2023 Wisconsin Statutes & Annotations › Chapter 138 - Money and rates of interest. › 138.052 - Residential mortgage loans.

138.052
Residential mortgage loans.
(1)
In this section:
(a)
“Contract rate" means the rate contracted to be paid from time to time on the principal of a loan.
(b)
“Loan" means a loan secured by a first lien real estate mortgage on, or an equivalent security interest in, a one-family to 4-family dwelling which the borrower uses as his or her principal place of residence and which is made, refinanced, renewed, extended or modified on or after November 1, 1981, but does not include a manufactured home transaction as defined in s. 138.056 (1) (bg).
(c)
“Loan administration" means a lender's processing of a loan and includes review, underwriting and evaluation of the loan application, document processing and preparation and administration of the loan closing, but does not include appraisals, inspections, surveys, credit reports or other activities incidental to loan origination and normally taking place outside the office of the lender or performed by 3rd persons.
(d)
“Person related to" has the meaning given under s. 421.301 (32) and (33).
(2)
(a)
1.
A loan may be prepaid by the borrower at any time in whole or in part.
2.
Except as provided in s. 428.207, the parties may agree that if a prepayment is made within 5 years of the date of the loan, then the lender shall receive an amount not exceeding 60 days' interest at the contract rate on the amount by which the aggregate principal prepayments for a 12-month period exceeds 20 percent of the original amount of the loan.
3.
If a prepayment is made 5 or more years from the date the loan is made, no premium or penalty may be received by the lender. This subdivision applies notwithstanding any refinancing, renewal, extension or modification of the loan.
(b)
Upon prepayment of a loan in full by cash, renewal or refinancing, the borrower is entitled to a refund of unearned interest paid. Unearned interest is that portion of any prepaid charge, excluding amounts permitted under sub. (3), multiplied by the number of unexpired payment periods as of the date of prepayment and divided by the total number of payment periods, plus, at the option of the lender, either:
1.
The portion of interest which is allocable to all unexpired payment periods as scheduled. Except as otherwise agreed by the parties under sub. (4), a payment period is unexpired if prepayment is made within 15 days after the payment's due date. The unearned interest is the interest which, assuming all payments are made as scheduled, would be earned for each unexpired payment period by applying to unpaid balances of principal, according to the actuarial method, the contract rate on the date of prepayment. The creditor may decrease the annual interest rate to the next multiple of 0.25 percent.
2.
The total interest charge less all prepaid interest charges and the amount determined by applying the contract rate, according to the actuarial method, to the unpaid balances for the actual time those balances were unpaid up to the date of prepayment.
(3)
For purposes of computing a refund under sub. (2) (b), interest does not include any of the following:
(a)
Identifiable and separately itemized charges for services incident to the loan if they are bona fide and paid to 3rd parties.
(b)
Fees, discounts or other sums actually imposed by the government national mortgage association, the federal national mortgage association, the federal home loan mortgage corporation or other governmentally sponsored secondary mortgage market purchaser of the loan or any private secondary mortgage market purchaser of the loan who is not a person related to the original lender.
(c)
A loan administration fee charged by a lender, including fees paid to 3rd parties for loan administration services, not exceeding 2 percent of the principal amount of any construction loan and 2 percent of the principal amount of any other loan.
(d)
The amount of any prepayment charge authorized under sub. (2) (a) 2. and received.
(e)
Loan commitment fees.
(f)
Amounts paid to the lender by any person other than the borrower.
(4)
For the purpose of calculating the rate of interest under sub. (2) (b), the parties may agree that any installment paid within 30 days prior to or after the scheduled due date is paid on the due date.
(5)
(a)
Except as provided in pars. (am) and (b), a bank, credit union, savings bank, savings and loan association or mortgage banker which originates a loan after January 31, 1983, and before January 1, 1994, and which requires an escrow to assure the payment of taxes or insurance shall pay interest on the outstanding principal balance of the escrow of not less than 5.25 percent per year, unless the escrow funds are held by a 3rd party in a noninterest-bearing account.
