A new usury audit for Tennessee junior lien mortgage loans has recently been implemented for DocMagic users. The federal Depository Institutions Deregulation and Monetary Control Act preempts usury limits on first lien mortgage loans. The following limitations also do not apply to lenders registered as Industrial Loan and Thrift Companies in Tennessee.

The applicable usury limits in Tennessee are as follows:

1. The "home loan" rate" applies to any junior lien mortgage loan secured by a 1-4 family, owner-occupied property that is amortized over a period that is greater than 181 months. The home loan rate is equal to four (4) percentage points above the index of market yields of long term government bonds adjusted to a thirty (30) year maturity by the department of the treasury. TN Code Section 47-15-102(a).

2. The "formula rate" applies to all junior lien mortgage loans not otherwise subject to the home loan rate. The formula rate is equal to four (4) percentage points above the average prime loan rate (or the average short-term business loan rate, however denominated) for the most recent week for which such an average rate has been published by the board of governors of the Federal Reserve System, or twenty-four percent (24%) per annum, whichever is less. TN Code Section 47-14-102(7).

The Tennessee Department of Financial Institutions (DFI) posts online both the current home loan rate and the current formula rate here. The home loan rate is published on a monthly basis; historical information about the home loan rate is available here. The formula rate remains in effect until the underlying average prime loan rate changes; however, applicable law requires the DFI to publish the formula rate on a weekly basis. Historical information about the formula rate is available here.

If a loan's interest rate exceeds either the home loan rate or the formula rate, as applicable, then a warning will appear after the worksheet is processed indicating that the interest rate exceeds the applicable usury limit together with a statement that the interest rate should be reduced below the then-applicable usury limit.

Please contact the DocMagic Compliance Department if you have any questions or comments.