closing fee, commitment      fee, or similar charge other than expressly authorized by this      paragraph or a payment reduction fee authorized by subsection 3.         b. (1)  A borrower may be charged by a lender in connection      with a loan any of the following costs which are incurred by the      lender in connection with the loan and which are disclosed to the      borrower:         (a)  Credit reports.         (b)  Appraisal fees paid to a third party, or when the appraisal      is performed by the lender, a fee which is a reasonable estimate of      the expense incurred by the lender in performing the appraisal.         (c)  Attorney's opinions.         (d)  Abstracting fees paid to a third party, or when the      abstracting is performed by the lender, a fee which is a reasonable      estimate of the expense incurred by the lender in performing the      abstracting.         (e)  County recorder's fees.         (f)  Inspection fees.         (g)  Mortgage guarantee insurance charge.         (h)  Surveying of property.         (i)  Termite inspection.         (j)  The cost of a title guaranty issued by the Iowa finance      authority pursuant to chapter 16.         (k)  A bona fide and reasonable settlement or closing fee which is      paid to a third party to settle or close the loan.         (2)  The lender shall not charge the borrower for the cost of      revenue stamps or real estate commissions which are paid by the      seller.         (3)  A lender shall not charge the borrower any costs other than      expressly permitted by this paragraph "b".  However, additional      costs incurred in connection with a loan under this paragraph      "b", if bona fide and reasonable, may be collected by a      state-chartered financial institution licensed under chapter 524,      533, or 534, to the extent permitted under applicable federal law as      determined by the office of the comptroller of the currency of the      United States department of treasury, the national credit union      administration, or the office of thrift supervision of the United      States department of treasury.  Such costs shall apply only to the      same type of state-chartered entity as the federally chartered entity      affected and shall apply to and may be collected by an insurer      organized under chapter 508 or 515, or otherwise authorized to      conduct the business of insurance in this state.         (4)  Nothing in this section shall be construed to change the      prohibition against the sale of title insurance or sale of insurance      against loss or damage by reason of defective title or encumbrances      as provided in section 515.48, subsection 10.         c.  If the purpose of the loan is to enable the borrower to      purchase a single-family or two-family dwelling, for the borrower's      residence, any provision of a loan agreement which prohibits the      borrower from transferring the borrower's interest in the property to      a third party for use by the third party as the third party's      residence, or any provision which requires or permits the lender to      make a change in the interest rate, the repayment schedule or the      term of the loan as a result of a transfer by the borrower of the      borrower's interest in the property to a third party for use by the      third party as the third party's residence shall not be enforceable      except as provided in the following sentence.  If the lender on      reasonable grounds believes that its security interest or the      likelihood of repayment is impaired, based solely on criteria which      is not more restrictive than that used to evaluate a new mortgage      loan application, the lender may accelerate the loan, or to offset      any such impairment, may adjust the interest rate, the repayment      schedule or the term of the loan.  A provision of a loan agreement      which violates this paragraph is void.         d.  If a lender collects a fee or charge which is prohibited      by paragraph "a" or "b" of this subsection or which exceeds      the amount permitted by paragraph "a" or "b" of this      subsection, the person from whom the fee was collected has the right      to recover the unlawful fee or charge or the unlawful portion of the      fee or charge, plus attorney fees and costs incurred in any action      necessary to effect recovery.         e. (1)  Notwithstanding section 628.3 when a foreclosure of a      mortgage on real property results from the enforcement of a      due-on-sale clause, the mortgagor may redeem the real property at any      time within three years from the day of sale under the levy, and the      mortgagor shall, in the meantime, be entitled to the possession      thereof; and for the first thirty months thereafter such right of      redemption is exclusive.  Any real property redeemed by the debtor      shall thereafter be free and clear from any liability for any unpaid      portion of the judgment under which the real property was sold.  