Home Equity Investment Loan Act.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
H 1
HOUSE BILL 1211

Short Title: Home Equity Investment Loan Act. (Public)
Sponsors: Representatives Longest and Liu (Primary Sponsors).
For a complete list of sponsors, refer to the North Carolina General Assembly web site.
Referred to: Rules, Calendar, and Operations of the House
May 5, 2026
*H1211-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO REGULATE H OME EQUITY INVESTMEN T LOANS AS RESIDENTI AL 2
MORTGAGE LOANS, TO I MPOSE CERTAIN CONSUM ER PROTECTIONS ON 3
THOSE LOANS, TO PROHIBIT CERTAIN MANDATORY ARBITRATION TERMS IN 4
COVERED MORTGAGE TRA NSACTIONS, TO MAKE VIOLATIONS UNFAIR OR 5
DECEPTIVE ACTS OR PR ACTICES, AND TO AUTH ORIZE FEES TO IMPLEM ENT 6
THIS ACT. 7
The General Assembly of North Carolina enacts: 8
SECTION 1. Chapter 53 of the General Statutes is amended by adding a new Article 9
to read: 10
"Article 21A. 11
"Home Equity Investment Loans. 12
"§ 53-274.1. Title. 13
This Article shall be known and may be cited as the "Home Equity Investment Loan Act." 14
"§ 53-274.2. Definitions. 15
The following definitions apply in this Article: 16
(1) Commissioner. – The Commissioner of Banks of this State. 17
(2) Company. – Any person that makes, brokers, purchases, or services a home 18
equity investment loan. 19
(3) Dwelling. – As defined in G.S. 53-244.030(9). 20
(4) Home equity investment loan or loan. – A transaction or arrangement, 21
including an option contract, futures contract, derivative, shared appreciation 22
agreement, shared value agreement, home equity sharing agreement, home 23
equity investment, equity investment option, or similar agreement, however 24
denominated, under which funds are advanced to or on behalf of a homeowner 25
and a person obtains a right to receive from or on behalf of the homeowner, 26
or from the proceeds of the dwelling or residential real estate, an amount 27
determined in whole or in part by reference to the value, equity, appreciation, 28
sale proceeds, or future value of a dwelling or of residential real estate upon 29
which a dwelling is constructed or intended to be constructed. The term 30
includes any transaction or arrangement described in this subdivision that is 31
secured by a mortgage, deed of trust, or other equivalent consensual security 32
interest in a dwelling located in this State or in residential real estate upon 33
which there is constructed or intended to be constructed a dwelling, and any 34
transaction or arrangement structured to evade the application of this Article. 35
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The term does not include a transaction or arrangement made, insured, 1
guaranteed, or administered by a federal, State, or local government agency, 2
a government-sponsored enterprise, or an agency or enterprise of a political 3
subdivision of this State. 4
(5) Homeowner. – A natural person who receives funds under a home equity 5
investment loan and who, at the time of application or closing, owns and 6
occupies, or intends to occupy, the dwelling securing the loan as the person 's 7
principal dwelling. 8
(6) Residential real estate. – As defined in G.S. 53-244.030(31). 9
"§ 53-274.3. Applicability; construction. 10
(a) A home equity investment loan is a residential mortgage loan for purposes of this 11
Chapter and Chapters 24 and 45 of the General Statutes and is subject to all otherwise applicable 12
State residential mortgage laws, including licensing, collection, foreclosure, and usury laws. 13
(b) A home equity investment loan shall not be treated as a reverse mortgage transaction 14
for purposes of any exclusion, exception, or limitation under Chapter 24 or Chapter 45 of the 15
General Statutes unless the transaction independently satisfies Article 21 of this Chapter. 16
(c) Regardless of how a transaction is denominated, labeled, or structured, including as 17
an investment, option, sale of future appreciation, sale of an interest in equity, shared appreciation 18
agreement, shared value agreement, or similar arrangement, any transaction that in substance 19
meets the definition of a home equity investment loan under G.S. 53-274.2 is governed by this 20
Article. 21
"§ 53-274.4. Licensing; home equity investment loan authorization and fees; purchasers 22
and assignees. 23
(a) No person shall make, broker, or service a home equity investment loan with respect 24