(am)
1.
Except as provided in par. (b) and unless the escrow funds are held by a 3rd party in a noninterest-bearing account, a bank, credit union, savings bank, savings and loan association or mortgage banker which originates a loan on or after January 1, 1994, and before April 18, 2018, or a loan subject to subd. 3., and which requires an escrow to assure the payment of taxes or insurance shall pay interest on the outstanding principal balance of the escrow at the variable interest rate established under subd. 2.
2.
a.
Annually, the division of banking for banks, savings and loan associations, and savings banks, and the office of credit unions for credit unions, shall determine the interest rate that is the average of the interest rates paid, rounded to the nearest one-hundredth of a percent, on regular passbook deposit accounts by institutions under the division's or office's jurisdiction at the close of the last quarterly reporting period that ended at least 30 days before the determination is made.
b.
Within 5 days after the date on which the determination is made, the division of banking shall calculate the average, rounded to the nearest one-hundredth of a percent, of the rates determined by the division of banking and the office of credit unions and report that interest rate to the legislative reference bureau within 5 days after the date on which the determination is made.
c.
The legislative reference bureau shall publish the average rate in the next publication of the Wisconsin administrative register. The published interest rate shall take effect on the first day of the first month following its publication and shall be the interest rate used to calculate interest on escrow accounts that are subject to this subdivision until the next year's interest rate is published under this subd. 2. c.
3.
The interest rate published under subd. 2. c. also applies to loans originated after January 31, 1983, and before January 1, 1994, if an interest rate is not specified in the loan agreement.
(b)
The parties may agree to waive payment of all or part of the interest required under par. (a) or (am) if more than 75 percent of the lender's interest in the loan is sold to a 3rd party who is not a person related to the lender and the escrow funds are held by the 3rd party.
(5m)
(a)
In this subsection, “escrow agent" means a person who receives escrow payments on behalf of itself or another person.
(b)
1.
Except as provided in par. (e), if an escrow is required to assure the payment of property taxes, a bank, credit union, savings bank, savings and loan association or mortgage banker which originates a loan on or after July 1, 1988, shall, before the loan closing, provide the borrower with a written notice clearly stating that the borrower may require the escrow agent to make payments in any manner specified in subd. 3. from the amount escrowed to pay property taxes and the responsibilities of the borrower and escrow agent as provided in subds. 4. and 5.
2.
Except as provided in par. (e), if an escrow is required to assure the payment of property taxes for a loan originated before July 1, 1988, the escrow agent shall send, by November 15, 1988, written notice to the borrower clearly stating that the borrower may require the escrow agent to make payments in any manner specified in subd. 3. from the amount escrowed to pay property taxes and the responsibilities of the borrower and escrow agent as provided in subds. 4. and 5.
3.
Except as provided in par. (e), a borrower may require an escrow agent who receives escrow payments to assure the payment of the borrower's property taxes to do any of the following, if the borrower notifies the escrow agent as provided in subd. 4. and if the borrower is current in his or her loan payments:
a.
Except as provided in subd. 3m., by December 20, send to the borrower a check in the amount of the funds held in escrow for the payment of property taxes, made payable to the borrower and the town, city or village treasurer authorized to collect the tax.
b.
Pay the property taxes by December 31, if the escrow agent has received a tax statement for that property by December 20.
c.
Pay the property taxes when due.
3m.
In its sole discretion, an escrow agent may send a check under subd. 3. a. that is made payable only to the borrower.
4.
To require the escrow agent to make payments in any of the manners specified in subd. 3., the borrower shall send, by November 1, written notice to the escrow agent specifying the manner, from the 3 choices under subd. 3., that the borrower wants the escrow agent to make payments. Except as provided in subd. 5. b., once notified, the escrow agent shall annually make payments in that manner unless the borrower is not current in his or her loan payments or unless otherwise notified in writing by the borrower by November 1.
