Unless the context indicates otherwise, the following definitions and rules of construction apply:

Act—The act of January 30, 1974 (P. L. 13, No. 6) (41 P. S. § § 101—605).

Actual settlement costs—The term includes the following:

1. (i) For the purposes of the act ‘‘actual settlement costs,’’ is deemed to include the following:

   1. (A) The attorney’s fees of the residential mortgage debtor if the attorney either:

      1. (I) Is representing the residential mortgage lender.
      2. (II) Is, directly or indirectly, recommended to the residential mortgage debtor by the residential mortgage lender.
   2. (B) Charges and fees related to the transfer of property paid by the residential mortgage debtor to a real estate broker, mortgage broker or other person receiving directly or indirectly from the residential mortgage debtor a finder’s fee, commission, placement fee, service charge or other similar compensation touching the transaction.
   3. (C) Except for the ‘‘single service charge’’ as defined in this section, only those charges that are cost justified regarding the specific residential mortgage for which they are charged.

2. (ii) For the purposes of the act ‘‘actual settlement costs’’ is deemed not to include the charges and fees excluded from the definition of ‘‘finance charge’’ as set forth in this section.

   Any insurance premium—The term, for purposes of the act, includes, but not be limited to, premiums for title insurance, fire and extended coverage insurance, flood insurance, F.H.A. mortgage insurance, private mortgage insurance and a deposit into an escrow account for payment of premiums on such insurance.

   Business loans—The term, for the purposes of the act, means extensions of credit where the funds are to be utilized in a business enterprise and where the following conditions exist:

3. (i) The borrower exercises actual control over the managerial decisions of the enterprise in which the funds are to be utilized.

4. (ii) The borrower signs an affidavit under penalty of perjury setting forth the intended use of proceeds.

   Charges and fees necessary for or related to the transfer of property or the closing of the residential mortgage loan—The term, for purposes of the act, includes, but not be limited to, the following, if paid by the residential mortgage debtor: property certification fees, realty transfer tax, fees for credit reports and attorney’s fees included under the definition of ‘‘actual settlement costs’’ which is set forth in this section; provided that the charges and fees are reasonable and bona fide, and not for the purpose of evading compliance with the act.

   Discount points—The term, for purposes of the act, is deemed not to include a fee paid to a residential mortgage lender by a person in the business of residential building or development in connection with a commitment by the lender to make mortgage loans to credit-worthy purchasers of real property, which has not previously been occupied as a residence; provided the fee is bona fide and not for the purpose of evading compliance with the act. This exclusion from the definition of ‘‘discount points’’ pertains, by way of example and not limitation, to fees charged by a residential mortgage lender to a person in the business of residential building or development under the Government National Mortgage Association Conventional Home Mortgage Program authorized by the Emergency Home Purchase Assistance Act of 1974 (P. L. 93-449) or under similar programs. Additionally, ‘‘discount points,’’ for purposes of the act, is deemed not to include fees paid under the Conventional Home Mortgage Program or a similar program to a residential mortgage lender by the seller of a residential unit which has previously been occupied as a residence in connection with a commitment by the lender to make a mortgage loan to a credit-worthy purchaser of a residential unit.

   Finance charge—The term, for purposes of the act, is deemed not to include the following:

5. (i) Fees, discounts or other sums realized by the Government National Mortgage Association, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation or other governmentally sponsored or private secondary mortgage market purchaser, in connection with the purchase of or commitment to purchase residential mortgages, provided the purchase or commitment to purchase is bona fide and not for the purpose of evading compliance with the act. The preceding sentence means, by way of example and not limitation, that fees, discounts and other sums realized by the Government National Mortgage Association under its Conventional Home Mortgage Program as provided in the definition of ‘‘discount points’’ set forth in this section or under similar programs are not included in the ‘‘finance charge’’ under the act. Department comment: this subsection is a clarification of, not an exemption from, the definition of finance charge. ‘‘Finance charge’’ is not intended to cover fees, discounts or charges between principals in secondary mortgage market transactions, but to cover nonactual settlement costs and charges related to the closing of the residential mortgage between the residential mortgage debtor and the original residential mortgage lender. Therefore, the levying of cost, charges and fees, or other sums by the residential mortgage lender against the residential mortgage debtor is a finance charge unless it is an actual settlement cost as defined in the act and this section.