to a dwelling located in this State unless the person is authorized to engage in the mortgage 25
business under Article 19B of this Chapter. 26
(b) A person authorized to engage in the mortgage business under Article 19B of this 27
Chapter shall not make a home equity investment loan on or after October 1, 2026, unless the 28
person is authorized by the Commissioner to make home equity investment loans under this 29
subsection. The Commissioner may accept applications and fees under this subsection before 30
October 1, 2026. An application for au thorization shall be in writing, in the form prescribed by 31
the Commissioner, and accompanied by a nonrefundable fee of five hundred dollars ($500.00). 32
Authorization under this subsection expires annually and may be renewed in the form prescribed 33
by the Commissioner upon payment of a renewal fee of two hundred fifty dollars ($250.00). 34
(c) A purchaser or assignee of a home equity investment loan is subject to this Article to 35
the extent the purchaser or assignee owns, holds, services, collects, or enforces the loan. This 36
section does not require licensure under Article 19B of this Chapter or authorization under 37
subsection (b) of this section solely because a person purchases or acquires a home equity 38
investment loan, but a purchaser or assignee that services th e loan or otherwise engages in the 39
mortgage business is subject to Article 19B of this Chapter. 40
(d) Notwithstanding any agreement to the contrary, a purchaser or assignee of a home 41
equity investment loan is subject to all affirmative claims, counterclaims, defenses, rights of 42
setoff, and rights of recoupment with respect to the loan that the homeowner may assert against 43
the company or any prior holder, servicer, or assignee of the loan. 44
"§ 53-274.5. Required disclosures. 45
(a) Within 10 business days after application, and in any event not less than 20 business 46
days before closing, a company shall provide to the homeowner all of the following and any 47
additional disclosures required by the Commissioner by rule: 48
(1) A statement that the transaction is a residential mortgage loan secured by the 49
homeowner's dwelling and that failure to pay may result in foreclosure or 50
forced sale of the dwelling. 51
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(2) The amount of funds to be advanced to the homeowner. 1
(3) The maximum dollar amount, if any, that the homeowner may be required to 2
pay, and if there is no maximum dollar amount, a clear and conspicuous 3
statement that the amount due is not subject to a dollar cap. 4
(4) The term of the loan and each event that may trigger payment or acceleration. 5
(5) The method that will be used to determine the value of the dwelling at 6
origination and at payment. 7
(6) The specific value -based payment formula elected in the contract, the 8
contractual payment cap required by G.S. 53-274.9, and a statement that a 9
contract that exceeds, omits, or provides for value-based payment in a manner 10
not authorized by that section is void and unenforceable against the 11
homeowner. 12
(7) A statement that the company shall pay all closing costs, the actual and 13
reasonable fees and expenses of the attorney requir ed by G.S. 53-274.6, and 14
the actual and reasonable fees and expenses of the housing counseling 15
required by G.S. 53-274.7. 16
(8) A description of the market-rate refinance option required by G.S. 53-274.11. 17
(9) Illustrative examples of the total amount due at payment assuming no 18
appreciation, moderate appreciation, and high appreciation of the dwelling, as 19
specified by the Commissioner by rule. 20
(10) The name, address, telephone number, and electronic mail address, if any, of 21
the company employee or agent designated to respond to inquiries concerning 22
the loan. 23
(b) The disclosures required by this section shall be clear and conspicuous and may not 24
be waived by the homeowner. The disclosures shall be provided in English and in each other 25
language in which the company, or a person acting on its behalf, advertises, solicits, negotiates, 26
or explains the transaction to the homeowner. 27
(c) The Commissioner may prescribe by rule form s for disclosures required by this 28
section. Until a form becomes effective, a company complies with this section by providing the 29
