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Bill Summary · SF 398

Summary — SF 398 (2025): Closing costs, discount points, and fees for loans secured by an interest in land

Status: Enacted (approved by Governor May 6, 2025)
Introduced: Feb 20, 2025 — Enrolled and signed May 6, 2025
Companion bill: HF 1181

Purpose

Align Iowa law with certain federal Truth‑in‑Lending (Reg Z) provisions to permit discount points that produce a bona fide reduction in interest and to exempt certain mortgage banker‑originated, land‑secured consumer loans from specific state fee limits when the loan’s APR, points, and fees fall within federally specified thresholds.

Key provisions

  • Amends Iowa Code §537.2501(1)(e) by adding a new subparagraph (6) that explicitly permits:
    • Discount points charged for the purpose of reducing—and that result in a bona fide reduction of—the interest rate on a loan; and
    • Points agreed to by creditor and consumer to secure a given interest rate,
    • Provided the total points and fees charged by all lenders do not exceed the amounts specified in 12 C.F.R. §1026.43(e)(3) (Reg Z).
  • Adds a new subsection (4) to §537.2501 stating that a consumer loan secured by an interest in land originated by a mortgage banker (licensed under §535B.5 or registered under §535B.3) is not subject to the state fee limitations in §535.8(4)(a) or §535.8(5) if the loan’s annual percentage rate, points, and fees charged by all lenders do not exceed the amounts in 12 C.F.R. §1026.43(e)(2)(vi) and §1026.43(e)(3).
  • Multiple floor amendments were filed and adopted (notably H‑1240 and House amendment S‑3112) before final enrollment.

Who is affected

  • Consumers taking out consumer loans secured by an interest in land (commonly mortgage loans).
  • Mortgage bankers licensed or registered in Iowa (§535B.5 and §535B.3).
  • Other lenders and brokers involved in origination and closing who share points/fees.
  • State regulators administering §§537.2501 and 535.8 and overseeing mortgage banker licensing.

Practical impact

  • Permits mortgage originators greater flexibility to contract for discount points that lower interest rates, provided federal Reg Z caps are respected.
  • Creates a limited state‑law exemption from certain Iowa fee caps for qualifying loans that meet federal APR/fee thresholds, effectively harmonizing state treatment with federal disclosure/limitation standards.
  • For consumers, this may increase availability of rate‑buydown options (paying points up front to reduce rate) but could also change upfront closing costs; required federal disclosures under Reg Z remain applicable.
  • No special delayed effective date is specified in the enrolled text; the bill was approved May 6, 2025.

Procedural notes

  • Passed Senate and House with unanimous or near‑unanimous votes (House 93–0; Senate 49–0 on final actions).
  • Enrolled, reported correctly, and signed by the Governor on May 6, 2025.

Compiled from official sources — confirm details with the bill’s official record.

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