§5-16-25. Real estate loans.

(a) Real estate loans may be made as authorized by this chapter upon any other loan plan approved by the commissioner. No real estate loan shall be made until a qualified person selected by the board of directors shall have submitted a signed appraisal of the real estate securing such loan and until approved by the board of directors or a committee thereunto authorized by the board of directors. Payments on real estate loans shall be applied, first, to the payment of interest on the unpaid balance of the loan, the remainder to the reduction of the loan; provided, that if the loan is in default in any manner, payments may be applied by the mortgages in any manner approved by the commissioner. Every loan shall be evidenced by a note or bond for the amount of the loan. The note or bond shall specify the amount, rate of interest and terms of repayment and may contain all other terms of the loan contract. Every real estate loan shall be secured by a mortgage or other instrument constituting a first lien, or the full equivalent thereof, upon the real estate securing the loan according to any lawful or well recognized practice which is best suited to the transaction. Any such instrument, constituting a first lien, is herein termed a "mortgage." Such mortgage shall provide specifically for full protection to the association with respect to usual insurance risks, taxes, assessments, other governmental levies and maintenance and repairs. It may provide for an assignment of rents, which assignment shall be valid. Every such mortgage or other instrument shall create and preserve to the association a first lien, which shall equally secure the original loan and each and every subsequent advance and loan in any amount and for any purpose by the association to such borrower. No subsequent loan to such borrower by any other person shall establish an intervening lien which shall disturb the first lien of such association as security for every advance and loan made to such borrower. All such mortgages shall be recorded in accordance with the law of this state. An association may pay taxes, assessments, insurance premiums and other similar charges for the protection of its real estate loans. All such payments shall be added to the unpaid balance of the loan and shall be equally secured by the first lien on the property. An association may require life insurance to be assigned as additional collateral upon any real estate loan. In such event, the association shall obtain a first lien upon such policy and may advance premiums thereon, and such premium advances shall be added to the unpaid balance of the loan and shall be equally secured by the first lien on the property. An association may require the borrower to pay monthly in advance, in addition to interest or interest and principal payment, the equivalent of one twelfth of the estimated annual taxes, assessments, insurance premiums and other charges upon the real estate securing a loan or any of such charges, so as to enable the association to pay such charges as they become due from the funds so received. The amount of such monthly charges may be increased or decreased so as to provide reasonably for the payment of the estimated annual taxes, assessments, insurance premiums and other charges. Every association shall keep a record of the status of taxes, assessments, insurance premiums and other charges on all real estate securing its loans and on all real and other property owned by it. All real estate loans may be prepaid, in part or in full, at any time, and the association shall not charge for such privilege of anticipatory payment an amount greater than one and one-half percent of the amount of such anticipatory payment. Any association, by agreement with the debtor, may modify the terms of any real estate loan so that such loan shall be an amortized loan, and incident thereto may credit on the debt the participation value of mortgage loan shares or accounts pledged as security for such real estate loan.

(b) Every association may require borrowing members to pay all reasonable expenses incurred in connection with the making, closing, disbursing, extending, readjusting or renewing of real estate loans. Without limiting the generality of the foregoing, such expenses may include appraisal, attorneys, abstract, recording and registration fees, title examination, credit report, survey, drawing of papers, loan closing costs and taxes imposed upon or in connection with the making and recording of any mortgage. Every association may also require borrowing members to pay the cost of all other necessary and incidental services rendered by the association or by others in connection with real estate loans in such reasonable amounts as may be fixed by the board of directors. Without limiting the generality of the foregoing, such costs may include the cost of services of inspectors, engineers and architects. Such reasonable initial charges may be collected by the association from the borrower and paid to any persons, including any director, officer or employee of the association rendering such services or paid directly by the borrower. In lieu of such initial charges to cover such expenses and costs, an association may charge a reasonable charge, part or all of which may be retained by the association which renders such service or part or all of which may be paid to others who render such services. No director, officer or employee of an association shall receive any fee or other compensation of any kind in connection with procuring any loan for an association, except for services actually rendered as above provided. No loan shall be made when the borrower is required to pay to the association or to another person in connection with the loan any unreasonable or unlawful charges or fees. The association shall ascertain the total amount paid by each borrower to it and to every other person for any reason in connection with the loan and shall furnish a loan settlement statement to each borrower upon the closing of the loan, indicating in detail the charges and fees such borrower has paid or obligated himself to pay to the association or to any other person in connection with such loan. A copy of such statement shall be retained in the records of the association.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §231.)