disclosures in a clear written document containing the information required by this section. 30
"§ 53-274.6. Independent legal counsel. 31
(a) A company shall not close a home equity investment loan unless the homeowner has 32
been represented in the transaction by an attorney licensed to practice law in this State who is 33
selected by the homeowner and who certifies in writing that the att orney has explained the 34
material terms and legal consequences of the transaction to the homeowner. 35
(b) The company shall pay the actual and reasonable fees and expenses of the attorney 36
required by this section and shall not directly or indirectly seek reim bursement from the 37
homeowner. 38
(c) A waiver of the requirements of this section is void. 39
"§ 53-274.7. Housing counseling. 40
(a) A company shall not close a home equity investment loan unless the homeowner has 41
received counseling from a housing counselor approved or designated by the Commissioner and 42
selected by the homeowner, and the company has received written certification from the 43
counselor that the homeowner has received counseling on the advisability of the home equity 44
investment loan, the material terms and payment triggers of the loan, the risk of foreclosure or 45
forced sale, the availability of other financial options and resources, and potential tax 46
consequences. 47
(b) The Commissioner may adopt rules establishing standards for housing counselor 48
approval, training, certification, and disclosures under this section. Until rules become effective, 49
the Commissioner may designate as approved counselors counselors whose names are 50
maintained on the Commissioner's list of approved reverse mortgage counselors under Article 21 51
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of this Chapter or counselors employed by housing counseling agencies approved by the United 1
States Department of Housing and Urban Development. 2
(c) The company shall pay the actual and reasonable fees and expenses of counseling 3
required by this section and shall not directly or indirectly seek reimbursement from the 4
homeowner. 5
(d) A waiver of the requirements of this section is void. 6
"§ 53-274.8. Closing costs. 7
(a) The company shall pay all closing costs associated with a home equity inve stment 8
loan. 9
(b) No company shall directly or indirectly charge, collect, finance, capitalize, or include 10
in the amount due under a home equity investment loan any application fee, authorization fee or 11
renewal fee required by G.S. 53-274.4(b), origination fee, broker fee, appraisal fee, title fee, 12
settlement fee, recording fee, document preparation fee, underwriting fee, processing fee, notary 13
fee, courier fee, or similar cost. 14
(c) A contract term in violation of this section is void. 15
"§ 53 -274.9. Permitted value-based payment; contractual payment cap; valuation; void 16
terms. 17
(a) A home equity investment loan may require payment determined in whole or in part 18
by reference to the value, equity, appreciation, sale proceeds, or future value of the dwelling or 19
residential real estate only as expressly authorized by this section. 20
(b) The total amount that may be required to be paid by or on behalf of a homeowner to 21
satisfy a home equity investment loan may not exceed the sum of all of the following: 22
(1) The total amount of funds actually advanced to or for the benefit of the 23
homeowner, excluding any amount the company is required to pay under this 24
Article. 25
(2) The total amount of property taxes, insurance premiums, assessments, and 26
other similar charges actually and reasonably advanced by the company to 27
protect the collateral and not reimbursed by the homeowner within 60 days 28
after the date of payment. 29
(3) Only one of the following amounts, if expressly elected in the contract: 30
a. Shared appreciation. – An amount not exceeding ten percent (10%) of 31
the increase in the value of the property from the date of origination of 32
the loan to the date of payment. 33
b. Shared value. – An amount not exceeding ten percent (10%) of the 34
value of the property at the time of payment. 35
(c) No amount described in subdivision (3) of subsection (b) of this section is due, 36
collectible, or enforceable unless the home equity investment loan has been outstanding for at 37
