PRIOR PRINTER'S NO. 756 PRINTER'S NO. 2137
No. 693 Session of 1989
INTRODUCED BY GREENLEAF, DAWIDA, SALVATORE, FISHER, LEWIS AND
MADIGAN, MARCH 16, 1989
SENATOR HOLL, BANKING AND INSURANCE, AS AMENDED, APRIL 25, 1990
AN ACT
1 Amending Title 42 (Judiciary and Judicial Procedure) of the
2 Pennsylvania Consolidated Statutes, establishing the priority
3 of advances made under certain mortgages; and providing for
4 the rights of mortgagees, mortgagors and other parties with
5 respect to certain mortgages.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. Title 42 of the Pennsylvania Consolidated
9 Statutes is amended by adding sections to read:
10 § 8143. Open-end mortgages.
11 (a) General rule.--Whether or not it secures any other debt
12 or obligation, a AN OPEN-END mortgage, other than a purchase <--
13 money mortgage as defined in section 8141 (relating to time from
14 which liens have priority), may secure unpaid balances of
15 advances made after the SUCH OPEN-END mortgage is left for <--
16 record. to the extent that the total unpaid indebtedness, <--
17 exclusive of interest thereon, does not exceed the maximum
18 amount of indebtedness which the mortgage states may be
19 outstanding at any time. With respect to the unpaid balances,
1 subsection (b) is applicable if the mortgage states, in
2 substance or effect, that the parties thereto intend that the
3 mortgage shall secure the same, not exceeding the maximum amount
4 of unpaid indebtedness, exclusive of interest thereon, which may
5 be outstanding at any time and contains at the beginning thereof
6 the term "open-end mortgage." The validity and enforceability of
7 the lien of the AN OPEN-END mortgage shall not be affected by <--
8 the fact that the first advance is made after the date of
9 recording of the mortgage or that there may be no outstanding
10 indebtedness for a period of time after an advance or advances
11 may have been made and repaid.
12 (b) Unobligated advance after notice.--A mortgage complying <--
13 with subsection (a) and AN OPEN-END MORTGAGE securing unpaid <--
14 balances of advances referred to in subsection (a) is a lien on
15 the premises described therein from the time the mortgage is
16 left for record for the full amount of the total unpaid
17 indebtedness, including the unpaid balances of the advances that
18 are made under the mortgage plus interest thereon, regardless of
19 the time when the advances are made. If such HOWEVER, IF an <--
20 advance is made more than five business days after the holder of <--
21 the mortgage receives written notice which complies with
22 subsection (d) of a lien or encumbrance on the mortgaged
23 premises which is subordinate to the lien of the mortgage and if
24 the holder is not obligated to make the advance at the time the
25 notice is received, then the lien of the mortgage for the unpaid
26 balance of the advance so made is subordinate to the lien or
27 encumbrance unless the advance so made is in order to pay
28 toward, or to provide funds to the mortgagor to pay toward, all
29 or part of the cost of completing any erection, construction,
30 alteration or repair of any part of the mortgaged premises, the
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1 financing of which, in whole or in part, the mortgage was given
2 to secure. If an advance is made more than five business days <--
3 after the holder of the AN OPEN-END mortgage receives written <--
4 notice of labor performed or to be performed or materials
5 furnished or to be furnished for the erection, construction,
6 alteration or repair of any part of the mortgaged premises and
7 if the holder is not obligated to make the advance at the time
8 the notice is received, then the lien of the mortgage for the
9 unpaid balance of the advance so made is subordinate to a valid
10 mechanic's lien for the labor actually performed or materials
11 actually furnished as specified in the notice unless the advance
12 so made is in order to pay toward, or to provide funds to the
13 mortgagor to pay toward, all or part of the cost of completing
14 any erection, construction, alteration or repair of any part of
15 the mortgaged premises the financing of which, in whole or in
16 part, the mortgage was given to secure.
17 (c) Mortgagor may limit indebtedness.--The mortgagor may
18 limit the indebtedness secured by the mortgage AN OPEN-END <--
19 MORTGAGE, AND RELEASE THE OBLIGATION OF THE MORTGAGEE TO MAKE
20 ANY FURTHER PAYMENTS, to that in existence at the time of the
21 delivery of a written notice to that effect to the recorder for
22 record, if the notice is executed by the mortgagor, is
23 acknowledged according to law and states the volume and initial
24 page of the record or the recorder's file number of the
25 mortgage, and a copy thereof is served upon the holder of the
26 mortgage more than three days prior to the delivery of the
27 notice to the recorder for record. The notice shall be recorded
28 and indexed by the recorder as an amendment of the mortgage and
29 shall be noted on the margin of the record of the mortgage,
30 giving the book and page number where the notice is recorded.
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1 The right of the mortgagor to limit indebtedness secured by the
2 mortgage is not applicable to interest subsequently accruing on
3 indebtedness, loan advances the holder of the mortgage is <--
4 obligated to make or advances made after the delivery of the
5 notice to the recorder for record in order to pay for all or
6 part of the cost of completing any erection, construction,
7 alteration or repair of any part of the mortgaged premises, the
8 financing of which, in whole or in part, the mortgage was given
9 to secure.
