Iowa Amends Mortgage, Consumer Credit Laws

Mortgage Origination Consumer Lending

On March 26, Iowa Governor Terry Branstad signed into law HF 2324, which revises the state’s mortgage and consumer credit statutes to align with federal law. The bill amends the current $25,000 loan ceiling applicable to certain consumer credit transactions and replaces it with a “threshold amount” that incorporates by reference limits established under federal Truth in Lending Act. The bill also adopts the federal definition of “points and fees” for mortgage transactions and provides that if a loan is extended with points and fees higher than those specified under federal law the loan is subject to state law, including monetary limits on loan origination or processing and broker fees, a limit on the types of permissible lender charges, and a limit on fees relating to payment of interest reduction fees in exchange for a lower rate of interest. The bill also amends the definition of “finance charge” in the state’s consumer credit code to include an initial charge imposed by a financial institution for an overdrawn account. Finally, the bill adds a new section that allows banks to include in their consumer credit contracts over $25,000 a provision that a consumer is responsible for reasonable attorney fees if the bank is the prevailing party in a lawsuit arising from the transaction. The changes take effect July 1, 2014.