Tenn. Comp. R. & Regs. 0180-12-.16 - OTHER LOANS

Current through March 20, 2022

(1) Every association is authorized to make any type loan that a Federal association can make.
(2) Variable Rate Mortgage:
(a) Standard Adopted; Effect of Changes in Standard - The standard for savings and loan association, upon which variations in the interest rate on mortgage contracts, deeds of trust, real estate sales contracts or any note or negotiable instrument (hereinafter referred to as "note") issued in connection therewith may be based, shall be the last published weighted average cost of savings, borrowings and Federal Home Loan Bank of Cincinnati, or such other Standard as the Commissioner may approve.

Subject to the provisions set forth below, an association in exercising its rights to change the interest rate pursuant to a variable interest clause in its note shall effect such changes in such manner as to maintain the same margin above or below the initial interest rate of such note as the last published Standard is above or below the last Standard at the date of such note.

1. Any increase or decrease in the interest rate shall not exceed ¼ of 1/% per annum in any semi-annual period and shall not result in a rate more than 2.5 percentage points greater than the rate for the first loan payment due after the closing of the loan.
2. No increase or decrease in the interest rate in any semi-annual period shall be less than 1/10 of 1/% per annum except for increases or decreases not previously invoked in full by reason of the ¼ of 1/% per annum maximum limitation.
3. No change in the rate of interest shall be made, and no notice of any such change shall be given, during the first semi-annual period.
4. After the first semi-annual period, there shall be only one change in any one semi-annual period.
5. At least six months shall elapse between each change.
6. Each change in rate shall become effective commencing on the date the monthly installment becomes due during the second month following publication of the Standard for each semi-annual period. Notwithstanding the foregoing, an association may provide in its note that the first change in rate shall become effective with the first loan installment falling due more than 30 days after the first publication of the Standard following expiration of the first semi-annual period of the loan.
7. Decreases shall be mandatory and increases shall be optional with the lender.
8. The fact that an association may not have invoked a permissible increase, in whole or in part, shall not be deemed a waiver of the association's right to invoke said increase at any time thereafter within the limits imposed by this subchapter.
(b) Change in Monthly Payments - An association, in exercising its right pursuant to a variable interest rate clause to change the interest rate, may at the option of the borrower (a) change the amount of the monthly payment of an amortized loan, or (b) reduce or extend the maturity date, or (c) a combination of both (a) and (b), provided the loan will be paid in full in regular monthly installments by the end of the maximum amortization period allowed at the time the instrument was executed or for such additional periods as may be required to amortize the loan without increasing the existing monthly payment, but not to exceed a maximum term of 40 years.
(c) Modification Agreements - If an association executes a modification agreement with a borrower respecting a mortgage contract, deed of trust, real estate sales contract, or modifies any note or negotiable instrument issued in connection therewith and the modification agreement or modified note includes a variable interest rate, it shall comply with these regulations.
(d) Notice to Borrowers - If an association changes the interest rate on any instrument evidencing a loan covered by these regulations, it shall notify the borrower in writing of the change and the effect, if any, on the number of installment payments required to pay the remaining balance of the loan. If the change increases the interest rate, the association shall also inform the borrower of his right to prepay all or part of the loan within 90 days of the notice, without a prepayment charge. The notice required under the section shall be deemed given when it is deposited in the United States mail, postage prepaid, addressed to the current owner of the property described in the deed of trust securing the note and any other person personally liable on the loan, as those persons' names and addresses appear on the association's records at the time of giving the notice.
(3) Graduated Payment Mortgage. (reserved)
(4) Reserve-Annuity Mortgage. (reserved)

Notes

Tenn. Comp. R. & Regs. 0180-12-.16
Original rule certified June 10, 1974. Repeal and new rule filed June 30, 1980; effective September 15, 1980. Transferred from the Department of Commerce and Insurance by Executive Order Number 38; effective February 11, 1983.

Authority: T.C.A. §§ 45-3-402 and 45-3-701(c).

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