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e-CFR
Data is current as of May 22, 2008

Title 12:
Banks and Banking
PART 590—PREEMPTION OF STATE USURY LAWS

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§ 590.4   Federally-related residential
manufactured housing loans—consumer protection provisions.

(a) Definitions. As used in this section:

(1) Prepayment. A “prepayment” occurs upon—

(i) Refinancing or consolidation of the indebtedness;

(ii) Actual prepayment of the indebtedness by the debtor, whether
voluntarily or following acceleration of the payment obligation by the
creditor; or

(iii) The entry of a judgment for the indebtedness in favor of the
creditor.

(2) Actuarial method. The term actuarial method means the
method of allocating payments made on a debt between the outstanding
balance of the obligation and the finance charge pursuant to which a
payment is applied first to the accumulated finance charge and any
remainder is subtracted from, or any deficiency is added to, the
outstanding balance of the obligation.

(3) Precomputed Finance Charge. The term precomputed finance
charge means interest or a time/price differential as computed by the
add-on or discount method. Precomputed finance charges do not include loan
fees, points, finder's fees, or similar charges.

(4) Creditor. The term creditor means any entity covered
by this part, including those which regularly extend or arrange for the
extension of credit and assignees that are creditors under section
501(a)(1)(C)(v) of the Depository Institutions Deregulation and Monetary
Control Act of 1980.

(b) General. (1) The provisions of the constitution or the laws
of any state expressly limiting the rate or amount of interest, discount
points, finance charges, or other charges which may be charged, taken,
received, or reserved shall not apply to any loan, mortgage, credit sale,
or advance which is secured by a first lien on a residential mobile home
if a creditor covered by this part complies with the consumer protection
regulations of this section.

(2) Relation to state law. (i) In making loans or credit sales
subject to this section, creditors shall comply with state and Federal law
in accordance with the following:

(A) State law regulating matters not covered by this section.
When state law regulating matters not covered by this section is
otherwise applicable to a loan or credit sale subject to this section,
creditors shall comply with such state law provisions.

(B) State law regulating matters covered by this section.
Creditors need comply only with the provisions of this section, unless
the Office determines that an otherwise applicable state law regulating
matters covered by this section provides greater protection to consumers.
Such determinations shall be published in theFederal
Registerand shall operate prospectively.

(ii) Any interested party may petition the Office for a determination
that state law requirements are more protective of consumers than the
provisions of this section. Petitions shall be sent to: Secretary to the
Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552,
and shall include:

(A) A copy of the state law to be considered;

(B) Copies of any relevant judicial, regulatory, or administrative
interpretations of the state law; and

(C) An opinion or memorandum from the state Attorney General or other
appropriate state official having primary enforcement responsibilities for
the subject state law provision, indicating how the state law to be
considered offers greater protection to consumers than the Office's
regulation.

(c) Refund of precomputed finance charge. In the event the
entire indebtedness is prepaid, the unearned portion of the precomputed
finance charge shall be refunded to the debtor. This refund shall be in an
amount not less than the amount which would be refunded if the unearned
precomputed finance charge were calculated in accordance with the
actuarial method, except that the debtor shall not be entitled to a refund
which, is less than one dollar. The unearned portion of the precomputed
finance charge is, at the option of the creditor, either:

(1) That portion of the precomputed finance charge which is allocable
to all unexpired payment periods as originally scheduled, or if deferred,
as deferred. A payment period shall be deemed unexpired if prepayment is
made within 15 days after the payment period's scheduled due date. The
unearned precomputed finance charge is the total of that which would have
been earned for each such period had the loan not been precomputed, by
applying to unpaid balances of principal, according to the actuarial
method, an annual percentage rate based on those charges which are
considered precomputed finance charges in this section, assuming that all
payments were made as originally scheduled, or as deferred, if deferred.
The creditor, at its option, may round this annual percentage rate to the
nearest one-quarter of one percent; or

(2) The total precomputed finance charge less the earned precomputed
finance charge. The earned precomputed finance charge shall be determined
by applying an annual percentage rate based on the total precomputed
finance charge (as that term is defined in this section), under the
actuarial method, to the unpaid balances for the actual time those
balances were unpaid up to the date of prepayment. If a late charge or
deferral fee has been collected, it shall be treated as a payment.

(d) Prepayment penalties. A debtor may prepay in full or in part
the unpaid balance of the loan at any time without penalty. The right to
prepay shall be disclosed in the loan contract in type larger than that
used for the body of the document.

(e) Balloon payments— (1) Federal savings associations.
Federal savings association creditors may enter into agreements with
debtors which provide for non-amortized and partially-amortized loans on
residential manufactured homes, and such loans shall be governed by the
provisions of this section and §560.220 of this chapter.

