| (a) Definitions. For the purposes of this section,
the following words and terms shall have the following meanings, unless
the context clearly indicates otherwise.
(1) First lien means any mortgage that takes priority
over any other lien or encumbrance on the same property and that must
be satisfied before other liens or encumbrances may share in proceeds
from the property's sale.
(2) Home loan means a loan that is:
(A) made to one or more individuals for personal, family,
or household purposes; and
(B) secured in whole or part by:
(i) a manufactured home, as defined by Finance Code §347.002,
used or to be used as the borrower's principal residence; or
(ii) real property improved by a dwelling designed
for occupancy by four or fewer families and used or to be used as
the borrower's principal residence.
(3) Improved residential real estate means residential
real estate containing offsite improvements, such as access to streets,
curbs, and utility connections, sufficient to make the property ready
for residential construction, and real estate in the process of being
improved by a building.
(4) Other acceptable collateral means any collateral
in which the credit union has a perfected security interest, that
has a quantifiable value, and is accepted by the credit union in accordance
with safe and sound lending practices.
(5) Owner-occupied means that the owner of the underlying
real property occupies a dwelling unit of the real property as a principal
residence.
(6) Readily marketable collateral means insured deposits,
financial instruments, and bullion in which the credit union has a
perfected interest. Financial instruments and bullion must be saleable
under ordinary circumstances with reasonable promptness at a fair
market value determined by quotations based on actual transactions,
on an auction or similarly available daily bid and ask price market.
(b) Written Policies. Before engaging in any real estate
lending, a credit union shall adopt and maintain written policies
that are appropriate for the size of the credit union and the nature
and scope of its operation. When formulating the real estate lending
policy, the credit union should consider both internal and external
factors, such as its size and condition, expertise of its lending
staff, avoidance of undue concentrations of risk, compliance with
all real estate laws and rules, and general market conditions. Each
policy must be consistent with safe and sound lending practices and
establish appropriate limits and standards for extensions of credit
that are secured by liens on or interests in real estate, or that
are made for the purpose of financing permanent improvements to real
estate. The policies shall, in addition to the general requirements
of §91.701(b) of this title (relating to Lending Powers), address
the following, as applicable:
(1) Title insurance;
(2) Escrow administration;
(3) Loan payoffs;
(4) Collection and foreclosure; and
(5) Servicing and participation agreements.
(c) Loan to Value Limitations.
(1) The board of directors shall establish its own
internal loan-to-value limits for real estate loans based on type
of loan. These internal limits, however, shall not exceed the following
regulatory limits:
(A) Unimproved land held for investment/speculation--Loan
to value limit 60%
(B) Construction and Development: commercial, multifamily,
and other nonresidential--Loan to value limit 75%
(C) Interim Construction: owner-occupied residential
real estate--Loan to value limit 90%
(D) Owner occupied residential real estate (other than
home equity)--Loan to value limit 95%
(E) Other residential real estate such as a second
or vacation home--Loan to value limit 90%
(F) Home equity--Loan to value limit 80%
(G) All Other--Loan to value limit 80%
(2) The regulatory loan-to-value limits should be applied
to the underlying property that collateralizes the loan. In determining
the loan to-value ratio, a credit union shall include the aggregate
amount of all sums borrowed, including the outstanding balances, plus
any unfunded commitment or line of credit from all sources on an item
of collateral, divided by the market value of the collateral used
to secure the loan.
(d) Maximum Maturities. Notwithstanding the general
15-year maturity limit on lending transactions to members, credit
unions engaged in real estate lending are expected to have loan policies
that establish prudent standards for loan structure including tenor
and amortization that are within the risk parameters approved by the
board of directors and consistent with the following regulatory limits:
(1) Improved residential real estate loans (principal
residence, first lien)--40 years
(2) Improved residential real estate loans (secondary
residence, first lien)--30 years
(3) Improved residential real estate loans (investment
property, first lien)--20 years
(4) Interim construction loans--18 months
(5) Manufactured home (first lien)--20 years
(6) Home equity loans--20 years (second lien)--30 years
(first lien)
(7) Home improvement loans--20 years
(8) A loan secured in part, by the insurance or guarantee
of, or with an advance commitment to purchase the loan, in full or
in part, by the Federal Government or any agency of the Federal Government,
may be made for the maturity specified in the law, regulations or
program under which the insurance, guarantee or commitment is provided
(e) Mortgage Fraud Notice. A credit union must provide
to each applicant for a home loan a written notice at closing. The
notice must be provided on a separate document, be in at least 14-point
type, and have the following or substantially similar language: "Warning:
Intentionally or knowingly making a materially false or misleading
written statement to obtain property or credit, including a mortgage
loan, is a violation of §32.32, Texas Penal Code, and, depending
on the amount of the loan or value of the property, is punishable
by imprisonment for a term of 2 years to 99 years and a fine not to
exceed $10,000. "I/we, the undersigned home loan applicant(s), represent
that I/we have received, read, and understand this notice of penalties
for making a materially false or misleading written statement to obtain
a home loan."I/we represent that all statements and representations
contained in my/our written home loan application, including statements
or representations regarding my/our identity, employment, annual income,
and intent to occupy the residential real property secured by the
home loan, are true and correct as of the date of loan closing." On
receipt of the notice, the applicant shall verify the information
and execute the notice. A credit union must keep the signed notice
on file with the records required under §91.701 of this title.
(f) Excluded Transactions. It is recognized that there
are a number of lending situations in which other factors significantly
outweigh the need to apply the regulatory loan-to-value limits. As
a result, an exception to the loan-to-value limits is permissible
for the following loan categories:
(1) Loans that are covered through appropriate credit
enhancements in the form of readily marketable collateral or other
acceptable collateral.
(2) Loans guaranteed or insured by the U.S. government
or its agencies, provided that the amount of the guaranty or insurance
is at least equal to the portion of the loan that exceeds the regulatory
loan-to-value limit.
(3) Loans guaranteed, insured, or otherwise backed
by the full faith and credit of the state, a municipality, a county
government, or an agency thereof, provided that the amount of the
guaranty, insurance, or assurance is at least equal to the portion
of the loan that exceeds the regulatory loan-to-value limit.
(4) Loans that are to be sold promptly after origination,
without recourse, to a financially responsible third party.
(5) Loans that are renewed, refinanced, or restructured
without the advancement of new funds or an increase in the line of
credit (except for reasonable closing costs) where consistent with
safe and sound credit union practices and part of a clearly defined
and well-documented program to achieve orderly liquidation of the
debt, reduce risk of loss, or maximize recovery on the loan.
Cont'd... |
