2007 - Home Loan Spread Provisions of Predatory Lending Act

Policy Name: Home Loan Spread Provisions of Predatory Lending Act

Date: Enacted in 2007; last revised 2013

Code Location: Section F of Article 1.1 of Chapter 24 of the North Carolina General Statutes: Rate spread home loans. (N.C. G.S.§ 24-1.1F.)

 Summary:

Section F of Article 1.1 of Chapter 24 protects homeowners by defining rate spread home loans as “usurious” in violation of Chapter 24. Section F defines a rate spread home loans as a loan that has an annual percentage rate that exceeds the limits set out in 15 U.S.C. § 1639c(c)(1)(B)(ii). In essence, a rate spread home loan has an annual percentage rate that exceeds the average prime offer rate for a comparable transaction by a certain amount depending on the loan type.

Under Section F, a mortgage broker who brokers a rate spread home loan shall be held jointly liable with the mortgage lender. This section grants the North Carolina Attorney General, the Commissioner of Banks, or any party to a rate spread home loan the power to enforce the provisions of this section. Lastly, Section F also prohibits creditors from offering consumers a residential mortgage loan product that has a prepayment penalty for paying all or part of the principal.

In 2013, the legislature amended Section F to adjust the triggers for a predatory loan classification. This adjustment brought Section F in line with the federal standards set by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.