Chapter 138

138.052(13)(a)1. 1. “Financial institution” means a bank, credit union, savings bank, savings and loan association, mortgage banker, or any other lender that receives an application for, services, or enforces the terms of a loan.

138.052(13)(a)2. 2. “Local governmental unit” means a city, village, town, or county, or any other local governmental unit, as defined in s. 66.0131 (1) (a), but does not include a 1st class city.

138.052(13)(b) (b) A local governmental unit may not enact an ordinance or adopt a resolution that does any of the following:

138.052(13)(b)1. 1. Imposes any fee or tax on any financial institution in connection with servicing, or enforcing the terms of, a loan.

138.052(13)(b)2. 2. Delays any financial institution in enforcing the terms of a loan.

138.052(13)(b)3. 3. Affects any financial institution’s servicing, or enforcement of the terms of, a loan.

138.052(13)(b)4. 4. Regulates any financial institution with respect to the lending practices or financial services of the financial institution as it relates to loans.

138.052(13)(c) (c) If a local governmental unit has in effect on July 2, 2013, an ordinance or resolution that is inconsistent with par. (b), the ordinance or resolution does not apply and may not be enforced.

138.052(13)(d) (d) Except in a 1st class city, the servicing of loans and enforcement of loan terms are matters of statewide concern for which uniformity in regulation is necessary and are subject only to applicable state and federal laws and not to local regulation.

138.052 History History: 1981 c. 45, 100, 314; 1987 a. 359, 360, 403; 1989 a. 31, 56; 1991 a. 90, 92; 1993 a. 68, 112; 1995 a. 27, 336; 1999 a. 9, 31; 2003 a. 33, 257; 2007 a. 11, 20, 97; 2013 a. 20; 2017 a. 340; 2023 a. 128.

138.052 Annotation Federal law preemption of this section as applied to federally chartered savings institutions regulated by the federal home loan bank board is discussed. Wisconsin League of Financial Inst. v. Galecki, 707 F Supp. 401 (W.D. Wis. 1989).

138.053 138.053 Regulation of interest adjustment provisions.

138.053(1) (1) Required contract provisions. No contract between a borrower and a lender secured by a first lien real estate mortgage on, or an equivalent security interest in, an owner-occupied residential property containing not more than 4 dwelling units may authorize the lender to increase the borrower’s contractual rate of interest unless the contract provides that:

138.053(1)(a) (a) No increase may occur until 3 years after the date of the contract;

138.053(1)(b) (b) No increase may occur unless the borrower is given at least 4 months’ written notice of the lender’s intent to increase the rate of interest, during which notice period the borrower may repay his or her obligation without penalty;

138.053(1)(c) (c) The amount of the initial interest rate increase may not exceed $1 per $100 for one year computed upon the declining principal balance;

138.053(1)(d) (d) The amount of any subsequent interest rate increase may not exceed $1 per $200 for one year computed upon the declining principal balance;

138.053(1)(e) (e) The interest rate may not be increased more than one time in any 12-month period; and

138.053(1)(f) (f) The loan may be prepaid without penalty at any time at which the interest rate in effect exceeds the originally stated interest rate by more than $2 per $100 for one year computed upon the declining principal balance.

138.053(2) (2) Disclosures required. No lender may make a loan secured by a first lien real estate mortgage on, or an equivalent security interest in, an owner-occupied residential property containing not more than 4 dwelling units providing for prospective changes in the rate of interest unless it has clearly and conspicuously disclosed to the borrower in writing:

138.053(2)(a) (a) That the interest rate is prospectively subject to change;

138.053(2)(b) (b) That notice of any interest adjustment must be given 4 months prior to any increase; and

138.053(2)(c) (c) Any prepayment rights of the borrower upon receiving notice of such change.

138.053(3) (3) Notice of interest adjustment. Notices provided under sub. (2) shall be mailed to the borrower at his or her last-known post-office address and shall clearly and concisely disclose:

138.053(3)(a) (a) The effective date of the interest rate increase;

138.053(3)(b) (b) The increased interest rate and the extent to which the increased rate will exceed the interest rate in effect immediately before the increase;

138.053(3)(c) (c) The amount of the borrower’s contractual monthly principal and interest payment before and after the effective date of the increase;

138.053(3)(d) (d) Any right of the borrower to voluntarily increase his or her contractual principal and interest payment;

138.053(3)(e) (e) Whether as a result of the increase a lump sum payment may be necessary at the end of the loan term;

138.053(3)(f) (f) Whether an additional number of monthly payments may be required; and

138.053(3)(g) (g) The borrower’s right to prepay within 4 months without a prepayment charge.