10 (d) Notice.--The written notices provided for in subsection
11 (b) shall be signed by the holder of the lien or encumbrance or
12 the person who has performed or intends to perform the labor or
13 who has furnished or intends to furnish materials, or by his
14 agent or attorney, and shall set forth a description of the real
15 property to which the notice relates, the date, the parties to,
16 the volume and initial page of the record or the recorder's file
17 number of the mortgage over which priority is claimed for the
18 lien or encumbrance, and the amount and nature of the claim to
19 which the lien or encumbrance relates or the nature of the labor
20 performed or to be performed or materials furnished or to be
21 furnished and the amount claimed or to be claimed therefor. The
22 written notices provided for in subsections (b) and (c) shall be
23 deemed to have been received by or served upon the holder of the
24 mortgage when delivered to the holder personally or by
25 registered or certified mail at the address of the holder
26 appearing in the mortgage or an assignment thereof or, if no
27 address is so given, at the principal place of business or
28 residence of the holder or the agent of the holder within this
29 Commonwealth or, if the holder has no principal place of
30 business or residence or agent within this Commonwealth, when
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1 posted in some conspicuous place on the mortgaged premises.
2 (e) Section not exclusive.--This section is not exclusive
3 and shall not be construed to change existing law with respect
4 to the priority of the lien of advances made pursuant to a
5 mortgage except to the extent that it gives priority to the lien
6 for advances under an open-end mortgage complying with the
7 requirements of this section which would not have such priority
8 in the absence of this section.
9 (f) Definitions.--As used in this section, the following
10 words and phrases shall have the meanings given to them in this
11 subsection:
12 "Holder of the mortgage." The holder of the mortgage as
13 disclosed by the records of the recorder or recorders of the
14 county or counties in which the mortgaged premises are situated.
15 "Indebtedness." The unpaid principal balance of advances
16 exclusive of interest and unpaid balances of advances and other
17 extensions of credit secured by the mortgage made for the
18 payment of taxes, assessments, maintenance charges, insurance
19 premiums and costs incurred for the protection of the mortgaged
20 premises.
21 "Mortgage." Includes a mortgage, deed of trust or other
22 instrument in the nature of a mortgage.
23 "Mortgagor." Includes the mortgagor's successors in interest
24 as disclosed by the records of the recorder or recorders of the
25 county or counties in which the mortgaged premises are situated.
26 "Obligated." A holder of a mortgage is "obligated" to make <--
27 an advance if the holder or the person to whom the repayment of
28 the advance is owed has a contractual commitment to do so, even
29 though the making of the advance may be conditioned upon the
30 occurrence or existence, or the failure to occur or exist, of
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1 any event or fact, which event or fact must occur or exist, or
2 fail to occur or exist, within three years following the time
3 the mortgage is left for record, but the three-year limitation
4 does not apply to any mortgage given to secure, in whole or in
5 part, loan advances made to pay the cost of any erection,
6 construction, alteration or repair of any part of the mortgaged
7 premises.
8 "OPEN-END MORTGAGE." A MORTGAGE WHICH SECURES ADVANCES, UP <--
9 TO A MAXIMUM AMOUNT OF INDEBTEDNESS OUTSTANDING AT ANY TIME
10 STATED IN THE MORTGAGE, PLUS ACCRUED AND UNPAID INTEREST. SUCH A
11 MORTGAGE SHALL BE IDENTIFIED AT THE BEGINNING THEREOF AS AN
12 "OPEN-END MORTGAGE" AND SHALL CLEARLY STATE THAT IT SECURES
13 FUTURE ADVANCES, WHICH IN THE CASE OF A HOME EQUITY PLAN, THE
14 LENDER HAS A CONTRACTUAL OBLIGATION TO MAKE ON THE TERMS AND
15 CONDITIONS SET FORTH IN THE MORTGAGE AND OPEN-END LOAN AGREEMENT
16 WITH THE BORROWER. SUCH OPEN-END MORTGAGE SHALL BE DEEMED TO
17 SECURE OBLIGATORY FUTURE ADVANCES EVEN THOUGH THE MORTGAGE OR
18 LOAN AGREEMENT CONTAINS SOME OR ALL OF THE LIMITATIONS AND
19 CONDITIONS ON THE OBLIGATION TO MAKE ADVANCES WHICH ARE
20 PERMITTED FOR HOME EQUITY PLANS UNDER THE HOME EQUITY LOAN
21 CONSUMER PROTECTION ACT (PUBLIC LAW 100-709, 102 STAT. 4725), AS
22 IMPLEMENTED BY REGULATION Z ISSUED THEREUNDER IN 12 CFR 226.5(B)
23 (RELATING TO GENERAL DISCLOSURE REQUIREMENTS).
24 "Recorder." The recorder of deeds or other official in
25 charge of recording mortgages in each county in which the
26 mortgaged premises are located.
27 § 8144. Mortgages to secure certain advances.
28 In addition to any other indebtedness, a mortgage may secure
29 unpaid balances of advances made, with respect to the mortgaged
30 premises, for the payment of taxes, assessments, maintenance
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1 charges, insurance premiums or costs incurred for the protection
2 of the mortgaged premises or the lien of the mortgage, expenses
3 incurred by the mortgagee by reason of default by the mortgagor
4 under the mortgage or advances made under a construction loan to
5 enable completion of the improvements for which the construction
6 loan was originally made, if such mortgage states that it shall
7 secure such unpaid balances. A mortgage complying with this
8 section is a lien on the premises described therein from the
9 time the mortgage is left for record or the time of delivery to
10 the mortgagee of a purchase money mortgage which is recorded
11 within ten days after its date for the full amount of the unpaid
12 balances of such advances that are made under the mortgage, plus
13 interest thereon, regardless of the time when the advances are
14 made.
15 Section 2. Effect of act on prior mortgages.
16 Nothing contained in this act shall be construed to affect
17 the priority of advances made under any mortgage recorded before
18 the effective date of this act.
19 Section 3. Effective date.
20 This act shall take effect in 60 days.
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