SENATE AMENDED
PRIOR PRINTER'S NOS. 211, 373, 938, PRINTER'S NO. 1546
1490
No. 210 Session of 1981
INTRODUCED BY L. E. SMITH, F. E. TAYLOR, DORR, MADIGAN,
PISTELLA, LIVENGOOD AND CAPPABIANCA, JANUARY 26, 1981
AS AMENDED ON SECOND CONSIDERATION, IN SENATE, MAY 5, 1981
AN ACT
1 Amending the act of December 14, 1967 (P.L.746, No.345),
2 entitled "An act relating to and regulating the business of
3 savings associations heretofore designated under other acts
4 and special charters variously as building and loan
5 associations and savings and loan associations; defining the
6 rights, powers, duties, liabilities, and immunities of such
7 associations; affecting persons engaged in the business of
8 savings associations; affecting the members, account holders
9 and borrowers of such associations; affecting Federal savings
10 and loan associations whose principal office is located in
11 the Commonwealth; prohibiting the transaction of business in
12 this Commonwealth by foreign savings associations; conferring
13 powers and imposing duties on certain departments and
14 officers of the Commonwealth and on the courts, recorders of
15 deeds; creating a Savings Association Board and defining its
16 powers and duties; prohibiting certain actions and imposing
17 penalties, and repealing certain acts," requiring the cashing
18 of checks for senior citizens, authorizing construction loans
19 without security, issuance of credit cards, mutual capital
20 certificates, consumer lending, granting trust powers,
21 increasing investment and lending powers, further providing
22 for renegotiating mortgages and, authorizing withdrawals by <--
23 travelers' convenience withdrawals AND PROVIDING FOR A <--
24 UNIFORM FORECLOSURE NOTICE FORM.
25 The General Assembly of the Commonwealth of Pennsylvania
26 hereby enacts as follows:
27 Section 1. Section 102, act of December 14, 1967 (P.L.746,
1 No.345), known as the "Savings Association Code of 1967," is
2 amended by adding definitions to read:
3 Section 102. Definitions.--The following words and phrases
4 when used in this act shall have, unless the context clearly
5 indicates otherwise, the meanings given to them in this section:
6 * * *
7 (28) "Travelers' convenience withdrawals," the right of an
8 account holder of an association as a convenience when fifty
9 miles or more from his or her principal residence to make a
10 withdrawal from his or her regular savings account at the office
11 of a financial institution, the accounts of which are insured by
12 the Federal Savings and Loan Insurance Corporation or the
13 Pennsylvania Savings Association Insurance Corporation.
14 (29) "Corporate debt security," a marketable obligation
15 evidencing the indebtedness of any corporation in the form of a
16 bond, note and/or debenture which is commonly regarded as debt
17 security and is not predominantly speculative in nature. A
18 security is marketable if it may be sold with reasonable
19 promptness at a price which corresponds reasonably to its fair
20 value.
21 Section 2. Clauses (9) and (20) of subsection (a) of section
22 701 of the act are amended and clauses are added to read:
23 Section 701. Powers of Associations.--(a) Every association
24 incorporated pursuant to or operating under the provisions of
25 this code shall have all of the powers enumerated, authorized,
26 and permitted by this code and such other rights, privileges and
27 powers as may be incidental to or reasonably necessary or
28 appropriate for the accomplishment of the objects and purposes
29 of the association. Among others, and except as otherwise
30 limited by the provisions of this code, every association shall
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1 have the following powers:
2 * * *
3 (9) To sell money orders, travelers checks and similar
4 instruments as agent for any organization empowered to sell such
5 instruments through agents within this Commonwealth and to
6 receive money for transmission through a Federal Home Loan Bank,
7 to issue credit cards, extend credit in connection therewith,
8 and otherwise engage in or participate in credit card operation
9 and to honor withdrawals by travelers' convenience withdrawals,
10 subject to regulations issued by the department after giving due
11 consideration to the laws and regulations applicable to Federal
12 savings and loan associations.
13 * * *
14 (20) To enter into a contract with any corporation
15 authorized to transact the business of insurance in this
16 Commonwealth, or to participate in, or become a member of a
17 trust, fund, plan or agreement to provide retirement benefits,
18 death benefits, or disability benefits, and to make such
19 contributions out of the earnings of the association, as may be
20 required to provide these benefits[: Provided, however, That the
21 terms and conditions of any such contract, trust, fund, plan or
22 agreement shall have first been approved in writing by the
23 department] ; provided that an association shall send the
24 department a copy of any such contract, trust, fund, plan or
25 agreement and of all changes therein immediately after every
26 adoption and change.
