A bill for an act relating to closing costs for a debt secured by an interest in land.(See HF 512.)
Summary
HSB125 would amend Iowa law governing closing costs and finance charges for debts secured by an interest in land, including mortgage and other land-secured consumer loans. The bill allows a creditor to contract for and receive closing costs so long as they are bona fide, reasonable in amount, and not used to evade the consumer credit protections in chapter 537. It also expressly recognizes certain items as permissible charges, including fees listed in section 535.8(4)(a) and (b), subject to a limited exception for certain mortgage bankers making consumer loans that meet federal points-and-fees thresholds.
The bill further adds two categories to the list of allowable charges: discount points used to reduce the interest rate or time-price differential, and points agreed to by the creditor and borrower to obtain a given interest rate. In practical terms, this clarifies that lenders may include these common mortgage pricing tools in loan transactions secured by land, provided they are bona fide and tied to actual rate reduction or agreed pricing terms.
Impact
The bill would modify section 537.2501 of the Iowa Code, expanding the types of closing costs and loan pricing charges that may be included in land-secured consumer loans without violating state consumer credit limits. It also creates a specific carve-out for certain mortgage bankers whose loans stay within federal points-and-fees limits under 12 C.F.R. 1026.43(e)(3), exempting those loans from some state restrictions in section 535.8. The affected parties are creditors, mortgage bankers, borrowers, and lenders involved in residential or other real-estate-secured lending.
Sentiment
The available voting record suggests the bill was received favorably in committee, passing the House Commerce Committee report unanimously 22-0. No committee transcript was provided, so there is no recorded debate to indicate opposition or concern in the materials supplied. The overall tone in the available record is therefore supportive and noncontroversial.
Contention
The main policy issue is how broadly lenders should be allowed to charge closing costs and points on loans secured by land while still protecting borrowers from excessive or disguised finance charges. Potential concerns would likely come from consumer advocates worried about fee circumvention or higher borrowing costs, while support would likely come from mortgage lenders and industry groups seeking clearer authority to charge customary closing costs and discount points. The bill attempts to address that tension by requiring charges to be bona fide and reasonable and by tying the mortgage-banker exception to federal thresholds.
In short title and general matters, further providing for applicability and choice of law; in security entitlements, further providing for property interest of entitlement holder in financial asset held by securities intermediary and for priority among security interests and entitlement holders; and, in perfection and priority, further providing for law governing perfection and priority of security interests in investment property.
A bill for an act relating to interest rates and charges on regulated loans, and consumer credit transaction service charges. (Formerly HSB 524.) Effective date: 07/01/2026.