PRINTER'S NO. 1931
No. 1586 Session of 1987
INTRODUCED BY CALTAGIRONE, WOGAN, MORRIS, STABACK, MAIALE,
GODSHALL, SEVENTY, LASHINGER, LETTERMAN, RAYMOND, KENNEY,
BLACK, FATTAH, PISTELLA, KUKOVICH, J. TAYLOR, F. TAYLOR AND
GRUITZA, JUNE 23, 1987
REFERRED TO COMMITTEE ON JUDICIARY, JUNE 23, 1987
AN ACT
1 Amending Title 42 (Judiciary and Judicial Procedure) of the
2 Pennsylvania Consolidated Statutes, providing for the
3 priority of liens arising under mortgages which allow for
4 future advances.
5 The General Assembly of the Commonwealth of Pennsylvania
6 hereby enacts as follows:
7 Section 1. Section 8141 of Title 42 of the Pennsylvania
8 Consolidated Statutes is amended by adding a subsection to read:
9 § 8141. Time from which liens have priority.
10 Liens against real property shall have priority over each
11 other on the following basis:
12 * * *
13 (1.1) A mortgage which secures obligatory future
14 advances and all advances made thereunder shall have priority
15 from the time the mortgage is left for record, or from the
16 time of delivery to the mortgagee of a purchase money
17 mortgage which is recorded within ten days of its date, up to
18 the maximum amount stated in the mortgage plus accrued and
1 unpaid interest. Such a mortgage shall be identified at the
2 beginning thereof as an Open End Mortgage and shall clearly
3 state that it secures future advances which the lender is
4 obligated to make on the terms and conditions set forth in
5 the mortgage and open end loan agreement with the borrower,
6 and shall state the maximum amount of indebtedness secured. A
7 mortgage shall be deemed to secure obligatory future advances
8 even though it contains some or all of the following
9 limitations and conditions:
10 (i) The right to withhold advances on default.
11 (ii) The right to withhold advances when there is an
12 adverse change in the credit worthiness of the borrower.
13 (iii) The right to withhold advances when there is
14 an adverse change in the value or condition of the
15 collateral.
16 (iv) An expiration date or the right of the lender
17 to cancel the obligation to make advances upon specified
18 notice to the borrower, or upon failure of the borrower
19 to comply with the terms of the agreement.
20 (v) Requirements for procedures to be followed by
21 the borrower to activate the obligation to make advances.
22 (vi) The right of the lender to discontinue the
23 business of making loans secured by real estate which
24 require future advances.
25 Advances made under such an Open End Mortgage shall have
26 priority from the time the mortgage is left for record, or
27 from the time of delivery to the mortgagee of a purchase
28 money mortgage which is recorded within ten days after its
29 date, even though at the time an advance is made events may
30 have occurred or failed to occur that would, under the
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1 mortgage or open end loan agreement or otherwise, permit the
2 lender to withhold the advance, provided that the lender has
3 not terminated the open end loan agreement prior to the
4 making of such an advance. The validity and enforceability of
5 the lien of such an Open End Mortgage shall not be affected
6 by the fact that the first advance is made after the date of
7 recording of the mortgage or that there may be no outstanding
8 indebtedness for a period of time after an advance or
9 advances have been made and repaid.
10 * * *
11 Section 2. Title 42 is amended by adding a section to read:
12 § 8143. Mortgages to secure certain advances.
13 In addition to any other indebtedness, a mortgage may secure
14 unpaid balances of advances made, with respect to the mortgaged
15 premises, for the payment of taxes, assessments, maintenance
16 charges, insurance premiums or costs incurred for the protection
17 of the mortgaged premises or the lien of the mortgage, expenses
18 incurred by the mortgagee by reason of default by the mortgagor
19 under the mortgage or advances made under a construction loan to
20 enable completion of the improvements for which the construction
21 loan was originally made, if such mortgage states that it shall
22 secure the unpaid balances. A mortgage complying with this
23 section is a lien on the premises described therein from the
24 time the mortgage is left for record or the time of delivery to
25 the mortgagee of a purchase money mortgage which is recorded
26 within ten days after its date, for the full amount of the
27 unpaid balances of such advances that are made under the
28 mortgage, plus interest thereon, regardless of the time when the
29 advances are made.
30 Section 3. Nothing contained in this act shall be construed
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1 to affect the priority of advances made under any mortgage
2 recorded before the effective date of this act.
3 Section 4. This act shall take effect in 60 days.
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