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title-31•Title 31 — Interest and Usury
(a) Except as herein and otherwise provided by law, no person shall, upon contract, take, directly or indirectly for loan of any money, wares, merchandise, goods and chattels, above the value of $6.00 for the forbearance of $100.00 for a year, or when there is a written contract specifying a rate of interest, no person shall take above the value of $16.00 for the forbearance of $100.00 for a year.
(b) Notwithstanding the limitations of subsection (a) of this section, the Commissioner of Banking may by regulations adopted, amended and rescinded from time to time, provide that the value which may be taken for any loan secured by a first lien on real property as described in paragraph (1) of this subsection shall be a value more than $6.00 but not more than the Monthly Index of Long Term United States Government Bond Yields, compiled by the Board of Governors of the Federal Reserve System and as published by said Board of Governors in the monthly Federal Reserve Bulletin, for the second preceding calendar month plus an additional 8% per annum rounded off to the nearest quarter of 1% per annum. Within the limits as provided by this subsection, and if he finds it to be in the best interests of the citizens and economy of this State, the commissioner may establish:
(1) A rate of interest on loans secured by a first lien on real property on which there is erected or to be erected a structure containing one, two, three, four, five or six dwelling units, a portion of which structure may be used for nonresidential purposes. The commissioner may establish different rates for such loans based upon the ratio of the loan to the appraised value of the real property. With respect to loans covered by this subsection, the commissioner may by regulation provide that any mortgage commitment outstanding as of the date of an increase in the rate set by the commissioner shall be extended from that date for a period not to exceed 60 days, provided that such extension shall not apply to any commitment which expires beyond the extension period so established.
If for any reason no such index of long term bonds is compiled or published for any 1 or more months, the commissioner shall determine and publish such an index based upon available statistics.
In the case of a loan secured by a first lien on real property made under the provisions of paragraph (1) of this subsection, beginning in the calendar year following the date of the mortgage loan, and annually thereafter, the mortgagee shall notify the mortgagor of the interest rate ceilings established by the commissioner as of the fifteenth day of the month preceding. Such notification shall be given at the same time as the mortgagee gives notice to the mortgagor for Federal Income Tax purposes of the interest paid on the loan in the preceding calendar year.
(c) When, however, pursuant to any such contract, interest or discount is taken or reserved for a period of less than 1 year, or when interest is required to be paid at intervals of less than 1 year such interest or discount may be computed on a daily basis, or on a monthly basis, or on a combination of both such bases when the period for which interest or discount is taken or reserved contains 1 or more months and 1 or more days; and, in any such case, a day shall be deemed to be a 1/360 part of a year, and a month shall be deemed to be a 1/12 part of a year, regardless of the number of days contained in such month. Any computation of interest or discount made on any such basis shall constitute a compliance with this section, and any such basis may be applied regardless whether the principal debt is payable in more than or less than 1 year from the time of making the loan.
(d) In making, amending and rescinding regulations pursuant to subsection (b) of this section, the Commissioner of Banking shall consider the general state of the economy, the discount rates prescribed by the Federal Reserve Bank of New York and the Federal Reserve Bank of Philadelphia, the advance rate as prescribed by the Federal Home Loan Bank of New York, the availability of funds for loans, studies and statistics published by the Federal Home Loan Bank Board and other agencies of the United States and of this State, and such other factors and bases for determination as the commissioner may deem pertinent. The rate established by any such regulations shall reasonably reflect prevailing market conditions, regionally and nationally, based upon the studies, statistics and factors considered, and shall remain in force until such time as such regulation is rescinded or such rate is increased or decreased by a subsequent regulation. Any such regulation shall have prospective effect only.
(e) Notwithstanding the provisions of paragraph (a) or (b) of this section, contracts for the following classes or types of loans may provide for any rate of interest which the parties agree upon, and interest at any such rate may be taken, notwithstanding that it exceeds a rate limited by paragraph (a) or (b) of this section:
(1) Loans in the amount of $50,000.00 or more, except loans where the security given is a first lien on real property on which there is erected or to be erected a structure containing one, two, three, four, five or six dwelling units, a portion of which structure may be used for nonresidential purposes. The rate of interest stated in such contract upon the origination of such loans may be taken notwithstanding that payments thereon reduce the amount outstanding to less than $50,000.00;
(2) Loans or advances of credit made by savings and loan associations, banking institutions, or any Department of Housing and Urban Affairs or Federal Housing Administration approved mortgages which are subsequently purchased, in whole or in part, by the Federal Housing Administration, Veterans Administration, Farmers Home Administration, Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Mortgage Corporation, and any successor thereof or by any organization authorized by the Emergency Home Finance Act of 1970 to purchase such loans or by any State or Federal governmental or quasi-governmental organizations.
