Iowa Amends Law Regarding Closing Costs for Small Dollar Subordinate Lien Consumer Loans

Iowa recently amended its laws governing the closing fees creditors may charge in connection with “consumer loans”—a category that notably excludes debts secured by a first lien on real property.  Pursuant to the amended law, creditors will be able to contract for and receive bona fide and/or agreed-upon discount points, as long as the points and fees the consumer is charged by all lenders in connection with the consumer loan do not exceed the thresholds for qualified mortgages, set forth in 12 C.F.R. § 1026.43(e)(3).

The amended statute also provides that “consumer loans” secured by an interest in land, originated by a licensed or registered mortgage banker, not be subject to specific limitations on commitment fees, closing fees, and payment reduction fees under Iowa law.  However, for those limitations not to apply, the annual percentage rate and points and fees the consumer is charged by all lenders in connection with the consumer loan cannot exceed the thresholds for qualified mortgages, set forth in 12 C.F.R. § 1026.43(e)(2)(vi) (for APR) and 12 C.F.R. § 1026.43(e)(3) (for points and fees). 

The Governor signed the law May 6, 2025, and it will become effective July 1, 2025.