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. -- 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 {ADD located in Rhode Island ADD} 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.

SECTION 2. This act shall take effect upon passage.