least 24 months. This subsection does not prohibit a homeowner from satisfying the loan before 38
that period by paying the amounts described in subdivisions (1) and (2) of subsection (b) of this 39
section. 40
(d) A contract term that calculates or requires payment by reference to the value, equity, 41
appreciation, sale proceeds, or future value of the dwelling or residential real estate in any manner 42
not expressly authorized by this section is void and unenforceable. 43
(e) No company shall contract for, receive, collect, or attempt to collect from or on behalf 44
of the homeowner any amount, how ever denominated, except as expressly authorized by this 45
section. 46
(f) For purposes of this section, the value of the property at origination shall be the fair 47
market value of the property, as determined by an appraisal performed by an appraiser licensed 48
or certified under Chapter 93E of the General Statutes. The company shall not apply any discount, 49
risk adjustment, or other reduction to the appraised fair market value. The company shall provide 50
a copy of the appraisal to the homeowner not less than 20 busi ness days before closing. If 51
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payment is not made in conjunction with a bona fide arm's-length sale of the property, the value 1
of the property at the time of payment shall be the fair market value of the property, as determined 2
by an appraisal performed by an appraiser licensed or certified under Chapter 93E of the General 3
Statutes. If the parties are unable to agree on a single appraiser within 30 days after written 4
demand for payment, each party may obtain an appraisal, and the value of the property shall be 5
the average of the appraisals. If the homeowner does not obtain an appraisal within 30 days after 6
the company provides the homeowner a copy of the company's appraisal, the company may rely 7
on its appraisal. 8
(g) If payment is made in conjunction with a bona fide arm's-length sale of the property, 9
the value of the property at the time of payment is the sale price, less the actual and reasonable 10
costs of sale. 11
(h) Nothing in this section shall be construed to limit the application of Chapter 24 of the 12
General Statutes to a home equity investment loan or to prevent any amount required to be paid 13
by or on behalf of a homeowner under a home equity investment loan from being treated as 14
interest, charges, or consideration for the use or forbearance of money. Any amount required to 15
be paid by or on behalf of a homeowner under a home equity investment loan in excess of the 16
amounts authorized by this section shall be treated as interest, charges, or consideration for the 17
use or forbearance of money for purposes of Chapter 24 of the General Statutes. 18
(i) A home equity investment loan contract that exceeds the payment cap required by 19
this section, omits the applicable cap, or provides for value -based payment in a manner not 20
expressly authorized by this section is void and unenforceable against the homeowner. 21
"§ 53-274.10. Homeowner protections. 22
(a) Prepayment of a home equity investment loan, in whole or in part, shall be permitted 23
without penalty at any time during the term of the loan. 24
(b) The company's sole remedy after the loan becomes due is to enforce the debt through 25
the property securing the loan, and the company shall not obtain a deficiency judgment against 26
the homeowner. 27
(c) A home equity investment loan contract may not waive or disclaim any protection 28
provided to the homeowner by this Article. 29
"§ 53-274.11. Payment; refinance option; foreclosure. 30
(a) A home equity investment loan contract may provide that the loan becomes due only 31
upon one or more of the following: 32
(1) The scheduled maturity date of the loan. 33
(2) The homeowner sells or otherwise voluntarily conveys title to the dwelling. 34
(3) The homeowner fails to pay property taxes, insurance premiums, or 35
assessments affecting the dwelling and does not cure the failure within 90 days 36
after written notice from the company. 37
(4) The homeowner commits waste that materially impairs the security for the 38
loan and fails to cure the impairment within 90 days after written notice from 39
the company. 40
(5) The homeowner dies and the dwelling is no longer occupied as a p rincipal 41
dwelling by any person who is a surviving joint owner, surviving spouse, heir, 42
