                                 CODE OF VIRGINIA

CERTAIN LOANS SECURED BY A SUBORDINATE DEED OF TRUST OR MORTGAGE (§ 6.2-327)

A. As used in this section:
			&#8220;Exempt subordinate mortgage lender&#8221; means (i) a bank, savings
institution, industrial loan association, or credit union or (ii) a seller in a
real estate sales transaction who takes a subordinate mortgage or deed of trust
on such real estate.
			&#8220;New money&#8221; means money advanced in excess of the outstanding
principal balance at the time a new advance is made.
			&#8220;Real estate&#8221; includes a leasehold estate of not less than 25
years.
			&#8220;Residential real estate&#8221; means real estate improved by the
construction thereon of housing consisting of one- to four-family dwelling
units.

B. An add-on interest loan shall be subject to the following provisions:

   1. Any person may charge add-on interest that results in an annual yield of
   not more than 18 percent upon loans secured in whole or in part by a
   subordinate mortgage or deed of trust on residential real estate;

   2. An add-on interest loan may be made only under this subsection and shall
   not exceed a period of five years and one month; and

   3. The lender may also impose a loan fee not exceeding two percent of the
   principal amount of the loan provided that such loan fee shall not be imposed
   more often than once each 18 months except to the extent that new money is
   advanced within such 18-month period by a renewal or additional loan. New
   money shall be money advanced in excess of the outstanding principal balance
   at the time such new advance is made. These provisions shall apply whether
   such loan fee is payable directly to the lender or to a third party in
   connection with such loan.

C. No charge, other than actual costs documented to the applicant and expended
for a credit report and an appraisal of the real estate conducted in connection
with the loan application, may be made if a loan secured by a subordinate
mortgage or deed of trust is not made. Such charge:

   1. Shall not exceed one percent of the amount of the loan applied for; but in
   no event shall such charge exceed $50 or one-half of such costs, whichever is
   less; and

   2. May be made only if the lender commits to make the loan. Such commitment
   shall be in writing and signed by the lender or a person who the lender has
   authorized to execute such documents.

D. Any loan secured by a subordinate mortgage or deed of trust on residential
real estate upon which the interest is charged at an annual interest rate on the
unpaid balance thereof shall be subject to the following provisions:

   1. Such a loan may be lawfully enforced at the annual interest rate stated in
   the contract of indebtedness on the principal amount of the loan. Such annual
   interest rate may vary in accordance with an exterior standard;

   2. In addition to the annual interest rate permitted by subdivision 1, the
   lender may charge the borrower a loan fee not exceeding five percent of the
   principal amount of the loan, provided that such loan fee shall not be imposed
   more often than once each 18 months except to the extent that new money is
   advanced within such 18-month period by a renewal or additional loan. Such
   loan fee may only be reimposed by the lender upon a borrower in connection
   with the refinancing of a loan made pursuant to this subsection; and

   3. The lender may charge the borrower with the actual costs of the loan as
   permitted by &#xA7; 6.2-328.

E. The rates, charges and other provisions permitted or required by this section
or by &#xA7; 6.2-328 shall apply to all loans secured by a subordinate mortgage
or deed of trust, including, without limitation, (i) single maturity loans, (ii)
amortizing loans, and (iii) loans secured by a credit line deed of trust as
permitted by &#xA7; 55.1-318.

F. Except for the loan fee permitted in this section, no discount, initial
interest, points or charges by any other name may be collected, charged or added
to a loan secured by a subordinate mortgage or deed of trust upon residential
real estate.

G. The provisions of this section shall not apply to any loan by an exempt
subordinate mortgage lender.

H. For the purpose of this section, an interest rate that varies in accordance
with any exterior standard, or that cannot be ascertained from the contract
without reference to any exterior circumstances or documents, shall be
enforceable as agreed in the contract of indebtedness or other signed agreement.

I. The borrower under any loan to which the provisions of this section apply may
assert any defense or claim he may have under &#xA7;&#xA7; 6.2-304 and 6.2-305
against any assignee or transferee of the contract of indebtedness.

HISTORY: 1987, c. 622, §§ 6.1-330.59, 6.1-330.69, 6.1-330.71; 1991, c. 157;
1996, c. 243; 2010, c. 794.