27 * * *
28 (24) Upon receiving written approval of the department an
29 association may act as trustee, executor, administrator,
30 guardian, or in any other fiduciary capacity in which banks,
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1 trust companies or other corporations are permitted to act. Such
2 approval and the exercise of such powers shall be subject to
3 regulations issued by the department after giving due
4 consideration to the laws and regulations applicable to Federal
5 savings and loan associations. The department shall also
6 promulgate regulations governing the surrender or revocation of
7 such powers. Upon receiving written approval of the department,
8 service corporations may invest in State or Federally chartered
9 corporations which are located in Pennsylvania and which are
10 engaged in trust activities.
11 (25) (i) In accordance with regulations issued by the
12 department, mutual capital certificates may be issued and sold
13 directly to subscribers or through underwriters. Such
14 certificates shall constitute a part of the general reserve and
15 net worth of the issuing association; and
16 (A) shall be subordinate to all savings accounts, savings
17 certificates and debt obligations;
18 (B) shall constitute a claim in liquidation on the general
19 reserves, surplus and undivided profits of the association
20 remaining after the payment in full of all savings accounts,
21 savings certificates and debt obligation;
22 (C) shall be entitled to the payment of dividends; and
23 (D) may have a fixed or variable dividend rate.
24 (ii) The department shall provide in its regulations for
25 charging losses to the mutual capital certificate, reserves and
26 other net worth accounts.
27 (26) Any loans authorized by this code may be made at such
28 interest, finance charge, rate, and/or terms herein authorized
29 or at any interest, finance charge, rate, and/or terms permitted
30 any other regulated lender. The department shall have power to
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1 issue regulations with respect to amounts, terms and conditions
2 including prepayment penalties and late charges.
3 * * *
4 Section 3. Section 813 of the act, amended July 3, 1980
5 (P.L.378, No.96), is amended to read:
6 Section 813. Withdrawals from Savings Accounts.--Any savings
7 account member may at any time withdraw all or any part of his
8 savings account, including the right to effect such withdrawals
9 by travelers' convenience withdrawals. An optional type savings
10 account may be subject to withdrawal by a Negotiable Order of
11 Withdrawal.
12 Section 4. The act is amended by adding a section to read:
13 Section 824. Cashing Checks for Senior Citizens.--An
14 institution shall AFTER PROPER IDENTIFICATION OF PAYEE cash, <--
15 without charge, any State or Federal Government check presented
16 for payment by the payee of the check who is a senior citizen
17 sixty-five years of age or older.
18 Section 5. Section 901 of the act is amended to read:
19 Section 901. Loans on Security of Real Estate.--An
20 association may make a loan or participate in making loans or
21 buy or sell participations in loans secured by a mortgage which
22 is a [first] lien on real estate[, or if the association holds
23 all prior liens on the real estate,] located in the regular
24 lending area of the association, owned by the borrower in fee or
25 in which he has a leasehold interest. [An association shall not
26 at any time retain a mortgage loan which is not secured by a
27 mortgage which is a first lien on the real estate unless the
28 association owns all prior liens.] The total of all liens held
29 by an association and all prior liens against real estate shall
30 not exceed the maximum percentages of fair market value set
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1 forth in the subsections of this article. The loan shall be
2 evidenced by a bond, note or other evidence of indebtedness and
3 shall be made upon the security, terms and conditions and in the
4 amount set forth in this article for such loan. Mortgage loans
5 and participations shall be primarily on one to four family
6 residential properties.
7 Section 6. Section 905 of the act, amended December 1, 1971
8 (P.L.572, No.148), is amended to read:
9 Section 905. Loans on Other Income Producing Properties.--An
10 association may make a mortgage loan not exceeding [seventy-
11 five] ninety percent of the fair market value of an income
12 producing property not designed primarily for residential use
13 limited to not in excess of twenty percent of the assets of an
14 association. Such mortgage loans shall be a first lien on the
15 premises described in the mortgage.
16 Section 7. Section 906 of the act is amended to read:
17 Section 906. Insured or Guaranteed Loans.--The maximum
18 limitations on loans set forth in sections 902 through 905
19 inclusive, as to percentage of fair market value of properties
20 on which loans are made, shall not apply to loans insured or
21 guaranteed in whole or in part by the United States, or by the
22 Commonwealth of Pennsylvania, or any instrumentality [thereof]
23 of either of them or if there is a commitment to so insure or
24 guarantee.