5.
a.
If the borrower chooses to receive payments as provided in subd. 3. a. or receives payment under subd. 3m., the borrower shall annually, by March 31, send to the person to whom the borrower makes his or her loan payments a copy of the receipt for paid property taxes.
b.
If the borrower fails to comply with subd. 5. a., the borrower loses the option of receiving payments that year in the manner specified in subd. 3. a. During the next year, the borrower may again receive payments under subd. 3. a. if the borrower renotifies the escrow agent by sending written notice to the escrow agent by November 1 of the next year and if the borrower is current in his or her loan payments.
6.
If the borrower sends the check received under subd. 3. a. to the town, city or village treasurer after the county has assumed responsibility for collecting property taxes, the town, city or village treasurer shall accept the check and pay over to the county treasurer the amount of the check. If the amount of the check sent by the borrower to the town, city or village treasurer exceeds the amount of property taxes owed by the borrower, the town, city or village treasurer shall refund the excess amount to the borrower and, if the county has assumed responsibility for collecting property taxes, pay over to the county treasurer the remaining amount of the check.
(c)
A borrower may establish an escrow account required for the payment of taxes and insurance in a financial institution, as defined in s. 710.05 (1) (c), of the borrower's choice if the escrow agent fails to comply with par. (b) 3., unless the lender or person to whom the loan is sold or released demonstrates that the financial institution is incapable of servicing the escrow account.
(d)
If a borrower establishes an escrow account under par. (c), the borrower shall annually, by March 31, send to the person to whom the borrower makes his or her loan payments verification of the amounts which the borrower deposited in the escrow account during the previous 12 months and copies of receipts for taxes and insurance paid during the previous 12 months.
(e)
Paragraphs (b) to (d) do not apply to an escrow required in connection with a loan to assure the payment of property taxes, whether the loan is originated before, on or after May 3, 1988, if it is the practice of the escrow agent to, by December 20, pay to the borrower the amount held in escrow for the payment of property taxes or to send the borrower a check in the amount of the funds held in escrow for the payment of property taxes, made payable to the borrower and the treasurer authorized to collect the tax. If the escrow agent in any year chooses not to make the payment by December 20 for any reason other than because the borrower is not current in his or her loan payments, the escrow agent shall send, by October 15 of that year, written notice to the borrower clearly stating that the borrower may require the escrow agent to make payments in any manner specified in par. (b) 3. from the amount escrowed to pay property taxes and the responsibilities of the borrower and escrow agent as provided in par. (b) 4. and 5.
(6)
The parties may agree to imposition of a late payment charge not exceeding 5 percent of the unpaid amount of any installment not paid on or before the 15th day after its due date. For purposes of this subsection, payments are applied first to current installments and then to delinquent installments. A delinquency charge may be imposed only once on any installment.
(7)
Interest imposed on the amount due after acceleration or maturity of a loan may not exceed the contract rate.
(7e)
A bank, credit union, savings bank, savings and loan association, mortgage banker or any other lender which receives an application for a loan after November 1, 1988, shall do all of the following:
(a)
If an application receives adverse action, provide a written statement of the reasons for the action when the action is communicated to the applicant, except that delivery of a notice of adverse action conforming to the requirements of 15 USC 1601 to 1693r and the regulations adopted under that law satisfies the requirements of this paragraph.
(b)
Before accepting an application or fee in connection with a loan, deliver to the potential loan applicant a written disclosure which clearly states all of the following:
1.
Whether an application fee or other charge paid by an applicant in connection with a loan application is refundable in whole or in part if the application is denied or the loan is not closed.
2.
Whether the terms of the agreement to make the loan, including but not limited to the interest rate and any fees charged in connection with the loan, are fixed through the date of the loan closing.
3.
