Rules & Regulations of the State of Tennessee
Title 0180 - Financial Institutions
Chapter 0180-12 - Operation of State-Chartered Building and Loan Associations
Section 0180-12-.16 - OTHER LOANS

(a) Standard Adopted; Effect of Changes in Standard - The standard for savings and loan association, upon which variations in the interest rate on mortgage contracts, deeds of trust, real estate sales contracts or any note or negotiable instrument (hereinafter referred to as "note") issued in connection therewith may be based, shall be the last published weighted average cost of savings, borrowings and Federal Home Loan Bank of Cincinnati, or such other Standard as the Commissioner may approve.

Subject to the provisions set forth below, an association in exercising its rights to change the interest rate pursuant to a variable interest clause in its note shall effect such changes in such manner as to maintain the same margin above or below the initial interest rate of such note as the last published Standard is above or below the last Standard at the date of such note.

(b) Change in Monthly Payments - An association, in exercising its right pursuant to a variable interest rate clause to change the interest rate, may at the option of the borrower (a) change the amount of the monthly payment of an amortized loan, or (b) reduce or extend the maturity date, or (c) a combination of both (a) and (b), provided the loan will be paid in full in regular monthly installments by the end of the maximum amortization period allowed at the time the instrument was executed or for such additional periods as may be required to amortize the loan without increasing the existing monthly payment, but not to exceed a maximum term of 40 years.

(c) Modification Agreements - If an association executes a modification agreement with a borrower respecting a mortgage contract, deed of trust, real estate sales contract, or modifies any note or negotiable instrument issued in connection therewith and the modification agreement or modified note includes a variable interest rate, it shall comply with these regulations.

(d) Notice to Borrowers - If an association changes the interest rate on any instrument evidencing a loan covered by these regulations, it shall notify the borrower in writing of the change and the effect, if any, on the number of installment payments required to pay the remaining balance of the loan. If the change increases the interest rate, the association shall also inform the borrower of his right to prepay all or part of the loan within 90 days of the notice, without a prepayment charge. The notice required under the section shall be deemed given when it is deposited in the United States mail, postage prepaid, addressed to the current owner of the property described in the deed of trust securing the note and any other person personally liable on the loan, as those persons' names and addresses appear on the association's records at the time of giving the notice.