2026 -- H 8104

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LC005422

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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: Representatives McEntee, Spears, Caldwell, and O'Brien

     Date Introduced: February 27, 2026

     Referred To: House Judiciary

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 34-23-5 of the General Laws in Chapter 34-23 entitled "Mortgages

of Real Property" is hereby amended to read as follows:

     34-23-5. Prepayment of mortgage loans.

     (a) Every bank, trust company, loan company, building-loan association, credit union,

finance company and other person(s) making a loan or loans secured by a mortgage or mortgages

on real estate located in Rhode Island containing thereon dwelling houses of not more than four (4)

dwelling units shall provide in the mortgage note, and in any event the loan or loans shall be upon

the condition that the full payment of mortgage may be made at any time after one year from the

making of the loan without penalty, provided further, that during the first year, penalty or other

charges for prepayment shall not exceed two percent (2%) of the balance due at date of the pay-

off. If interest or other charges in connection with the loan or loans shall have been prepaid or

included in the face of the mortgage, the holder thereof shall rebate the interest or other charges

under regulations promulgated by the director of the department of business regulation.

     (b) Alternatively a bank, trust company, loan company, building-loan association, credit

union, finance company and other person(s) making a nonpurchase money loan or loans secured

by a mortgage or mortgages on real estate located in Rhode Island containing on it dwelling houses

of not more than four (4) dwelling units, may impose a prepayment penalty or other similar charges

for the prepayment of a mortgage loan notwithstanding the prepayment penalty limitation imposed

in subsection (a), but only if:

     (1) The terms, conditions and amount of the prepayment penalty or other similar charges

are prominently and conspicuously disclosed in writing to the borrower;

     (2) The borrower agrees and consents to be bound by these terms and conditions; and

     (3) Provided no prepayment penalty shall be imposed for any prepayment occurring more

than sixty (60) months after the date of such loan.

     (c) Any bank, trust company, loan company, building-loan association, credit union,

finance company or other lender that chooses to offer a mortgage product pursuant to subsection

(b) shall have available a similar mortgage product that complies with the limitations set forth in

subsection (a) and all applicable federal regulations.

     (d) Any prepayment penalty imposed under this section shall not be construed as interest

under the provisions of § 6-26-2.

     (e) The limitations under this section shall only apply to mortgage loans made for real

estate containing owner-occupied dwelling houses of not more than four (4) dwelling units.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PROPERTY -- MORTGAGES OF REAL PROPERTY

***

     This act would limit the provisions related to prepayment of real estate mortgages to those

mortgage loans made for real estate containing owner-occupied dwelling houses of not more than

four dwelling units.

     This act would take effect upon passage.

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