6. (ii) A satisfaction fee, if the fee is not charged for prior to the last scheduled payment, or to receipt of payment in full on the residential mortgage.

   Loan yield—The annual rate of return determined in accordance with the provisions set forth in § 7.3 (relating to determination of loan yield).

   One hour prior to commencement of bidding—The term, for purposes of section 404 of the act (41 P. S. § 404), is deemed to mean one hour prior to the scheduled start of the general proceeding at which the real property in question was originally listed for sale.

   Performance—The term, for purposes of sections 403 and 404 of the act (41 P. S. § § 403 and 404), includes, but is not limited to, a conspicuous designation as to where cure shall be tendered, provided that the designated location is one of the following:

7. (i) A regular place of business of the residential mortgage lender in the county where the real property is located or in a county contiguous thereto which is open during normal business hours.
8. (ii) For a period of time that the required notice provides the residential mortgage debtor with knowledge of a specific sum of money, payment of which during the period will constitute satisfactory tender of cure, an address at which tender of cure may be made by mail.

9. (iii) If the residential mortgage lender has no place of business as set forth in subparagraph (i), any designated location in the county where the real property is located, or in a county contiguous thereto, which is open during normal business hours. The designated location may be the office of an attorney. The residential mortgage lender may require that on the day of a scheduled sheriff’s sale, tender of cure be limited to the place of the sale, provided that the residential mortgage debtor is given the name of the agent of the lender authorized to accept tender of cure and the agent is present at the place of sale at least 1 1/2 hours prior to commencement of the sale.

   Residential mortgage—The term means the following:

10. (i) Residential mortgage—The term, for purposes of the permissible interest rate under the act but not the disclosure requirements under the act, is deemed not to include a transaction which is entered into under an act within the scope of section 604 of the act (41 P. S. § 604).
11. (ii) Residential mortgage—The term, for purposes of sections 403 and 404 of the act (41 P. S. § § 403 and 404), includes an obligation to pay a sum of money in an original bona fide principal amount of $50,000 or less, evidenced by a security document as defined in the act and this chapter, and secured by a lien upon real property located within this Commonwealth containing two or fewer residential units or on which two or fewer residential units are to be constructed and shall include an obligation on a residential condominium unit.

12. (iii) Residential mortgage—The term, for purposes of the act, is deemed not to include:

    1. (A) A transaction with a person in the business of residential building or development to finance the construction of two or fewer residential units, provided the transaction is bona fide construction financing to a builder or developer, and not for the purpose of evading compliance with the act.
    2. (B) A single mortgage document executed by a residential mortgage debtor and creating a lien upon real property containing three or more residential units or on which three or more residential units are to be constructed.

13. (iv) Residential mortgage—A loan evidenced by a single note and mortgage shall be considered to be two separate residential mortgage loans when the following factor exist:

    1. (A) Two separate residential mortgage lenders have issued separate commitments to lend to the same residential mortgage debtor.
    2. (B) The residential mortgage debtor will be indebted under said note and mortgage to only one residential mortgage lender at any time.

    3. (C) The residential mortgage lenders have agreed to purchase and sell the loan documents to one another upon completion of construction or rehabilitation of the mortgaged premises by the residential mortgage debtor. With respect to the residential mortgage loans, each lender may impose the single service charge allowable under the act, and each may commit for and impose a rate of interest allowable under the act without regard to the rate of interest imposed by the other; provided that the foregoing arrangement is bona fide and not for the purpose of evading compliance with the act.

