17:12B-159. Limitations on such loans

(1) (Deleted by amendment.)

(2) Each such loan shall be evidenced by one or more notes, bonds or other written evidence of indebtedness, and no security other than an interest in tangible personal property, or a mortgage upon the real property shall be taken directly or indirectly to secure the same prior to default. An interest in real property taken as security for a property improvement loan shall not be deemed to be a mortgage loan within the meaning of Article X of this act and shall not be subject to the provisions of that article.

(3) (Deleted by amendment.)

(4) Each loan as defined in section 158 of this act (C. 17:12B-158) shall be repayable in regular installments payable at least quarterly over a period not exceeding 20 years and 32 days subsequent to the making of such loan. The amount of any installment shall not be greater or less than any other installment, except that the first installment or last installment, or first and last installments may be in an amount other than that of a regular installment, but any such installment shall not be less than one-half of, nor more than one and one-half times the amount of the regular installment. An association which makes a loan as defined in section 158 of P.L.1963, c. 144 (C. 17:12B-158) shall not require that more than one installment be payable in any one payment period, except that the last two installments may be payable in the same payment period. Every such loan shall provide for payment periods of equal duration measured in terms of weeks or months, except that the period scheduled to elapse between the making of the loan and the date when the first installment is scheduled to be paid, hereinafter in this paragraph referred to as "the initial payment period" may be longer than any other payment period, but may not exceed 120 days. Any such loan may provide for the omission of installments during any period not exceeding 120 days in any one 12-month period. When the period during which installments are so omitted falls within or coincides with the initial payment period as hereinabove defined, the initial payment period may be longer than any other payment period, but may not exceed 120 days.

(5) Nothing in this section shall prevent an association from making a loan as defined in section 158 of P.L.1963, c. 144 (C. 17:12B-158), the proceeds of which will be applied in whole or in part to the repayment at or before final maturity of a loan theretofore made under the provisions of this section.

(6) An association which makes a loan as defined in section 158 of P.L.1963, c. 144 (C. 17:12B-158) may,

(a) When the payment of such loan is secured, and provision is made by law for the filing or recording to the instrument of security or notice or abstract thereof, require compliance with such provision and retain the cost of such recording or filing out of the proceeds of the loan but shall make no other charges in connection with the preparation of such mortgage or other security instruments; and

(b) When the maturity of the unpaid balance of the loan is accelerated, in accordance with the terms of the instrument evidencing the obligation, charge interest at a rate not exceeding the rate charged on the loan, from the date such acceleration takes place, upon the difference between the amount of the unpaid principal balance of the loan, and the amount of credit given pursuant to section 163 (C. 17:12B-163).

No association shall make any further interest or charge or demand, in connection with such loan, other than those expressly authorized by sections 159 through 164 (C. 17:12B-159 through C. 17:12B-164) of this act, except an association may charge interest at a rate not exceeding the rate charged on the loan upon each installment in arrears for the period from the date that default in the payment of such installment occurs to the date that payment of such installment is made; or, if the maturity of the unpaid balance of the loan is accelerated, as provided in this section, to the date upon which such acceleration takes place. In lieu of providing for interest pursuant to this paragraph (b), such instrument may provide that on any installment in arrears for more than 15 days, the association may make a late charge which shall not exceed 5% of such installment, or $5.00 whichever is the lesser; provided that only one such late charge shall be made on any one installment and that no such late charge shall be made upon any installment scheduled, by the terms of such instrument, to fall due upon a date subsequent to the date upon which the maturity of the unpaid balance of the loan is accelerated as provided by this section.

(c) No person who is a party to the instrument evidencing the loan shall be released or discharged from liability to the association by reason of the association's extending the time for the payment of an installment or installments owing or due upon such loan, or by reason of the association's waiver of any term or condition of the instrument evidencing such loan, or of the instrument intended to secure payment thereof.

(d) All parties to the instrument evidencing the loan may waive presentation for payment, demand for payment, protest and notice of protest, nonpayment, dishonor, and the association's election to accelerate the maturity of the unpaid balance of the loan.

For the purposes of this section,

(i) "Unpaid principal balance" of a loan means the face amount of the note evidencing such loan, less the aggregate of all installments paid thereon, plus the cost of any insurance paid for by the association pursuant to paragraph (f) of subsection (6) of this section, after crediting against such cost the amount of the return premium, if any, received by the association on cancellation of prior insurance paid for by the borrower or the cost of which was retained out of the proceeds of the loan;

(ii) "Unpaid balance" of a loan means the unpaid principal balance of such loan, plus unpaid interest and late charges, if any.

(e) Require one or more comakers or endorsers of the instrument evidencing a loan, or one or more guarantors of payment of the loan;

(f) When the payment of such loan is secured, require that such security be insured for the benefit of the association against such loss or damage as the association may require, and may retain out of the proceeds of such loan the premium for such insurance. If such insurance expires, lapses, or is canceled and other insurance by insurers and in amounts satisfactory to the association is not furnished to the association without lapse of coverage, the association may, but shall be under no duty to, obtain insurance upon such security, and the cost thereof, less the amount of the return premium, if any, received by the association on cancellation of prior insurance paid for by the borrower, or the cost of which was retained out of the proceeds of the loan, shall be added to and become part of the principal of such loan, payable upon demand with interest at the legal rate; and, in default of such payment within 30 days after such demand, the entire unpaid balance of the loan shall, at the election of the association become immediately due and payable;

(g) Upon institution of a suit for the collection of a loan in default, charge a collection fee, in addition to court costs allowable by law, equal to 10% of the unpaid balance of the loan, but in no case shall such collection fee exceed $100.00;

(h) Extend the scheduled due date of any loan and defer the scheduled due date of any or all installment payments, or reduce the amount of any or all installments and may, as a consideration therefor, make a total additional charge not to exceed the amount ascertained under the provisions of section 160 (C. 17:12B-160).

L.1963, c. 144, s. 159. Amended by L.1965, c. 126, s. 1; L.1969, c. 255, s. 1, eff. Jan. 7, 1970; L.1975, c. 313, s. 4, eff. Feb. 19, 1976; L.1981, c. 101, s. 15, eff. March 31, 1981.