Section 215.21. Mortgage loans.

 

(1)   Basic security required. Subject to such additional limitations as the division may prescribe, associations may make loans on the security of any of the following:

(a) A mortgage on real estate owned by the borrower in fee simple if the aggregate value of the mortgage and any current balance of any mortgage, lien and encumbrances does not exceed the appraised value of the real estate.

(b) Leasehold interests extending or renewable automatically for a period of at least 15 years beyond the maturity of the debt.

(c) An assignment or transfer of stock certificates or other evidence of the borrower's ownership interest in a corporation formed for the cooperative ownership of real estate. Sections 846.10 and 846.101 , as they apply to a foreclosure of a mortgage involving a one-family residence, apply to a proceeding to enforce the lender's rights in security given for a loan under this paragraph. The division shall promulgate joint rules with the office of credit unions that establish procedures for enforcing a lender's rights in security given for a loan under this paragraph.

(2)   Lending area. Except for loans made under s. 45.37 , the lending area of an association is limited to that area within a radius of 100 miles of the association's office.

(3)   Mortgage and mortgage note. Every mortgage loan shall be secured by a mortgage upon the real estate security and evidenced by a mortgage note.

(4)   Priority of association's mortgages.

(a) All mortgages described in this section shall have priority over all liens, except tax and special assessment liens and liens under ss. 292.31 (8) (i) and 292.81 , upon the mortgaged premises and the buildings and improvements thereon, which shall be filed subsequent to the recording of such mortgage.

(b) Any additional advance made to a borrower, where the mortgage and mortgage note provides for such additional advances, shall not exceed an amount specified in said mortgage.

(5)   Maximum amount of loans to one borrower.

(a) The aggregate of loans that an association may make to any one borrower is subject to such limits as determined and prescribed by the division and review board, but not exceeding 10 percent of the aggregate savings accounts or the net worth of the association, whichever is less.

(b) The aggregate of loans to any one borrower shall consist of any loans made directly to the borrower and to any corporation of which the borrower is an officer, director or shareholder.

(6)   Maximum periods of loan amortization.

(a) Direct reduction mortgage loans. The total monthly contractual payment on a direct reduction mortgage shall appear in the mortgage note. The division shall by regulation establish the maximum terms for the various types of direct reduction mortgages. The interest charges on loans of this type may be adjusted monthly or semiannually in accordance with the terms of the mortgage note.

(b) Straight mortgage loans. An association may make mortgage loans without the amortization of principal.

(7)   Types of real estate security. An association may make loans on the following types of real estate security as defined by the division:

(a) Home type properties;

(b) Combination home-and-business type properties;

(c) Commercial type properties, the aggregate of which shall be fixed by the division;

(d) Vacant lands, subject to the limitations under sub. (16) (a) .

(8)   Insurance coverage of mortgaged premises.

(a) The borrower shall cause the buildings and improvements on any property on which the association has a mortgage to be insured and kept insured, unless the association maintains insurance under par. (b) , up to the full insurable value during the life of the loan, for the benefit of the association, against loss by fire, windstorm and such other hazards as the association requires. The selection of the insurance agent or insurer through which the insurance covering such property is to be negotiated shall be made in accordance with ss. 134.10 and 628.34 (5) .

(b) The insurance policies or evidence or certificate of the existence of such insurance policies shall remain on deposit with the association until the loan is paid. An association which carries adequate insurance, issued by a company licensed to write insurance protecting the association from losses under par. (a) at no cost to the borrower if the borrower fails to maintain insurance, shall not be required to request or record future insurance policies of the borrower if at the time of closing the mortgage transaction the borrower deposited with the association an acceptable policy or evidence or certificate of the existence of such an insurance policy, with a mortgage clause protecting the interest of the association.

(c) War damage insurance shall not be required unless the directors of the association, by resolution, demand that same be provided by the borrower.

(10)   Additional collateral.

(a) Any association may accept, as additional collateral to its mortgage note, any other real estate, personal property or a policy of insurance on the life of any person who is a party to or responsible for the payment of the mortgage note. The association may be named beneficiary as well as absolute assignee of such life insurance and, to protect its interests therein, advance premiums thereon.

(b) Upon written request of any borrower, any association may accept as additional collateral a policy of health and accident insurance on the life of any person responsible for the repayment of the mortgage loan, and may, in the event of the borrower's inability to pay premiums thereon, advance said premiums. Any premiums so advanced shall be added to the unpaid balance of the mortgage loan and become a part of the mortgage indebtedness.

(12)   Insured or guaranteed loans. An association may make mortgage loans insured or guaranteed wholly or in part under the national housing act approved June 27, 1934, or the servicemen's readjustment act of 1944, ( P.L. 78-346 ). All mortgage loans made under this section shall be in accordance with federal law and regulations and ch. 219 .

(13)   Purchasing of loans. Except as otherwise prescribed in s. 215.13 (21) , an association may purchase mortgage loans from any person, provided that the association could have made such loans in the first instance. The association may enter into an agreement with the seller of such mortgages to service the loans.

(14)   Selling loans. Except as otherwise prescribed in s. 215.13 (22) an association may sell mortgage loans, without recourse, to any person, and service such loans for the purchaser in accordance with a duly executed servicing agreement. The aggregate of loans sold in any calendar year shall not exceed such limits as may be set by the division and review board.