devisee, or other successor in interest and who holds or succeeds to an 43
ownership interest in the dwelling and remains bound by the security 44
instrument. 45
(b) If a home equity investment loan becomes due and the homeowner notifies the 46
company then entitled to collect or enforce the loan that the homeowner cannot pay without 47
selling the dwelling, the company shall, directly or through a person authorized to engage in the 48
mortgage business under Article 19B of this Chapter and before initiating foreclosure or 49
otherwise enforcing the security instrument, offer the homeowner a market-rate refinance under 50
all of the following: 51
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(1) Converts the amount due into a closed-end residential mortgage loan. 1
(2) Provides a fixed interest rate not exceeding the average prime offer rate for a 2
comparable transaction, as published by the Consumer Financial Protection 3
Bureau or its successor, on the date of the offer. 4
(3) Requires substantially equal monthly payments of principal and interest over 5
a term of not less than 120 months. 6
(4) Does not require points, origination fees, or a prepayment penalty. 7
(c) When a homeowner 's obligation to pay a home equity investment loan is triggered 8
under subsection (a) of this section, in addition to any other notice required by Chapter 45 of the 9
General Statutes, the company shall give the homeowner not less than 90 days ' written notice 10
and an opportunity to cure before commencing foreclosure or otherwise enforcing the debt. 11
"§ 53-274.12. Annual statement and account history. 12
Within 60 days after the end of each calendar year and when the loan becomes due, the 13
company shall issue to the homeowner a written statement regarding the activity of the loan for 14
the preceding calendar year, or for the period since the last statement was provided. The statement 15
shall include all of the following: 16
(1) The amount advanced to the homeowner during the statement period and 17
cumulatively. 18
(2) Any taxes, insurance premiums, assessments, or similar protective advances 19
paid by the company during the statement period and cumulatively. 20
(3) Any amounts paid by or on behalf of the homeowner during the statement 21
period and cumulatively. 22
(4) The current amount that would be due if the loan were paid on the date of the 23
statement without a sale, calculated in accordance with G.S. 53-274.9. 24
(5) The method most recently used to determine the value of the dwelling for 25
purposes of the loan. 26
(6) The name, address, telephone number, and electronic mail address, if any, of 27
the company employee or agent designated to respond to inquiries concerning 28
the loan. 29
"§ 53-274.13. Company default. 30
(a) A company 's failure to advance funds to or on behalf of the homeowner, pay an 31
amount the company is required to pay to or for the benefit of the homeowner under this Article, 32
or otherwise perform a material funding obligation under a home equity investment loan contract 33
or written commitment is a default by the company. 34
(b) Upon default by the company, t he company forfeits any right to collect an amount 35
described in G.S. 53-274.9(b)(3), interest, fees, charges, or any other amount in excess of the 36
funds actually advanced to or for the benefit of the homeowner, excluding any amount the 37
company is required to pay under this Article, and any protective advances described in 38
G.S. 53-274.9(b)(2). The company 's right to recover when the loan becomes due is limited to 39
those amounts, less all amounts paid by or on behalf of the homeowner. 40
(c) Subsection (b) of this section does not apply if the company cures the default within 41
the time stated in the home equity investment loan contract or written commitment or within 30 42
days after receiving written notice from the homeowner that the advance, payment, or other 43
performance was not made, whichever is later. 44
(d) The remedies in this section are in addition to any other remedy available under this 45
Article or other law. 46
"§ 53-274.14. Prohibited acts. 47
(a) A company shall not engage in any of the following acts in connection with the 48
making, brokering, purchasing, servicing, collecting, or enforcing of a home equity investment 49
loan: 50
