H. B. 2500
(By Delegate Louisos)
[Introduced February 18, 2005; referred to the
Committee on Banking and Insurance then the Judiciary.]
A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new section, designated §31A-1-5a, relating
to providing that a commercial lender, who forecloses upon or
repossesses collateral on a loan, whether the collateral is
real or personal property, must consider the loan paid in full
at the time the property is foreclosed upon or repossessed;
providing that in the event a commercial lender sells a note
securing a loan prior to the note's maturity that the debtor
on the note may purchase the note at a prorated value that is
no more than one percent above the prime rate; and, providing
that in the event a commercial lender sells a note prior to
maturity that contains a balloon provision, that the balloon
provision is no longer enforceable.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new section, designated §31A-1-5a, to read as
follows:
ARTICLE 1. GENERAL PROVISIONS AND DEFINITIONS.
§31A-1-5a. Foreclosure and repossession limitations of
fiduciaries, financial institutions and other
persons; lenders right to purchase note sold by
lender prior to maturity.
(a) Notwithstanding any other provision of this code to the
contrary, banking institutions, fiduciaries, building and loan
associations, regulated consumer lenders, insurance companies,
fraternal benefit societies and other persons lawfully engaging in
the lending and investing business and services shall, in the event
of foreclosing or repossessing any real or personal property
previously pledged as collateral on a loan, consider the loan paid
in full at the time the property is foreclosed upon or repossessed
and no further right of action or recourse may exist against the
debtor.
(b) Notwithstanding any provision of this code to the
contrary, in the event any banking institution, fiduciary, building
and loan association, regulated consumer lender, insurance company,
fraternal benefit society or other person lawfully engaging in the
lending and investing business and services,
sells a note securing
a loan, currently paid and in good standing, prior to the note's
maturity, to another commercial lender, the debtor on the note shall have the option to purchase the note at a prorated value that
is no more than one percent over the prime interest rate.
(c) Notwithstanding any other provision of this code to the
contrary, in the event a note held by a commercial lender that
contains a balloon provision is sold prior to maturity, the balloon
provision shall no longer be legally binding, but shall convert to
the periodic terms that precede the requirement for the balloon
payment unless otherwise agreed by the debtor. For the purpose of
this subsection, "balloon provision" means any provision in a
commercial loan contract that requires the debtor to pay the total
sum left due and owing on the loan, regardless of amount, on a
specific date or with the occurrence of a specific contingency.
NOTE: The purpose of this bill is to provide that a commercial
lender, who forecloses upon or repossesses collateral on a loan,
whether the collateral is real or personal property, must consider
the loan paid in full at the time the property is foreclosed upon
or repossessed.
The bill also contains provisions that provide that
in the event a commercial lender sells a note securing a loan prior
to the note's maturity that the debtor on the note may purchase the
note at a prorated value that is no more than one percent above the
prime rate, and that in the event a commercial lender sells a note
prior to maturity that contains a balloon provision, the balloon
provision becomes unenforceable.
This section is new; therefore, strike-throughs and
underscoring have been omitted.
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