138.053(4) (4) Applicability.

138.053(4)(a) (a) This section does not apply to variable rate contracts, nor to loans or forbearances to corporations or limited liability companies.

138.053(4)(b) (b) This section applies only to transactions initially entered into on or after June 12, 1976 and before November 1, 1981.

138.053 History History: 1975 c. 387; 1981 c. 45; 1993 a. 112.

138.053 Annotation “Due on sale” provision of note and mortgage was enforceable. Mutual Fed. S. & L. Asso. v. Wisconsin Wire Wks. 71 Wis. 2d 531, 239 N.W.2d 20.

138.055 138.055 Variable rate contracts.

138.055(1) (1) Required contract provisions. No contract between a borrower and a lender secured by a first lien real estate mortgage on, or an equivalent security interest in, an owner-occupied residential property containing not more than 4 dwelling units may contain a variable interest rate clause unless the contract provides that:

138.055(1)(a) (a) When an increase in the interest rate is permitted by a movement upward of a prescribed index, a decrease in the interest rate is also required by a downward movement of the prescribed index subject to pars. (b) to (f);

138.055(1)(b) (b) The rate of interest shall not change more than once during any 6-month period;

138.055(1)(c) (c) Any singular change in the interest rate shall not exceed the rate of $1 per $200 for one year computed upon the declining principal balance and the total variance in such rate shall at no time exceed a rate equal to $2.50 per $100 for one year computed on the declining principal balance greater or lesser than the rate originally in effect;

138.055(1)(d) (d) Decreases required by the downward movement of the prescribed index shall be mandatory. Increases permitted by the upward movement of the prescribed index shall be optional with the lender. Changes in the interest rate shall only be made when the prescribed index changes a minimum of one-tenth of one percent;

138.055(1)(e) (e) The fact that a lender may not have invoked an increase, in whole or in part, shall not be deemed a waiver of the lender’s right to invoke an increase at any time thereafter within the limits imposed by this section;

138.055(1)(f) (f) The rate shall not change during the first semiannual period of the loan; and

138.055(1)(g) (g) The borrower may prepay the loan in whole or in part within 90 days of notification of any increase in the rate of interest without a prepayment charge.

138.055(2) (2) Disclosures required. No lender may make a loan secured by a first lien real estate mortgage on, or an equivalent security interest in, an owner-occupied residential property containing not more than 4 dwelling units containing a variable interest rate provision unless it has clearly and conspicuously disclosed to the borrower in writing prior to execution of the loan documents:

138.055(2)(a) (a) That the loan contract contains a variable interest rate;

138.055(2)(b) (b) The index used in applying any variable interest rate changes contemplated in the note and its current base; and

138.055(2)(c) (c) Any prepayment rights of the borrower upon receiving notice of any such change.

138.055(3) (3) Notice of interest adjustment. When a change in the interest rate is required or permitted by a movement in the prescribed index, the lender shall give notice to the borrower by mail, addressed to the borrower’s last-known post-office address, not less than 30 days prior to any change in interest rate, which notice shall clearly and concisely disclose:

138.055(3)(a) (a) The effective date of the interest rate change;

138.055(3)(b) (b) The interest rate change, and if an increase, the extent to which the increased rate will exceed the rate in effect immediately before the increase;

138.055(3)(c) (c) The changes in the index which caused the interest rate change;

138.055(3)(d) (d) The amount of the borrower’s contractual monthly principal and interest payments before and after the effective date of the change in the interest rate;

138.055(3)(e) (e) Whether as a result of an increase in the interest rate a lump sum payment may be necessary at the end of the loan term; and

138.055(3)(f) (f) The borrower’s right to prepay the loan within 90 days after said notice without a prepayment charge if the notice required an increase in interest rate.

138.055(4) (4) Index. In determining any variable interest rate changes permitted under this section, a lender shall use either the index published by the federal home loan bank of Chicago based on the cost of all funds to Wisconsin member institutions or an index approved by:

138.055(4)(b) (b) The office of credit unions, if the lender is a credit union;

138.055(4)(c) (c) The commissioner of insurance, if the lender is an insurance company; or

138.055(4)(d) (d) The division of banking for all other lenders.

138.055(5) (5) Applicability.

138.055(5)(a) (a) This section does not apply to loans or forbearances to corporations or limited liability companies.

138.055(5)(b) (b) This section applies only to transactions initially entered into on or after June 12, 1976 and before November 1, 1981.

