§ 34-23-5 - Prepayment of mortgage loans.
SECTION 34-23-5
§ 34-23-5 Prepayment of mortgage loans.– (a) Every bank, trust company, loan company, building-loan association, creditunion, finance company and other person(s) making a loan or loans secured by amortgage or mortgages on real estate located in Rhode Island containing thereondwelling houses of not more than four (4) dwelling units shall provide in themortgage note, and in any event the loan or loans shall be upon the conditionthat the full payment of mortgage may be made at any time after one year fromthe making of the loan without penalty, provided further, that during the firstyear, penalty or other charges for prepayment shall not exceed two percent (2%)of the balance due at date of the pay-off. If interest or other charges inconnection with the loan or loans shall have been prepaid or included in theface of the mortgage, the holder thereof shall rebate the interest or othercharges under regulations promulgated by the director of the department ofbusiness regulation.
(b) Alternatively a bank, trust company, loan company,building-loan association, credit union, finance company and other person(s)making a nonpurchase money loan or loans secured by a mortgage or mortgages onreal estate located in Rhode Island containing on it dwelling houses of notmore than four (4) dwelling units, may impose a prepayment penalty or othersimilar charges for the prepayment of a mortgage loan notwithstanding theprepayment penalty limitation imposed in subsection (a), but only if:
(1) The terms, conditions and amount of the prepaymentpenalty or other similar charges are prominently and conspicuously disclosed inwriting to the borrower;
(2) The borrower agrees and consents to be bound by theseterms and conditions; and
(3) Provided no prepayment penalty shall be imposed for anyprepayment occurring more than sixty (60) months after the date of such loan.
(c) Any bank, trust company, loan company, building-loanassociation, credit union, finance company or other lender that chooses tooffer a mortgage product pursuant to subsection (b) shall have available asimilar mortgage product that complies with the limitations set forth insubsection (a) and all applicable federal regulations.
(d) Any prepayment penalty imposed under this section shallnot be construed as interest under the provisions of § 6-26-2.