66-4-301 - Restrictive covenants on loans by nonprofit lenders at a zero or low interest rate. - Tennessee Statutes

66-4-301. Restrictive covenants on loans by nonprofit lenders at a zero or low interest rate.

(a)  All contracts for home loans made by a nonprofit lender with a zero percent (0%) interest rate or low interest rate loan must contain the following restrictive covenant:

This zero percent (0%) interest or low interest rate loan cannot be refinanced, replaced or consolidated without the prior, written approval of the local board of directors of the nonprofit lender that financed the loan so long as this initial, zero percent (0%) interest or low interest rate loan is in existence.

(b)  As used in this section:

     (1)  “Home loan” means a term loan which secures a one (1) to four (4) family dwelling used as the primary residence of the borrower; and

     (2)  “Low interest loan” means a home loan that carries an interest rate that is two (2) percentage points or more below the yield on United States treasury securities with a comparable maturity at the time the loan is made.

(c)  Each mortgage or deed of trust securing a home loan as provided in subsection (a) shall state on the face of the instrument prominently displayed:

THIS INSTRUMENT SECURES A ZERO INTEREST OR LOW INTEREST RATE LOAN AS DEFINED UNDER TENNESSEE CODE ANNOTATED SECTION 66-4-301 AND IS SUBJECT TO THE RESTRICTIONS THEREIN.

(d)  A lender may reasonably rely on such statement or lack thereof appearing on the face of the instrument as conclusive proof of the existence or nonexistence of a restricted home loan as provided in subsection (a).

[Acts 2004, ch. 657, § 1.]