       Residential real property—The term, for purposes of the act, does not include vacant real property unless the construction of two or fewer residential units is included either in the agreement of sale for such property or in a separate agreement approximately contemporaneous with such agreement of sale.

       Residential unit—The term includes a type of residence, regardless of whether the unit is conceived of as a principal residence, a secondary residence, a summer residence, a vacation residence or a residence of some other denomination; and regardless of whether the unit is constructed or is to be constructed by conventional, precut, modular, sectional or other means.

       Security document—The term, for the purposes of the act is deemed to include the following:

    4. (i) An installment land contract, land contract or lease purchase agreement. It shall also include any similar document if it is a lease of real property where the lessee pays or agrees to pay as compensation for use a sum substantially equivalent to or in excess of the aggregate value of the real property involved and it is agreed that the lessee will become, or for no other (or a nominal) consideration has the option to become, the owner of the real property upon full compliance with the terms of the agreement.

    5. (ii) A document containing a confession of judgment which, when confessed, effects a lien upon real estate.

       Single service charge—The term, for purposes of the act, means a charge, in addition to other charges or fees included within the definitions of other ‘‘actual settlement costs’’ which is set forth in this section or in the act, paid directly or indirectly, by the residential mortgage debtor and received and retained, directly or indirectly, or on behalf of the residential mortgage lender for services or facilities furnished by the lender in connection with a residential mortgage, and not otherwise provided for as an ‘‘actual settlement cost’’ as set forth in this section or in the act. The charge is deemed to be ‘‘reasonable,’’ for purposes of this chapter and the act, if not in excess of the applicable limitations expressed in section 101(e) of the act (41 P. S. § 101(e)), and except as hereinafter provided, no part of such service charge shall be collected from the residential mortgage debtor prior to loan settlement. At the residential mortgage lender’s option, a portion of the service charge, not exceeding $75, may be collected from the residential mortgage debtor when a mortgage application is received from or when a mortgage commitment is issued to the debtor, and a remainder of the service charge may be collected at settlement. Settlement fees and like charges are included within the definition of single service charge.

       Take possession of any security—The term, for purposes of section 403 of the act (41 P. S. § 403), is deemed to mean take possession of a residential real property security.

       Term of a residential mortgage—The term, for purposes of the act when used in connection with renegotiable rate or rollover mortgage loans, the interval of time between the making of the loan and the first renegotiation of the loan; and a subsequent renewal of a loan shall be deemed to be for a separate term.

Source

The provisions of this § 7.2 adopted March 22, 1974, effective March 23, 1974, 4 Pa.B. 509; amended January 10, 1975, effective January 11, 1975, 5 Pa.B. 72; amended March 31, 1975, effective February 1, 1975, 5 Pa.B. 185; amended January 6, 1978, effective January 7, 1978, 8 Pa.B. 9; amended December 5, 1980, effective December 6, 1980, 10 Pa.B. 4591; corrected October 9, 1998, effective August 6, 1998, 28 Pa.B. 5094; corrected October 23, 1998, effective August 6, 1998, 28 Pa.B. 5094. Immediately preceding text appears at serial pages (125603) to (125609).

Notes of Decisions

A loan made to a corporation exclusively for the benefit of the corporation does not constitute a residential mortgage; 41 P. S. § 405 is not applicable. First Mortgage Company of Pennsylvania v. Carbone, 3 Pa. D. & C. 3d 517, 523 (1977).

The Department of Banking and Securities regulations support an expansive construction of the term ‘‘lien’’; an installment land contract in which the vendees assume possession and all the burdens and incidents of ownership, but the vendor retains title pending full payment and has the power to confess judgment in the event of default, will be treated as a residential mortgage for purposes of curing default. Anderson Contracting Co. v. Daugherty, 417 A.2d 1227 (Pa. Super. 1979); appeal dismissed 425 A.2d 329 (Pa. 1980).