AN ACT RELATING TO PROPERTY -- MORTGAGES OF REAL PROPERTY (Limits mortgage prepayment rules to mortgages on owner-occupied properties with one to four dwelling units.)

S3073

2026 -- S 3073
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LC005273
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STATE OF RHODE ISLAND
IN GENERAL ASSEMBLY
JANUARY SESSION, A.D. 2026
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A N A C T
RELATING TO PROPERTY -- MORTGAGES OF REAL PROPERTY

Introduced By:
Senators Britto, and McKenney

Date Introduced:
March 13, 2026

Referred To:
Senate Commerce
It is enacted by the General Assembly as follows:
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SECTION 1. Section 34-23-5 of the General Laws in Chapter 34-23 entitled "Mortgages
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of Real Property" is hereby amended to read as follows:
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34-23-5. Prepayment of mortgage loans.
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(a) Every bank, trust company, loan company, building-loan association, credit union,
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finance company and other person(s) making a loan or loans secured by a mortgage or mortgages
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on real estate located in Rhode Island containing thereon dwelling houses of not more than four (4)
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dwelling units shall provide in the mortgage note, and in any event the loan or loans shall be upon
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the condition that the full payment of mortgage may be made at any time after one year from the
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making of the loan without penalty, provided further, that during the first year, penalty or other
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charges for prepayment shall not exceed two percent (2%) of the balance due at date of the pay-
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off. If interest or other charges in connection with the loan or loans shall have been prepaid or
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included in the face of the mortgage, the holder thereof shall rebate the interest or other charges
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under regulations promulgated by the director of the department of business regulation.
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(b) Alternatively a bank, trust company, loan company, building-loan association, credit
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union, finance company and other person(s) making a nonpurchase money loan or loans secured
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by a mortgage or mortgages on real estate located in Rhode Island containing on it dwelling houses
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of not more than four (4) dwelling units, may impose a prepayment penalty or other similar charges
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for the prepayment of a mortgage loan notwithstanding the prepayment penalty limitation imposed
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in subsection (a), but only if:

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(1) The terms, conditions and amount of the prepayment penalty or other similar charges
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are prominently and conspicuously disclosed in writing to the borrower;
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(2) The borrower agrees and consents to be bound by these terms and conditions; and
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(3) Provided no prepayment penalty shall be imposed for any prepayment occurring more
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than sixty (60) months after the date of such loan.
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(c) Any bank, trust company, loan company, building-loan association, credit union,
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finance company or other lender that chooses to offer a mortgage product pursuant to subsection
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(b) shall have available a similar mortgage product that complies with the limitations set forth in
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subsection (a) and all applicable federal regulations.
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(d) Any prepayment penalty imposed under this section shall not be construed as interest
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under the provisions of § 6-26-2.
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(e) The limitations under this section shall only apply to mortgage loans made for real
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estate containing owner-occupied dwelling houses of not more than four (4) dwelling units.
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SECTION 2. This act shall take effect upon passage.
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LC005273
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EXPLANATION
BY THE LEGISLATIVE COUNCIL
OF
A N A C T
RELATING TO PROPERTY -- MORTGAGES OF REAL PROPERTY
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This act would limit mortgage prepayment rules to mortgages on owner-occupied
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properties with one to four (4) dwelling units.
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This act would take effect upon passage.
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LC005273
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