The      right of redemption established by this paragraph is not subject to      waiver by the mortgagor and the period of redemption established by      this paragraph shall not be reduced.  The times for redemption by      creditors provided in sections 628.5, 628.15 and 628.16 shall be      extended to thirty-three months in any case in which the mortgagor's      period for redemption is extended by this paragraph.  This paragraph      does not apply to foreclosure of a mortgage if for any reason other      than enforcement of a due-on-sale clause.  As used in this paragraph,      "due-on-sale clause" means any type of covenant which gives the      mortgagee the  right to demand payment of the outstanding balance or      a major part thereof upon a transfer by the mortgagor to a third      party of an interest of the mortgagor in property covered by the      mortgage.  This paragraph applies to any foreclosure occurring on or      after May 10, 1980.  However, this paragraph does not apply if the      lender establishes, based on reasonable criteria which are not more      restrictive than those used to evaluate new mortgage-loan      applications, that the security interest or the likelihood of      repayment is impaired as a result of the transfer of interest.         (2)  This lettered paragraph applies only to a mortgage given in      connection with a loan as defined in subsection 1 of this section.         3.  A lender who offers to make a loan with only those fees      authorized by subsection 2 may also offer in exchange for the payment      of an interest reduction fee to make a loan on all of the same terms      except at a lower interest rate and with the lower payments resulting      from the lower interest rate.  Prior to accepting an application for      a loan which includes a payment reduction fee, the lender shall      provide the potential borrower with a written disclosure describing      in plain language the specific terms which the loan would have both      with the payment reduction fee and without it.  This disclosure shall      include a good faith example showing the amount of the payment      reduction fee and the reduction in payments which would result from      the payment of this fee in a typical loan transaction.  A payment      reduction fee which complies with this subsection may be collected in      connection with a loan in addition to the fees authorized by      subsection 2.         4.  A lender shall not, as a condition of making a loan as defined      in this section, require the borrower to place money, or to place      property other than that which is given as security for the loan, on      deposit with or in the possession or control of the lender or some      other person if the effect is to increase the yield to the lender      with respect to that loan; provided that this subsection shall not      prohibit a lender from requiring the borrower to deposit money      without interest with the lender in an escrow account for the payment      of insurance premiums, property taxes and special assessments payable      by the borrower to third persons.  Any lender who requires an escrow      account shall not violate the provisions of section 507B.5,      subsection 1, paragraph "a".         5.  If any lender receives interest either in a manner or in an      amount which is prohibited by subsection 4 of this section, the      borrower shall have the right to recover all amounts collected or      earned by the lender, whether or not from the borrower, in violation      of this section, plus attorney fees, plus court costs incurred in any      action necessary to effect such recovery.         6. a.  The provisions of this section shall not apply to any      loan which is subject to the provisions of section 636.46, nor shall      it apply to origination fees, administrative fees, commitment fees or      similar charges paid by one lender to another lender if these fees      are not ultimately paid either directly or indirectly by the borrower      who occupies or will occupy the dwelling or by the seller of the      dwelling.         b.  A lender shall not use an appraisal for any purpose in      connection with making a loan under this section if the appraisal is      performed by a person who is employed by or affiliated with any      person receiving a commission or fee from the seller of the property.      If a lender violates this paragraph the borrower is entitled to      recover any actual damages plus the costs paid by the borrower, plus      attorney fees incurred in an action necessary to effect recovery.  
         Section History: Early Form
         [C79, S79, C81, § 535.8; 81 Acts, ch 176, § 1, 2] 
         Section History: Recent Form
         83 Acts, ch 124, § 19, 20; 85 Acts, ch 252, §39; 2004 Acts, ch      1141, §74; 2004 Acts, ch 1175, §262; 2005 Acts, ch 19, §113, 114;      2008 Acts, ch 1160, §14; 2008 Acts, ch 1191, §79, 80         Referred to in § 16.42, 524.905, 533.315, 534.205, 534.206, 535.2,      535.10, 536A.20, 537.1301