California Civil Code 2948.5 – (a) A borrower shall not be required to pay interest on a …
(a) A borrower shall not be required to pay interest on a principal obligation under a promissory note secured by a mortgage or deed of trust on real property improved with between one to four residential dwelling units for any period that meets any of the following requirements:
(1) Is more than one day prior to the date that the loan proceeds are disbursed from escrow.
Terms Used In California Civil Code 2948.5
- Deed: The legal instrument used to transfer title in real property from one person to another.
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- will: includes codicil. See California Civil Code 14
(2) In the event of no escrow, if a request for recording is made in connection with the disbursement, is more than one day prior to the date the loan proceeds are disbursed to the borrower, to a third party on behalf of the borrower, or to the lender to satisfy an existing obligation of the borrower.
(3) In all other circumstances where there is no escrow and no request for recording, is prior to the date funds are disbursed to the borrower, to a third party on behalf of the borrower, or to the lender to satisfy an existing obligation of the borrower.
(b) Interest may commence to accrue on the business day immediately preceding the day of disbursement, for obligations described in paragraphs (1) and (2) of subdivision (a) if both of the following occur:
(1) The borrower affirmatively requests, and the lender agrees, that the disbursement will occur on Monday, or a day immediately following a bank holiday.
(2) The following information is disclosed to the borrower in writing: (A) the amount of additional per diem interest charged to facilitate disbursement on Monday or the day following a holiday, as the case may be, and (B) that it may be possible to avoid the additional per diem interest charge by disbursing the loan proceeds on a day immediately following a business day. This disclosure shall be provided to the borrower and acknowledged by the borrower by signing a copy of the disclosure document prior to placing funds in escrow.
(c) This section does not apply to a loan that is subject to subdivision (c) of § 10242 of the Business and Professions Code.
(Amended by Stats. 2003, Ch. 554, Sec. 1. Effective January 1, 2004.)