If the lender may change the terms of the agreement to make the loan if the loan is not closed on or before the date agreed upon, the specific terms which the lender may change.
(7m)
(a)
A lender shall notify the borrower as provided in par. (b) if on or after May 3, 1988, the payment, collection or other loan or escrow services related to the loan are sold or released.
(b)
The notice required under par. (a) shall be in writing and shall include the name, address and telephone number of the party to whom servicing of the loan is sold or released. The lender shall deliver the notice to the borrower by mail or personal service within 15 working days after servicing of the loan is sold or released.
(7s)
A person who receives loan or escrow payments on behalf of itself or another person shall do all of the following:
(a)
Respond to a borrower's inquiry within 15 days after receiving the inquiry.
(b)
Consider that a loan payment by check, or other negotiable or transferable instrument, is made on the date on which the check or instrument is physically received, except that the person may charge back an uncollected loan payment.
(8)
This section does not apply to a loan insured, or committed to be insured, or secured by mortgage or trust deed insured by the U.S. secretary of housing and urban development, insured, guaranteed or committed to be insured or guaranteed under 38 USC 3701 to 3727 or insured or committed to be insured under 7 USC 1921 to 1995.
(9)
Chapters 421 to 427 and subch. I of ch. 428 do not apply to the refinancing, modification, extension, renewal or assumption of a loan which had an original principal balance in excess of $25,000 if the unpaid principal balance of the loan has been reduced to $25,000 or less.
(10)
This section does not apply to any of the following:
(a)
A loan to a corporation or a limited liability company.
(b)
A loan that is primarily for a business purpose or for an agricultural purpose, as defined in s. 421.301 (4).
(11)
The contract rate is not subject to rate limitations imposed under this chapter or ss. 218.0101 to 218.0163 or under s. 422.201.
(12)
(a)
Any lender violating sub. (2) (b), (5), (5m) (b) 1., (6), (7), (7e), (7m) or (7s), or an escrow agent, as defined in sub. (5m) (a), violating sub. (5m) (b) 2., is liable to the borrower for $500 plus actual damages, costs and reasonable attorney fees.
(b)
Paragraph (a) does not apply to an unintentional mistake corrected by the lender on demand.
(13)
(a)
In this subsection:
1.
“Financial institution" means a bank, credit union, savings bank, savings and loan association, mortgage banker, or any other lender that receives an application for, services, or enforces the terms of a loan.
2.
“Local governmental unit" means a city, village, town, or county, or any other local governmental unit, as defined in s. 66.0131 (1) (a), but does not include a 1st class city.
(b)
A local governmental unit may not enact an ordinance or adopt a resolution that does any of the following:
1.
Imposes any fee or tax on any financial institution in connection with servicing, or enforcing the terms of, a loan.
2.
Delays any financial institution in enforcing the terms of a loan.
3.
Affects any financial institution's servicing, or enforcement of the terms of, a loan.
4.
Regulates any financial institution with respect to the lending practices or financial services of the financial institution as it relates to loans.
(c)
If a local governmental unit has in effect on July 2, 2013, an ordinance or resolution that is inconsistent with par. (b), the ordinance or resolution does not apply and may not be enforced.
(d)
Except in a 1st class city, the servicing of loans and enforcement of loan terms are matters of statewide concern for which uniformity in regulation is necessary and are subject only to applicable state and federal laws and not to local regulation.
History:  1981 c. 45, 100, 314; 1987 a. 359, 360, 403; 1989 a. 31, 56; 1991 a. 90, 92; 1993 a. 68, 112; 1995 a. 27, 336; 1999 a. 9, 31; 2003 a. 33, 257; 2007 a. 11, 20, 97; 2013 a. 20; 2017 a. 340.
Federal law preemption of this section as applied to federally chartered savings institutions regulated by the federal home loan bank board is discussed. Wisconsin League of Financial Inst. v. Galecki, 707 F Supp. 401 (W.D. Wis. 1989).