(15)   Participation loans. Any association may participate with other lenders in mortgage loans of any type that such association may otherwise make, subject to such rules as the division issues, including the interest in participation loans to be retained by the originator. The normal lending area, prescribed in sub. (2) , shall not apply to any association purchasing a participating interest in such loan, provided the real estate securing such loan is located within the United States.

(16)   Unacceptable types of security.

(a) An association may make a mortgage loan on the security of vacant land, if the loan is any of the following:

1. A loan made to develop or to acquire and develop land for primarily residential purposes may be secured by the land to be developed.

2. A loan made to a builder to construct residential property may be secured by a lot suitable for the construction of a home.

3. A loan made to acquire a building site for future construction of a personal residence may be secured by the building site.

4. A loan made to acquire land for use in connection with a farm operated for profit may be secured by that land.

5. A loan that the association reasonably believes will be used to develop or to acquire and develop land for commercial or industrial use within 5 years after the acquisition of the land.

(b) An association may not make a mortgage loan on the security of real estate in which an officer, director or employee of the association or his or her spouse has an interest. This paragraph does not apply to home-type property containing 4 dwelling units or less personally used by the borrower as a place of residence.

(c) Nothing in this section shall prevent any property from being pledged as additional collateral for a loan as long as the value of the unacceptable security is not used to determine the appraised value of the real estate security upon which the loan is based.

(d) An association may not make a mortgage loan on the security of or to finance the purchase of vacant land that is acquired or held for speculation.

(17)   Prohibited loans.

(a) No association may directly or indirectly make a mortgage loan to an officer, director or employee of the association.

(b) Without the prior written approval of the division, no association may directly or indirectly make a mortgage loan to:

1. A business venture employing an officer, director or employee of the association.

2. Such other persons as the division may by rule designate to avoid conflicts between the best interests of the association and the interests of its officers, directors or employees.

(c) In this subsection “ business venture" means any partnership, joint venture, corporation or similar entity.

(d) This subsection does not apply to loans made:

1. On the security of home-type property containing 4 dwelling units or less and used by the borrower as his or her residence; or

2. To a nonprofit, religious, charitable or fraternal organization or a corporation in which the association has been authorized to invest by the division.

(18)   Basis of appraisals. All appraisals of real estate securing mortgage loans shall be based on the reasonable market value of the real estate.

(21)   Penalty for giving or accepting money for loans. Every officer, director, employee or agent of any association, or any appraiser making appraisals for any association, who accepts or receives, or offers or agrees to accept or receive anything of value in consideration of its loaning any money to any person; or any person who offers, gives, presents or agrees to give or present anything of value to any officer, director, employee or agent of any association or to any appraiser making appraisals for any association in consideration of its loaning money to the person, is guilty of a Class I felony. Nothing in this subsection prohibits an association from employing an officer, employee or agent to solicit mortgage loans and to pay the officer, employee or agent on a fee basis.

(23)   False statement in loan applications; penalty. Any person who makes or causes to be made any false written statement to any state or federal savings and loan association for the purpose of obtaining a loan for himself or herself or for another, with intent to mislead, or which may mislead the association, may be imprisoned for not more than 6 months or fined not to exceed $1,000.

(24)   Board may waive principal payment on loans. Any association, in the discretion of its board, may accept only payments of interest on the loan and taxes on the mortgaged premises, and may waive the principal payments for periods not exceeding one year at a time.

(25)   Loans due, when. Whenever a borrower is in arrears in any contractual payments, whether principal, interest, taxes or insurance, the board of directors may call the borrower's whole loan due and payable as provided in the mortgage note.

(28)   Loans. Subject to the rules of the division, an association may make or invest its funds in loans, originated and serviced by or through an institution, the accounts or deposits of which are insured by the deposit insurance corporation or by or through an approved federal housing administration mortgagee, in an aggregate amount not exceeding 10 percent of such association's assets on the security of real estate or leasehold interests.

1971 c. 222 ; 1973 c. 205 , 208 ; 1975 c. 11 , 359 ; 1975 c. 371 s. 50 ; 1975 c. 387 ; 1977 c. 58 , 140 ; 1979 c. 250 , 287 ; 1981 c. 45 ; 1983 a. 36 , 167 ; 1989 a. 103 ; 1991 a. 316 ; 1993 a. 213 , 453 , 482 ; 1995 a. 27 , 104 , 227 , 417 ; 1997 a. 27 , 283 ; 2001 a. 109 ; 2005 a. 22 . Cross-reference: See ss. 138.051 and 138.052 for residential mortgage loans, s. 138.053 for interest adjustment clauses, and ss. 138.055 and 138.056 for variable interest rate clauses. Cross-reference: See s. 706.11 (1) for provision as to priority of mortgages to federal savings and loan associations and the department of veterans affairs. Cross-reference: See also ch. DFI-SL 13 and s. DFI-SL 3.01 , Wis. adm. code. The limitation on loans to one borrower under sub. (5) is intended to protect the assets of the lender. A violation does not create a cause of action in favor of anyone else who claims that the excess loan damaged him or her. McNeill v. Jacobson, 55 Wis. 2d 254 , 198 N.W.2d 611 . When money is advanced in reliance upon a justifiable expectation that the lender will have security equivalent to that in the existing mortgage that its advances discharged, equity will treat the transaction as tantamount to an assignment of the original security, provided no innocent 3rd party will suffer. Rock River Lumber Corp. v. Universal Mortgage Corp. 82 Wis. 2d 235 , 262 N.W.2d 114 (1978). Adjustable interest rates in home mortgages: a reconsideration. 1975 WLR 742.