Section 393. Repayment of mortgage loans; application of pledged shares

1.
  For the purpose of making payment on his mortgage loan a member  may  at
  any  time,  without  forfeiture  of  dividends, transfer from the amount
  credited upon the shares pledged by him as security, a sum equal to  the
  matured value of one or more instalment shares.
    2.  Any  mortgage  loan  made  by  a savings and loan association to a
  member may be repaid in whole or in part  at  any  time,  but  the  loan
  contract  may expressly provide for a period during which prepayment may
  not be made without incurring prepayment penalties. When such  provision
  is  contained therein, the loan contract must also expressly provide for
  prepayment penalties or no prepayment penalties may  be  collected  when
  the  loan  is prepaid. However, where a loan is secured by mortgage on a
  one to six family residence, or is extended to finance the purchase of a
  cooperative under subdivision two-a of section three hundred  eighty  of
  this  chapter  which  residence or cooperative is or will be occupied in
  whole or in part by the member, prepayment penalties may be imposed only
  during the first twelve months from the date the mortgage or cooperative
  loan was made and may not exceed:
    (a) Interest for a period of three months on the principal so prepaid;
  or
    (b) Interest for the  remaining  months  of  the  first  year  on  the
  principal  so  prepaid  if the prepayment is made at any time within one
  year from the date the loan is made.
    The book value of instalment shares pledged as security for  any  such
  loan  shall  be  deducted from the amount of the loan in determining the
  amount of principal upon which such interest may be charged.
    3. Whenever any mortgage is foreclosed, the withdrawal  value  of  the
  shares  transferred  and pledged to any such association as security for
  the loan shall be applied toward the payment of the indebtedness of  the
  member and his rights under such shares shall terminate.
    4.  In  event  of  the  voluntary  or  involuntary  liquidation of any
  association, the holder of shares pledged as  security  for  a  mortgage
  loan  pursuant  to  the  provisions  of subdivision one of section three
  hundred eighty of this article shall be entitled to have the payments on
  such shares and the  dividends  credited  or  entitled  to  be  credited
  thereon applied in reduction of such mortgage loan.
    5.  No shares pledged as security for a mortgage loan may be withdrawn
  while the mortgage loan against which they are pledged is outstanding.