25 Section 8. Subsection (a) and subsection (d) of section 908
26 of the act, subsection (a) amended December 27, 1974 (P.L.1012,
27 No.329), and subsection (d) added December 1, 1971 (P.L.572,
28 No.148), are amended to read:
29 Section 908. Development Loans.--(a) An association may
30 lend on the security of developed building lots or sites, or for
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1 the acquisition and development of land into building lots or
2 sites not in excess of seventy-five percent of the fair market
3 value of the real estate security as of the date of the
4 advancement of the funds and such loans may be combined with
5 construction loans and permanent loans, subject to the following
6 conditions:
7 [(1) The net worth of the association is five percent or
8 more of its savings accounts.]
9 [(2)] (1) If the building lots or sites are completely
10 developed at the time the loan is made the security documents
11 shall require the borrower within a period of not more than six
12 months to commence construction of one to four family
13 residential structures on a specified number of such building
14 lots or sites and within a period of [five] eight years to
15 complete construction of said structures on all of the building
16 lots or sites.
17 [(3)] (2) If the building lots or sites are to be developed
18 out of the proceeds of the loan the security documents shall
19 require development of the real estate security to be commenced
20 in not more than nine months.
21 * * *
22 (d) Notwithstanding the provisions of subsections (a) and
23 (b) of this section an association may lend to an individual on
24 the security of a developed building lot or site designed for
25 the erection of his permanent one family residence, without any
26 requirement for the commencement of construction, not in excess
27 of [seventy-five] ninety percent of the fair market value,
28 provided the security document shall require the borrower to
29 repay the loan in a period not longer than [five] fifteen years
30 and shall require equal monthly payments throughout said [five-
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1 year] fifteen-year period sufficient to result in an
2 amortization of not less than [forty] thirty percent of the
3 principal amount of the loan at the expiration of [five] fifteen
4 years.
5 Section 9. Section 910 of the act, amended December 27, 1974
6 (P.L.1012, No.329), is amended to read:
7 Section 910. Urban Renewal Loans.--An insured association
8 may grant or participate in a grant of mortgage loans within an
9 urban renewal area as defined in subsection (a) of section 110
10 of the Housing Act of 1949 as amended, provided, such loans
11 shall not exceed ninety percent of the fair market value of any
12 type of improved property. An association may make investments
13 in real property and obligations secured by liens on real
14 property located within a geographic area or neighborhood
15 receiving concentrated development assistance by a local
16 government under Title I of the Housing and Community
17 Development Act of 1974 (Public Law 93-383) limited to not in
18 excess of two percent of the assets of an association.
19 Section 10. Section 913 of the act is amended to read:
20 Section 913. Construction Loans.--(a) Any mortgage herein
21 authorized may be made for the acquisition and construction or
22 the construction of a structure as hereinbefore classified for
23 loans on improved real estate. The security documents shall
24 specify the terms upon which advances are to be made on such
25 construction loan and it may be combined with a permanent loan
26 to continue after completion of the construction.
27 (b) An association may also make construction loans without
28 security. In such loans the investment shall not exceed the
29 greater of:
30 (1) The sum of its surplus, undivided profits, and reserves,
19810H0210B1546 - 8 -
1 or
2 (2) Five percent of the assets of the association.
3 (c) The principal purpose of such construction loans without
4 security, as provided in subsection (b), shall be to provide
5 financing with respect to what is, or is expected to become
6 primarily residential real estate where:
7 (1) the association relies substantially for repayment on
8 the borrower's general credit standing and forecast of income
9 without other security; or
10 (2) the association relies on other assurances for
11 repayment, including, but not limited to a guarantee or similar
12 obligation of a third party.
13 (d) Investments in construction loans without security shall
14 not be included in any percentage of assets or other percentage
15 referred to in this act.
16 Section 11. The introductory paragraph and subsections (d)
17 and (e) of section 915 of the act, subsections (d) and (e)
18 amended October 5, 1978 (P.L.1123, No.263), are amended and
19 subsections are added to read:
20 Section 915. Terms of Mortgage.--Mortgages other than those
21 set forth in subsections (c), (d), (e), [and] (f), (k) AND (l) <--
22 and (m) of this section shall be written on such basis and in <--
23 such aggregate amounts as the department may by regulation
24 authorize or on a monthly direct reduction loan basis and the
25 contract shall provide that the first monthly payment shall be
26 made not later than sixty days after the advance of the loan,
27 provided however:
28 * * *
29 (d) If the loan is made for the purpose of facilitating the
30 trade-in or exchange of residential real property a substantial
19810H0210B1546 - 9 -
1 portion of which is used as a dwelling for not more than four
2 families and does not exceed [eighty] ninety percent of the fair
3 market value of the property it may be made for a term not
4 exceeding eighteen months without amortization but interest
5 shall be payable not less frequently than semi-annually.