If such loan is not purchased within 395 days from the date the loan instruments are executed, the maximum rate of interest which may be charged on such loan shall not be in excess of that authorized by the commissioner under the provisions of this section and such rate of interest, if in excess of that rate, shall be reduced to the rate in effect at the date of the execution of the loan instruments. No such reduction shall change the maturity date of the loan without the written consent of the borrower nor shall such reduction affect the lien of the mortgage which secures the loan.
(f) Any provision in a mortgage commitment contracted prior to the effective date of this act providing for an increase in interest rates to be charged based on the highest lawful interest rate shall be null and void.
(g) Notwithstanding any other provisions of this section, if the applicable rate prescribed in this subsection exceeds the rate a person would be permitted to charge in the absence of this subsection, the rate of interest which may be taken on a loan for a business or agricultural purpose in the amount of $1,000.00 or more may not exceed 5% in excess of the discount rate, including any surcharge thereon, or any 90-day commercial paper in effect at the Federal Reserve Bank of New York on the day when such loan is made.
Notwithstanding any provisions of R.S. 31:1-1 to the contrary, the commissioner may by regulation establish a rate of interest which may be charged by any person on loans made by them equal to the rate allowed by Federal law or regulation to be charged by national banking associations at any time when the rate so allowed by Federal law exceeds 8% per annum. Nothing herein shall authorize any person to make any loan which he is not authorized by law to make, nor shall anything in this act apply to loans secured by a first lien on real estate on which there is erected or to be erected a structure containing one, two, three, four, five or six dwelling units, a portion of which structure may also be used for nonresidential purposes.
Where in any other law a rate of interest applicable to loans regulated by this section is referred to as that established by R.S. 31:1-1, the rate applicable shall be as established herein.
Any person violating section 31:1-1 of this Title may be compelled to answer as a witness in any action he may bring as to his agreement to receive, or the receipt by him, of any money or other personal property in violation of the provisions of said section.
In all actions to enforce any note, bill, bond, mortgage, contract, covenant, conveyance, or assurance, for the payment or delivery of any money, wares, merchandise, goods, or chattels lent, and on which a higher rate of interest shall be reserved or taken than was or is allowed by the law of the place where the contract was made or is to be performed, the amount or value actually lent, without interest or costs of the action, may be recovered, and no more. If any premium or illegal interest shall have been paid to the lender, the sum or sums so paid shall be deducted from the amount that may be due as aforesaid, and recovery had for the balance only.
Any borrower of money or other personal property may by action in the Superior Court against the lender, or in any discovery proceeding, compel him to discover, upon oath, the money or other personal property really lent, and all agreements, devices, shifts, bargains, contracts and conveyances which shall have passed between them relative to such loan, or the repayment thereof, and the interest or consideration for the same. If thereupon it shall appear that more than lawful interest was taken or reserved the lender shall be obliged to accept his principal money, or the personal property or the value thereof, without any interest or other consideration, and to pay costs.
No bond, mortgage or other security for the payment of money, valid on its face, heretofore or hereafter made or issued by any railroad or canal corporation created by or under the laws of this state, shall be held, deemed or considered invalid because such bond, mortgage or other security may have been made, issued, sold, assigned or otherwise disposed of by such corporation below the par value thereof.
No corporation, limited liability company or limited liability partnership shall plead or set up the defense of usury to any action brought against it to recover damages or enforce a remedy on any obligation executed by said corporation, limited liability company or limited liability partnership.
Notwithstanding the provisions of any other law, statute or regulation applicable to or constituting any limitation on the maximum rate of interest per annum payable on bonds, notes or other obligations, or as to annual interest cost to maturity of money borrowed or received upon issuance of bonds, notes or other obligations, every county, municipality, school district, body corporate and politic, district or public authority, agency, commission or other public institution heretofore or hereafter created by the State, any county, or municipality or by one or more counties or municipalities, is hereby authorized and empowered to contract to pay interest on or an interest cost per annum for money borrowed and evidenced by bonds, notes or other obligations without limit as to the rate of interest per annum payable thereon or as to the annual interest cost to maturity of the money borrowed.
This act shall be liberally construed to effect its legislative purpose of suspending for the aforesaid period any existing statutory limitation as to rate of interest or cost of money borrowed or provision of law with respect thereto and applicable to any county, municipality, school district, body corporate and politic, district or public authority, agency, commission or other public institution heretofore or hereafter created by the State, or any one or more counties or municipalities, but nothing herein contained shall be held or deemed in any way to effect or to impair existing contract limitations with bondholders or others as to rate of interest or cost of money borrowed without the consent of such bondholders or others given as provided in any such contract.
This act shall constitute and be construed as a suspension and as an amendment, for the aforesaid period, of the provisions of every law or statute establishing any limitation as to rate of interest per annum or cost of borrowing money applicable to any county, municipality, school district, body corporate and politic, district or public authority, agency, commission or other public institution heretofore or hereafter created as aforesaid.
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