2023 Wisconsin Statutes & Annotations › Chapter 138 - Money and rates of interest. › 138.055 - Variable rate contracts.

138.055
Variable rate contracts.
(1)
Required contract provisions. No contract between a borrower and a lender secured by a first lien real estate mortgage on, or an equivalent security interest in, an owner-occupied residential property containing not more than 4 dwelling units may contain a variable interest rate clause unless the contract provides that:
(a)
When an increase in the interest rate is permitted by a movement upward of a prescribed index, a decrease in the interest rate is also required by a downward movement of the prescribed index subject to pars. (b) to (f);
(b)
The rate of interest shall not change more than once during any 6-month period;
(c)
Any singular change in the interest rate shall not exceed the rate of $1 per $200 for one year computed upon the declining principal balance and the total variance in such rate shall at no time exceed a rate equal to $2.50 per $100 for one year computed on the declining principal balance greater or lesser than the rate originally in effect;
(d)
Decreases required by the downward movement of the prescribed index shall be mandatory. Increases permitted by the upward movement of the prescribed index shall be optional with the lender. Changes in the interest rate shall only be made when the prescribed index changes a minimum of one-tenth of one percent;
(e)
The fact that a lender may not have invoked an increase, in whole or in part, shall not be deemed a waiver of the lender's right to invoke an increase at any time thereafter within the limits imposed by this section;
(f)
The rate shall not change during the first semiannual period of the loan; and
(g)
The borrower may prepay the loan in whole or in part within 90 days of notification of any increase in the rate of interest without a prepayment charge.
(2)
Disclosures required. No lender may make a loan secured by a first lien real estate mortgage on, or an equivalent security interest in, an owner-occupied residential property containing not more than 4 dwelling units containing a variable interest rate provision unless it has clearly and conspicuously disclosed to the borrower in writing prior to execution of the loan documents:
(a)
That the loan contract contains a variable interest rate;
(b)
The index used in applying any variable interest rate changes contemplated in the note and its current base; and
(c)
Any prepayment rights of the borrower upon receiving notice of any such change.
(3)
Notice of interest adjustment. When a change in the interest rate is required or permitted by a movement in the prescribed index, the lender shall give notice to the borrower by mail, addressed to the borrower's last-known post-office address, not less than 30 days prior to any change in interest rate, which notice shall clearly and concisely disclose:
(a)
The effective date of the interest rate change;
(b)
The interest rate change, and if an increase, the extent to which the increased rate will exceed the rate in effect immediately before the increase;
(c)
The changes in the index which caused the interest rate change;
(d)
The amount of the borrower's contractual monthly principal and interest payments before and after the effective date of the change in the interest rate;
(e)
Whether as a result of an increase in the interest rate a lump sum payment may be necessary at the end of the loan term; and
(f)
The borrower's right to prepay the loan within 90 days after said notice without a prepayment charge if the notice required an increase in interest rate.
(4)
Index. In determining any variable interest rate changes permitted under this section, a lender shall use either the index published by the federal home loan bank of Chicago based on the cost of all funds to Wisconsin member institutions or an index approved by:
(b)
The office of credit unions, if the lender is a credit union;
(c)
The commissioner of insurance, if the lender is an insurance company; or
(d)
The division of banking for all other lenders.
(5)
Applicability.
(a)
This section does not apply to loans or forbearances to corporations or limited liability companies.
(b)
This section applies only to transactions initially entered into on or after June 12, 1976 and before November 1, 1981.
History:  1975 c. 387; 1981 c. 45; 1991 a. 221; 1993 a. 112; 1995 a. 27; 1999 a. 9; 2003 a. 33.
Variable rate mortgages: The transition phase. 61 MLR 140.