(a) All contracts for home loans made by a nonprofit lender with a zero percent (0%) interest rate or low interest rate loan must contain the following restrictive covenant:

This zero percent (0%) interest or low interest rate loan cannot be refinanced, replaced or consolidated without the prior, written approval of the local board of directors of the nonprofit lender that financed the loan so long as this initial, zero percent (0%) interest or low interest rate loan is in existence.

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Terms Used In Tennessee Code 66-4-301

  • Code: includes the Tennessee Code and all amendments and revisions to the code and all additions and supplements to the code. See Tennessee Code 1-3-105
  • Deed: The legal instrument used to transfer title in real property from one person to another.
  • Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
  • Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
  • State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • United States: includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • written: includes printing, typewriting, engraving, lithography, and any other mode of representing words and letters. See Tennessee Code 1-3-105
(b) As used in this section:

(1) “Home loan” means a term loan which secures a one (1) to four (4) family dwelling used as the primary residence of the borrower; and
(2) “Low interest loan” means a home loan that carries an interest rate that is two (2) percentage points or more below the yield on United States treasury securities with a comparable maturity at the time the loan is made.
(c) Each mortgage or deed of trust securing a home loan as provided in subsection (a) shall state on the face of the instrument prominently displayed:

THIS INSTRUMENT SECURES A ZERO INTEREST OR LOW INTEREST RATE LOAN AS DEFINED UNDER TENNESSEE CODE ANNOTATED SECTION 66-4-301 AND IS SUBJECT TO THE RESTRICTIONS THEREIN.

(d) A lender may reasonably rely on such statement or lack thereof appearing on the face of the instrument as conclusive proof of the existence or nonexistence of a restricted home loan as provided in subsection (a).