(2) Other creditors. All other creditors may enter into
agreements with debtors which provide for non-amortized and
partially-amortized loans on residential manufactured homes to the extent
authorized by applicable Federal or state law or regulation.

(f) Late charges. (1) No late charge may be assessed, imposed,
or collected unless provided for by written contract between the creditor
and debtor.

(2) To the extent that applicable state law does not provide for a
longer period of time, no late charge may be collected on an installment
which is paid in full on or before the 15th day after its scheduled or
deferred due date even though an earlier maturing installment or a late
charge on an earlier installment may not have been paid in full. For
purposes of assessing late charges, payments received are deemed to be
applied first to current installments.

(3) A late charge may be imposed only once on an installment; however,
no such charge may be collected for a late installment which has been
deferred.

(4) To the extent that applicable state law does not provide for a
lower charge or a longer grace period, a late charge on any installment
not paid in full on or before the 15th day after its scheduled or deferred
due date may not exceed five percent of the unpaid amount of the
installment.

(5) If, at any time after imposition of a late charge, the lender
provides the borrower with written notice regarding amounts claimed to be
due but unpaid, the notice shall separately state the total of all late
charges claimed.

(6) Interest after the final scheduled maturity date may not exceed the
maximum rate otherwise allowable under State law for such contracts, and
if such interest is charged, no separate late charge may be made on the
final scheduled installment.

(g) Deferral fees. (1) With respect to mobile home credit
transactions containing precomputed finance charges, agreements providing
for deferral of all or part of one or more installments shall be in
writing, signed by the parties, and

(i) Provide, to the extent that applicable state law does not provide
for a lower charge, for a charge not exceeding one percent of each
installment or part thereof for each month from the date when such
installment was due to the date when it is agreed to become payable and
proportionately for a part of each month, counting each day as 1/30th of a
month;

(ii) Incorporate by reference the transaction to which the deferral
applied;

(iii) Disclose each installment or part thereof in the amount to be
deferred, the date or dates originally payable, and the date or dates
agreed to become payable: and

(iv) Set forth the fact of the deferral charge, the dollar amount of
the charge for each installment to be deferred, and the total dollar
amount to be paid by the debtor for the privilege of deferring
payment.

(2) No term of a writing executed by the debtor shall constitute
authority for a creditor unilaterally to grant a deferral with respect to
which a charge is to be imposed or collected.

(3) The deferral period is that period of time in which no payment is
required or made by reason of the deferral.

(4) Payments received with respect to deferred installments shall be
deemed to be applied first to deferred installments.

(5) A charge may not be collected for the deferral of an installment or
any part thereof if, with respect to that installment, a refinancing or
consolidation agreement is concluded by the parties, or a late charge has
been imposed or collected, unless such late charge is refunded to the
borrower or credited to the deferral charge.

(h) Notice before repossession, foreclosure, or acceleration.
(1) Except in the case of abandonment or other extreme circumstances,
no action to repossess or foreclose, or to accelerate payment of the
entire outstanding balance of the obligation, may be taken against the
debtor until 30 days after the creditor sends the debtor a notice of
default in the form set forth in paragraph (h)(2) of this section. Such
notice shall be sent by registered or certified mail with return receipt
requested. In the case of default on payments, the sum stated in the
notice may only include payments in default and applicable late or
deferral charges. If the debtor cures the default within 30 days of the
postmark of the notice and subsequently defaults a second time, the
creditor shall again give notice as described in this paragraph (h)(1).
The debtor is not entitled to notice of default more than twice in any
one-year period.

(2) The notice in the following form shall state the nature of the
default, the action the debtor must take to cure the default, the
creditor's intended actions upon failure of the debtor to cure the
default, and the debtor's right to redeem under state law.

To:

Date:      , 19

Notice of Default and Right To Cure Default

Name, address, and telephone number of creditor

Account number, if any

Brief identification of credit transaction

You are now in default on this credit transaction. You have a right to
correct this default within 30 days from the postmarked date of this
notice.

If you correct the default, you may continue with the contract as
though you did not default. Your default consists of:

Describe default alleged

Cure of default: Within 30 days from the postmarked date of this
notice, you may cure your default by (describe the acts necessary for
cure, including, if applicable, the amount of payment required, including
itemized delinquency or deferral charges).

Creditor's rights: If you do not correct your default in the time
allowed, we may exercise our rights against you under the law by (describe
action creditor intends to take).

If you have any questions, write (the creditor) at the above address or
call (creditor's designated employee) at (telephone number) between the
hours
of      and      on
(state days of week).

If this default was caused by your failure to make a payment or
payments, and you want to pay by mail, please send a check or money order;
do not send cash.

[54 FR 49715, Nov. 30, 1989, as amended at 61 FR 50984, Sept. 30, 1996;
67 FR 60554, Sept. 26, 2002]

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