6 (e) Any development loan under section 908 shall be
7 repayable within [five] eight years and the interest on any such
8 loan shall be payable at least semi-annually.
9 * * *
10 (k) Balloon loans are prohibited for financing the purchase <--
11 of a one to two family residential property.
12 (K) EXCEPT IN THE CASE OF A DUE-ON-SALE CLAUSE OR EXCEPT IN <--
13 THE CASE OF A DEFAULT AND IN ACCORDANCE WITH THE ACT OF JANUARY
14 30, 1974 (P.L.13, NO.6), REFERRED TO AS THE LOAN INTEREST AND
15 PROTECTION LAW, NO LOAN FOR FINANCING THE PURCHASE OF AN OWNER
16 OCCUPIED ONE OR TWO FAMILY RESIDENTIAL PROPERTY SHALL CONTAIN A
17 PROVISION THAT THE LOAN MAY BE ACCELERATED AT THE LENDER'S
18 OPTION. BALLOON LOANS ARE PROHIBITED FOR FINANCING THE PURCHASE
19 OF AN OWNER OCCUPIED ONE OR TWO FAMILY RESIDENTIAL PROPERTY.
20 THIS RESTRICTION SHALL APPLY TO ALL COMMITMENTS FOR MORTGAGE
21 LOANS GRANTED SUBSEQUENT TO THE EFFECTIVE DATE OF THIS
22 SUBSECTION.
23 (l) Whenever a renegotiable OR ADJUSTABLE rate mortgage loan <--
24 is to be made under the authority of this act, the mortgagor <--
25 must be given, along with the letter of commitment, written
26 notice of the initial base value of the reference index to be
27 utilized as a base in determining interest rate increases and
28 decreases.
29 (m) Except in the case of a default and in accordance with
30 the act of January 30, 1974 (P.L.13, No.6), referred to as the
19810H0210B1546 - 10 -
1 Loan Interest and Protection Law, no loan for financing the
2 purchase of a one to two family residential property shall
3 contain a provision that the loan may be accelerated at the
4 lender's option. THE INITIAL BASE VALUE OF THE REFERENCE INDEX <--
5 TO BE UTILIZED AS A BASE IN DETERMINING INTEREST RATE INCREASES
6 AND DECREASES MUST BE ESTABLISHED AT THE TIME OF LOAN
7 SETTLEMENT. , THE INITIAL OR BASE VALUE OF THE REFERENCE INDEX
8 TO BE UTILIZED SHALL BE COMMITTED TO THE BORROWER AT THE SAME
9 TIME THAT THE INITIAL CONTRACT INTEREST RATE IS COMMITTED TO THE
10 BORROWER AND SHALL BE ENTERED IN THE LOAN DOCUMENTS AS A
11 CONTRACTUAL PROVISION OF THE LOAN.
12 Section 12. Section 919 of the act, amended December 13,
13 1979 (P.L.522, No.115), is amended to read:
14 Section 919. [Loans Secured by Chattel Paper.--(a) When an
15 association holds a mortgage on real estate or on a leasehold
16 interest therein it may also grant a loan secured by chattel
17 paper to the mortgagor of the real estate or a leasehold
18 interest to assist him in the purchase of consumers' durable
19 goods, which shall be used in connection with said mortgaged
20 premises, for the equipping of residential property provided:
21 (1) Any such loan shall conform to the requirements of
22 Article 9 of the Uniform Commercial Code approved April 6, 1953
23 (P.L.3, No.1), its amendments and supplements. No examination of
24 public records shall be required in connection with the loan
25 secured by chattel paper if the borrower is newly acquiring
26 title to all of the chattels described in the security agreement
27 and the seller of the chattels furnishes to the association a
28 receipted bill for the same,
29 (2) No such loan shall exceed ten thousand dollars ($10,000)
30 in amount, nor shall its term exceed fifteen years and thirty-
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1 two days,
2 (3) No such loan may be granted unless it constitutes a
3 first lien on the chattels described therein,
4 (4) In addition to obtaining a security agreement for such
5 loans, the association shall secure a promissory note evidencing
6 the borrower's agreement to repay said loan in regular monthly
7 installments over a period not exceeding five years with
8 interest at a rate not exceeding that herein authorized under
9 section 918 for loans for property repair, alteration and
10 improvement on the declining balance. The note shall contain a
11 provision that if the obligor shall sell the mortgaged real
12 estate or assign his leasehold interest therein or remove
13 therefrom any chattels described in the security agreement the
14 entire balance remaining due on the loan shall immediately
15 become due and payable,
16 (5) An association may make the following charges in
17 connection with said loan:
18 (i) Premiums for insurance obtained in connection with the
19 loan,
20 (ii) A single delinquency charge for each installment in
21 arrears for a period of more than fifteen days other than by
22 reason of acceleration or by reason of a delinquency on a prior
23 installment, in an amount not to exceed the lesser of two
24 dollars and fifty cents ($2.50) or five percent of the amount of
25 the installment,
26 (iii) A charge for an extension in an amount not to exceed
27 two percent of the unpaid balance of the loan, said charge may
28 be imposed only one time during the life of the loan,
29 (iv) Fees paid for filing documents in public offices in
30 connection with said loan,
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1 (v) Actual expenditures, including reasonable attorneys'
2 fees for proceedings to collect the loan,] Consumer Loans and
3 Certain Securities.--An association may make secured or
4 unsecured loans for personal, family or household purposes, and
5 may invest in, sell, or hold commercial paper and corporate debt
6 securities subject to regulations issued by the department after
7 giving due consideration to the laws and regulations applicable
8 to Federal savings and loan associations. The total of such
9 loans and investments are limited to not in excess of twenty
10 percent of the assets of the association.