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(1) Misrepresenting material facts, making false promises, or engaging in a course 1
of misrepresentation through agents or otherwise. 2
(2) Failing to provide disclosures in accordance with this Article. 3
(3) Closing a loan without receiving each certification required by G.S. 53-274.6 4
and G.S. 53-274.7. 5
(4) Improperly refusing to issue a satisfaction of the security instrument. 6
(5) Failing, within 10 business days after written request from the homeowner or 7
the holder or servicer of an existing loan secured by a first lien on the dwelling, 8
to execute and deliver in recordable form, without charge to the homeowner, 9
a subordination agreement subordinating the home equity investment loan and 10
any security instrument or other recorded instrument securing, evidencing, or 11
making enforceable the home equity investment loan to any refinancing or 12
modification of that existing first lien loan. 13
(6) Contracting for or enforcing a provision that prohibits, limits, or penalizes a 14
homeowner's disclosure to any person of the existence, terms, cost, risks, or 15
performance of a home equity investment loan. 16
(7) Contracting for, receiving, collecting, or attem pting to collect any amount 17
prohibited by G.S. 53-274.8 or G.S. 53-274.9. 18
(8) Failing to offer the market-rate refinance option required by G.S. 53-274.11. 19
(9) Defaulting under G.S. 53-274.13 and failing to cure the default within the time 20
allowed by that section. 21
(10) Failing to comply with this Article. 22
(b) A provision described in subdivision (6) of subsection (a) of this section is void and 23
unenforceable against the homeowner. 24
"§ 53-274.15. Rules. 25
The Commissioner may adopt rules necessary to implement and enforce this Article. 26
"§ 53-274.16. Enforcement and civil remedies. 27
(a) In addition to any authority under Article 19B of this Chapter, the Commissioner 28
may, after notice and opportunity for hearing, order a company to cease and desist from 29
violating this Article or any rule adopted under this Article and may impose a civil penalty of 30
not more than five thousand dollars ($5,000) for each violation. For purposes of this subsection, 31
each loan transaction and each failure to provide a disclosure, notice, certification, cure 32
opportunity, or satisfaction required by this Article constitutes a separate violation. 33
(b) Upon a finding that a company has violated this Article, the Commissioner may 34
suspend or revoke any license held by the company under Article 19B of this Chapter to the 35
extent permitted by law. 36
(c) A violation of this Article is an unfair or deceptive act or practice in or affecting 37
commerce under G.S. 75-1.1." 38
SECTION 2. G.S. 53-244.030(30) reads as rewritten: 39
"(30) Residential mortgage loan. – Any loan or obligation made or represented to 40
be made to one or more individuals primarily for personal, family, or 41
household use that is secured by a mortgage, deed of trust, or other equivalent 42
consensual security interest on a dwelling located within this State or 43
residential real estate upon which is constructed or intended to be constructed 44
a dwelling. This term includes reverse mortgage loans under Article 21 of this 45
Chapter Chapter, home equity investment loans under Arti cle 21A of this 46
Chapter, and contracts for deed under Chapter 47H of the General Statutes." 47
SECTION 3. G.S. 53-244.118(a) reads as rewritten: 48
"(a) The Commissioner may adopt any rules that the Commissioner deems necessary to 49
carry out the provisions of this Article, to provide for the protection of the borrowing public, to 50
prohibit unfair or deceptive practices, to instruct licensees or registrants in interpreting this 51
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Article, and to implement and interpret the provisions of G.S. 24-1.1E, 24-1.1F, and 24 -10.2 1
24-10.2, and 24-10.3 as they apply to licensees and registrants under this Article. " 2
SECTION 4.(a) G.S. 24-9(c) reads as rewritten: 3
"(c) The provisions of G.S. 24-1.2A, 24-11, and 24-11.1 shall not apply to equity lines of 4
credit offered by banks. E xcept as provided in this subsection and notwithstanding any other 5
provision of this Chapter or any other provision of State law, any bank may charge and collect 6
from any borrower interest at any rate and fees and other charges in any amount that the borrower 7