138.055 History History: 1975 c. 387; 1981 c. 45; 1991 a. 221; 1993 a. 112; 1995 a. 27; 1999 a. 9; 2003 a. 33.

138.055 Annotation Variable rate mortgages: The transition phase. 61 MLR 140.

138.056 138.056 Variable rate loans.

138.056(1) (1) Definitions. In this section:

138.056(1)(a) (a) “Approved index” means any of the following:

138.056(1)(a)2. 2. The monthly average of weekly auction rates on U.S. treasury bills with a maturity of 3 months or 6 months made available by the federal reserve board.

138.056(1)(a)3. 3. The monthly average yield on U.S. treasury securities adjusted to a constant maturity of 1, 2, 3 or 5 years, made available by the federal reserve board.

138.056(1)(a)4. 4. An index readily verifiable by borrowers and beyond the control of an individual lender and approved by:

138.056(1)(a)4.b. b. The office of credit unions, if the lender is a credit union;

138.056(1)(a)4.c. c. The commissioner of insurance, if the lender is an insurance company; or

138.056(1)(a)4.d. d. The division of banking for all other lenders.

138.056(1)(b) (b) “Dwelling” includes a cooperative housing unit and a mobile home or manufactured home.

138.056(1)(bd) (bd) “Manufactured home” has the meaning given in s. 101.91 (2).

138.056(1)(bg) (bg) “Manufactured home transaction” means a consumer credit sale, as defined in s. 421.301 (9), of or a consumer loan, as defined in s. 421.301 (12), secured by a first lien or equivalent security interest in a mobile home or manufactured home.

138.056(1)(bm) (bm) “Mobile home” has the meaning given in s. 101.91 (10).

138.056(1)(d) (d) “Variable rate loan” means a manufactured home transaction or a loan as defined in s. 138.052 (1) (b), the terms of which permits the interest rate to be increased or decreased.

138.056(2) (2) Required terms. Except as provided in sub. (2m), a variable rate loan contract shall:

138.056(2)(a) (a) Provide for a term of not more than 40 years.

138.056(2)(b) (b) Use an approved index if it provides for adjustments to the interest rate corresponding to an index. Subject to sub. (2m), the initial index value shall be the most recently available value of the index prior to the date of closing of the loan. The interest rate at adjustment shall reflect the difference, in reference to the interest rate of the variable rate loan at the date of closing or, if sub. (2m) is applicable, upon expiration of the initial interest rate period, between the initial index value and the index value most recently available as of the date notice of the interest rate adjustment is mailed under sub. (4) except the lender may decrease the interest rate or decline to increase the interest rate at any time. The interest rate shall be decreased to reflect any downward movement of the index except to the extent the decrease offsets increases in the index not implemented as interest rate increases. An increase in the index permitting the lender to increase the interest rate but declined by the lender for any rate adjustment interval may be carried over and applied in succeeding interest rate adjustment intervals to the extent the increase is not offset by subsequent decreases in the index.

138.056(2)(c) (c) Provide for no more than a one percent increase in the interest rate not more than once each 6 months and permit decreases in the interest rate to be made at any time, if it does not provide for adjustments to the interest rate corresponding to an approved index. If an increase is waived, the lender may at any time increase the interest rate to a rate equal to the interest rate if all increases were made at the first opportunity.

138.056(2m) (2m) Discounted initial rate. A variable rate loan contract may include a discounted initial interest rate that is lower than the rate established under sub. (2) (b). Upon expiration of the initial interest rate period, sub. (2) (b) shall apply. For purposes of sub. (2) (b), the initial index value shall be the most recently available value of the index immediately prior to the expiration of the initial interest rate period. This subsection applies to variable rate loan contracts entered into on or after July 3, 2015.

138.056(3) (3) Fees prohibited. No costs or fees may be charged in connection with adjustment to the interest rate of a variable rate loan or an adjustment to the payment, principal balance or term implementing an interest rate adjustment.

138.056(3m) (3m) Prepayment penalties.

138.056(3m)(a) (a) Notwithstanding s. 138.052 (2) (a), and except as provided in s. 428.207, a lender may not include a prepayment penalty in a variable rate loan using an approved index unless all of the following are satisfied:

138.056(3m)(a)1. 1. The lender also makes variable rate loans without prepayment penalties and the lender provides the borrower with a written statement that the lender also makes variable rate loans without prepayment penalties.

138.056(3m)(a)2. 2. At the time of the offer of the variable rate loan, and the borrower acknowledges, in writing, receipt of the statement specified in subd. 1.