11 Section 13. Subsection (n) of section 922 of the act,
12 amended December 1, 1971 (P.L.572, No.148), is amended to read:
13 Section 922. Securities and Obligations.--An association may
14 invest its funds:
15 * * *
16 (n) In capital stock obligations or other securities of any
17 service corporation organized under the laws of the Commonwealth
18 of Pennsylvania if the entire capital stock of such corporation
19 is available for purchase only by savings associations and
20 savings banks organized and existing under the laws of the
21 Commonwealth of Pennsylvania and by Federal savings and loan
22 associations having their home offices in the Commonwealth of
23 Pennsylvania. The department shall have the right to define
24 service corporations and the activities thereof. An association
25 may make investments in service corporations up to [one] two
26 percent of its assets plus such additional percentage of assets
27 as the department may by regulation authorize,
28 * * *
29 Section 14. The act is amended by adding a section SECTIONS <--
30 to read:
19810H0210B1546 - 13 -
1 Section 925. Nonconforming Loans.--An association shall have
2 the right to invest limited to not in excess of five percent of
3 the assets of the association in loans upon the security of or
4 respecting real property or in interests therein used for
5 primarily residential or farm purposes that do not comply with
6 the limitations elsewhere provided in the code. NOTHING IN THIS <--
7 SECTION SHALL BE CONSTRUED TO ALLOW LOANS WHICH WOULD NOT
8 OTHERWISE BE PERMITTED UNDER SECTION 915(K).
9 SECTION 926. ENFORCEMENT OF MORTGAGES.--BEFORE ANY
10 RESIDENTIAL MORTGAGE LENDER, AS DEFINED BY THE ACT OF JANUARY
11 30, 1974 (P.L.13, NO.6), REFERRED TO AS THE LOAN INTEREST AND
12 PROTECTION LAW, MAY ACCELERATE THE MATURITY OF ANY RESIDENTIAL
13 MORTGAGE OBLIGATION AS DEFINED BY THE LOAN INTEREST AND
14 PROTECTION LAW, COMMENCE ANY LEGAL ACTION INCLUDING MORTGAGE
15 FORECLOSURE TO RECOVER UNDER SUCH OBLIGATION, OR TAKE POSSESSION
16 OF ANY SECURITY OF THE RESIDENTIAL MORTGAGE DEBTOR, AS DEFINED
17 BY THE LOAN INTEREST AND PROTECTION LAW, FOR SUCH RESIDENTIAL
18 MORTGAGE OBLIGATION, SUCH PERSON SHALL GIVE THE RESIDENTIAL
19 MORTGAGE DEBTOR NOTICE OF SUCH INTENTION AS PROVIDED UNDER
20 SECTION 403 OF THE LOAN INTEREST AND PROTECTION LAW. A FORM OF
21 NOTICE OF INTENTION TO FORECLOSE, PRESCRIBED BY REGULATIONS OF
22 THE SECRETARY OF BANKING AS PROVIDED UNDER SECTION 601 OF THE
23 LOAN INTEREST AND PROTECTION LAW, SHALL BE INTERPRETED AS
24 SATISFYING THE REQUIREMENTS OF SECTION 403 OF SAID ACT.
25 Section 15. This act shall take effect immediately.
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