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HOUSE BILL 1188
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Passed Legislature - 1995 Regular Session
State of Washington 54th Legislature 1995
Regular Session
By
Read first time 01/17/95.
Referred to Committee on Financial Institutions & Insurance.
Concerning the
loan security ratio.
AN ACT Relating to
loan-to-value ratios and examination periods; and amending RCW 31.04.125 and
31.04.145.
BE IT ENACTED BY THE
LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1. RCW 31.04.125 and 1991 c
208 s 13 are each amended to read as follows:
(1) No licensee may
make a loan with a repayment period greater than six years and fifteen days
after the loan origination date except for open-end loans or loans secured by
real estate or personal property used as a residence.
(2) No licensee may
make a loan using any method of calculating interest other than the simple
interest method; except that the add-on method of calculating interest may be
used for a loan not secured by real property or personal property used as a
residence when the repayment period does not exceed three years and fifteen
days after the loan origination date.
(3) ((No licensee
may make a loan secured by real estate in an amount in excess of ninety percent
of the value of such real estate and improvements, including all prior liens
against the property.
(4))) No licensee may make a loan using the add-on
method to calculate interest that does not provide for a refund to the borrower
or a credit to the borrower's account of any unearned interest when the loan is
repaid before the original maturity date in full by cash, by a new loan, by
refinancing, or otherwise before the final due date. The refund must be
calculated using the actuarial method, unless a sum equal to two or more
installments has been prepaid and the account is not in arrears and continues
to be paid ahead, in which case the interest on the account must be
recalculated by the simple interest method with the refund of unearned interest
made as if the loan had been made using the simple interest method. When
computing an actuarial refund, the lender may round the annual rate used to the
nearest quarter of one percent.
In computing a required
refund of unearned interest, a prepayment made on or before the fifteenth day
after the scheduled payment date is deemed to have been made on the payment
date preceding the prepayment. In the case of prepayment before the first
installment due date, the company may retain an amount not to exceed
one-thirtieth of the first month's interest charge for each day between the
origination date of the loan and the actual date of prepayment.
(((5))) (4)
No licensee may provide credit life or disability insurance in an amount
greater than that required to pay off the total balance owing on the date of
the borrower's death net of refunds in the case of credit life insurance, or
all minimum payments that become due on the loan during the covered period of
disability in the case of credit disability insurance. The lender may not
require any such insurance.
(((6))) (5)
Except in the case of loans by mail, where the borrower has sufficient time to
review papers before returning them, no licensee may prepare loan papers in
advance of the loan closing without having reviewed with the borrower the terms
and conditions of the loan to include the type and amount of insurance, if any,
requested by the borrower.
Sec. 2. RCW 31.04.145 and 1994 c
92 s 169 are each amended to read as follows:
For the purpose of
discovering violations of this chapter or securing information lawfully
required under this chapter, the director may at any time, either personally or
by a designee, investigate the loans and business and examine, wherever
located, the books, accounts, records, and files used in the business of every
licensee and of every person who is engaged in the business described in RCW
31.04.035, whether the person acts or claims to act as principal or agent, or
under or without the authority of this chapter. For that purpose the director
and designated representative shall have free access to the offices and places
of business, books, accounts, papers, records, files, safes, and vaults of all
such persons. The director and persons designated by the director may require
the attendance of and examine under oath all persons whose testimony may be
required about the loans or the business or the subject matter of any investigation,
examination, or hearing. The director shall make such an examination of the
affairs, business, office, and records of each licensee ((at least once each
eighteen months)) as determined by rule. The licensee so examined
shall pay to the director the actual cost of examining and supervising each
licensed place of business.
Passed
the House February 3, 1995.
Passed
the Senate April 4, 1995.
Approved by the Governor April 12, 1995.
Filed in
Office of Secretary of State April 12, 1995.