agrees to pay in connection with an equity line of credit. However, an equity line of credit made 8
by a bank shall be subject to the following, to the extent otherwise applicable: 9
(1) The provisions of G.S. 24-1.1E (relating to restrictions and limitati ons on 10
high-cost home loans). 11
(2) The provisions of G.S. 24-10.2 (relating to consumer protections in certain 12
home loans). 13
(2a) The provisions of G.S. 24-10.3 (relating to certain mandatory arbitration 14
provisions prohibited in covered mortgage transactions). 15
(3) Notwithstanding the limitation against prepayment penalties contained in 16
G.S. 45-82.4, a bank may charge and collect prepayment fees or penalties 17
following the borrower's voluntary exercise of a right or option to repay all or 18
any portion of the outstanding balance of a variable interest rate equity line of 19
credit at a fixed interest rate over a specified period of time, subject to the 20
following limitations: 21
a. Prepayment fees or penalties may be charged only with respect to the 22
prepayment of that portion of the outstanding balance the borrower 23
voluntarily agrees to repay at a fixed interest rate over a specified time; 24
b. No prepayment fees or penalties may be charged for prepayments 25
made more than 30 months after the borrower voluntarily exercises the 26
right or option to repay that portion of the outstanding balance of the 27
equity line of credit at a fixed interest rate over a specified period of 28
time; and 29
c. The prepayment fees or penalties charged with respect to that portion 30
of the outstanding balance to be repaid at a fixed rate over a specified 31
period of time may not exceed, in the aggregate, more than two percent 32
(2%) of the amount prepaid. 33
Otherwise, no prepayment fees or penalties may be charged or collected by 34
the bank with respect to an equity line of credit." 35
SECTION 4.(b) G.S. 24-9 is amended by adding a new subsection to read: 36
"(e) This section does not apply to a home equity investment loan under Article 21A of 37
Chapter 53 of the General Statutes." 38
SECTION 5. G.S. 24-10.2(a) reads as rewritten: 39
"(a) For purposes of this section, the term "consumer home loan" means a loan, including 40
an open-end credit plan but excluding a reverse mortgage transaction, in which (i) the borrower 41
is a natural person, (ii) the debt is incurred by the borrower primarily for personal, family, or 42
household purposes, and (iii) the loan is secured by a mortgage or deed of trust upon real estate 43
upon which there is located or there is to be located a structure or structures designed principally 44
for occupancy of from one to four families which is or will be occupied by the borrower as the 45
borrower's principal dwelling. The term also includes a home equity investment loan under 46
Article 21A of Chapter 53 of the General Statutes." 47
SECTION 6. Chapter 24 of the General Statutes is amended by adding a new section 48
to read: 49
"§ 24-10.3. Certain mandatory arbitration provisions prohibited in covered mortgage 50
transactions. 51
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(a) The following definitions apply in this section: 1
(1) Borrower. – A natural person obligated or applying to become obligated on a 2
covered mortgage transaction. 3
(2) Covered mortgage transaction. – Any of the following: 4
a. A residential mortgage loan, as defined in G.S. 53-244.030(30), 5
including a contract for deed under Chapter 47H of the General 6
Statutes. 7
b. An extension of credit under an open -end consumer credit plan 8
secured by the principal dwelling of the borrower. 9
(b) To the extent prohibited by 15 U.S.C. § 1639c(e), as amended, 12 C.F.R. § 10
1026.36(h), as amended, or any successor provision, no covered mortgage transaction and no 11
contract or other agreement relating to a covered mortgage transaction may include terms that 12
require arbitration or any other nonjudicial procedure as the method for resolving any controversy 13
or settling any claims arising out of the transaction. 14
(c) This section does not prohibit a borrower and a creditor, company, lender, holder, 15
assignee, or servicer from agreeing, after a dispute or claim arises, to arbitration or another 16
nonjudicial procedure to resolve that dispute or claim. 17
(d) To the extent prohibited by 15 U.S.C. § 1639c(e), as amended, 12 C.F.R. § 18
