A. In the exercise of its options under a due-on-sale clause, in a real property loan made or assumed between March 15, 1979 and October 15, 1982, a lender shall be prohibited from accelerating the indebtedness and declaring the loan due and payable and shall be limited in increasing the interest rate upon an assumption of the loan upon the transfer of the real property to the existing contract rate of interest plus an increase in the rate of interest not greater than two percentage points and a fee to transfer the real property loan of not greater than one percentage point of the unpaid principal balance of the real property loan at the time of the transfer. On each succeeding assumption of the real property loan on the same property, the lender may increase the contract rate of interest and charge the transfer fee as provided in the previous sentence. There shall be no enforcement of a prepayment penalty in said mortgages.
B. In no case shall the rate of interest charged on an assumption as provided in Subsection A of this section exceed one percent above the most recent federal national mortgage association auction rate of interest at which bids were made, rounded to the nearest one-fourth of one percent. Upon closing, the lender shall disclose in writing to the party assuming the real property loan the most recent federal national mortgage association auction rate of interest referred to in this subsection.
History: Laws 1983, ch. 314, § 5.
ANNOTATIONSPrepayment penalty. — The prohibition on enforcement of a prepayment penalty in Subsection A is sufficiently justified by the significant and legitimate public purpose of promoting the alienability of land to withstand challenge under N.M. Const., Art. II, § 19. Los Quatros, Inc. v. State Farm Life Ins. Co., 1990-NMSC-082, 110 N.M. 750, 800 P.2d 184.
The prohibition on enforcing prepayment bans, found in the last sentence of Subsection A, applies whether or not there has been a sale and whether or not the lender has sought to exercise its options under a due-on-sale clause. Los Quatros, Inc. v. State Farm Life Ins. Co., 1990-NMSC-082, 110 N.M. 750, 800 P.2d 184.
Even if a prohibition on prepayment penalties is governed by the restriction on window-period loans in the Garn - St. Germain Act (12 U.S.C. § 1701 j-3(b)(1)), that act does not prevent a state from enlarging the class of loans subject to the prohibition, so long as they are "real property loans" made or assumed during the window period. Los Quatros, Inc. v. State Farm Life Ins. Co., 1990-NMSC-082, 110 N.M. 750, 800 P.2d 184.