1026.36(h), as amended, or any successor provision, no covered mortgage transaction and no 19
contract or other agreement relating to a covered mortgage transaction may b e applied or 20
interpreted so as to bar a borrower from bringing an action in any court of competent jurisdiction 21
pursuant to State or federal law for damages or other relief in connection with an alleged violation 22
of law. 23
(e) A term included in violation of this section is void and unenforceable. 24
(f) This section shall be construed consistent with 15 U.S.C. § 1639c(e), 12 C.F.R. § 25
1026.36(h), and any successor provision. 26
(g) A violation of this section is an unfair or deceptive act or practice in or affectin g 27
commerce under G.S. 75-1.1." 28
SECTION 7. G.S. 45-101(1b) reads as rewritten: 29
"(1b) Home loan. – Any of the following: 30
a. A loan that has all of the following characteristics: 31
a. 1. The loan is not (i) an equity line of credit as defined in 32
G.S. 24-9, (ii) a construction loan as defined in G.S. 24-10, (iii) 33
a reverse mortgage transaction, or (iv) a bridge loan with a term 34
of 12 months or less, such as a loan to purchase a new dwelling 35
where the borrower plans to sell a current dwelling within 12 36
months. 37
b. 2. The borrower is a natural person. 38
c. 3. The debt is incurred by the borrower primarily for personal, 39
family, or household purposes. 40
d. 4. The principal amount of the loan does not exceed the 41
conforming loan size limit for a single -family dwelling as 42
established from time to time by Fannie Mae. 43
e. 5. The loan is secured by (i) a security interest in a manufactured 44
home, as defined in G.S. 143-145, in the State which is or will 45
be occupied by the borrower as the borrower's principal 46
dwelling, (ii) a mortgage or deed of trust on real property in the 47
State upon which there is located an existing structure designed 48
principally for occupancy of from one to four families that is 49
or will be occupied by the borrower as the borrower's principal 50
dwelling, or (iii) a mortgage or deed of trust on real property 51
General Assembly Of North Carolina Session 2025
Page 10 House Bill 1211-First Edition
in the State upon which there is to be constructed using the loan 1
proceeds a structure or structur es designed principally for 2
occupancy of from one to four families which, when 3
completed, will be occupied by the borrower as the borrower's 4
principal dwelling. 5
f. 6. A purpose of the loan is to (i) purchase the dwelling, (ii) 6
construct, repair, rehabilita te, remodel, or improve the 7
dwelling or the real property on which it is located, (iii) satisfy 8
and replace an existing obligation secured by the same real 9
property, or (iv) consolidate existing consumer debts into a 10
new home loan. 11
b. A home equity investment loan under Article 21A of Chapter 53 of the 12
General Statutes secured by the borrower's principal dwelling." 13
SECTION 8. Until rules adopted under G.S. 53-274.15 specifying the examples 14
required by G.S. 53-274.5(a)(9), as enacted by Section 1 of this act, become effective, a company 15
complies with G.S. 53-274.5(a)(9) by providing examples of the total amount due at payment 16
assuming (i) no appreciation, (ii) annual appreciation of three percent (3%), and (iii) annual 17
appreciation of six percent (6%). 18
SECTION 9.(a) G.S. 53-274.4(b) and G.S. 53-274.15, as enacted by Section 1 of this 19
act, are effective when this act becomes law. 20
SECTION 9.(b) Section 2 of this act, Section 3 of this act, Section 4(a) of this act, 21
and Section 6 of this act become effective October 1, 2026. Section 2 of this act applies to home 22
equity investment loans and contracts for deed entered into on or after that date. Section 4(a) of 23
this act applies to equity lines of credit entered into on or after that date. Section 6 of this ac t 24
applies to covered mortgage transactions entered into, and to contracts or other agreements 25
relating to covered mortgage transactions executed, on or after that date. 26
SECTION 9.(c) The remainder of Section 1 of this act, Section 4(b) of this act, and 27
Sections 5, 7, and 8 of this act become effective October 1, 2026, and apply to home equity 28
investment loan applications made on or after that date. 29
SECTION 9.(d) The remainder of this act is effective when it becomes law. 30