(i) Aggregation and Attribution for Commercial Loans.
(1) General Rule. A commercial loan or extension of
credit to one borrower is attributed to another person, and each person
will be considered a borrower, when:
(A) the proceeds of the commercial loan or extension
of credit are to be used for the direct benefit of the other person,
to the extent of the proceeds so used, as provided by paragraph (2)
of this subsection;
(B) a common enterprise is deemed to exist between
the persons as persons as provided by paragraph (3) of this subsection;
or
(C) the expected source of repayment for each commercial
loan or extension of credit is the same for each person as provided
by paragraph (3) of this subsection.
(2) Direct Benefit. The proceeds of a commercial loan
or extension of credit to a borrower is considered used for the direct
benefit of another person and attributed to the other person when
the proceeds, or assets purchased with the proceeds, are transferred
in any manner to or for the benefit of the other person, other than
in a bona fide arm's length transaction where the proceeds are used
to acquire property, goods, or services from such other person.
(3) Common Enterprise.
(A) Description. A common enterprise is considered
to exist and commercial loans to separate borrowers will be aggregated
when:
(i) the expected source of repayment for each loan
or extension of credit is the same for each borrower and neither borrower
has another source of income from which the loan (together with the
borrower's other obligations) may be fully repaid. An employer will
not be treated as a source of repayment under this subparagraph because
of wages and salaries paid to an employee, unless the standards of
clause (ii) of this subparagraph are met:
(ii) the loans or extension of credit are made:
(I) to borrowers who are related directly or indirectly
through control as defined by subsection (a) of this section; and
(II) substantial financial interdependence exists between
or among the borrowers. Substantial financial interdependence is deemed
to exist when fifty (50) percent or more of one borrower's gross receipts
or gross expenditures (on an annual basis) are derived from transactions
with the other borrower. Gross receipts and expenditures include gross
revenues/expenses, intercompany loans, dividends, capital contributions,
and other similar receipts or payments;
(iii) separate persons borrow from a credit union to
acquire a business of enterprise of which those borrowers will own
more than fifty (50) percent of the voting securities of voting interest,
in which case a common enterprise is deemed to exist between the borrowers
for purposes of combining the acquisition loans; or
(iv) the Department determines, based upon an evaluation
of the facts and circumstances of particular transactions, that a
common enterprise exists.
(B) Commercial Loans to Certain Entities. A commercial
loan or extension of credit:
(i) to a partnership or joint venture is considered
to be a commercial loan or extension of credit to each member of the
partnership or joint venture. Excepted from this subdivision is a
partner or member who: is not held generally liable, by the terms
of the partnership or membership agreement or by applicable law, for
the debts or actions of the partnership, joint venture, or association,
provided those terms are valid against third parties under applicable
law; and has not otherwise agreed to guarantee or be personally liable
on the loan or extension of credit.
(ii) to a member of a partnership, joint venture, or
association is generally not attributed to the partnership, joint
venture, or associations, or to other members of the partnership,
joint venture, or association, except as otherwise provided by paragraphs
(2) and (3) of this subsection, provided that a commercial loan or
extension of credit made to a member of a partnership, joint venture
or association for the purpose of purchasing an interest in the partnership,
joint venture or association, is attributed to the partnership, joint
venture or association.
(C) Guarantors and Accommodation Parties. The derivative
obligation of a drawer, endorser, or guarantor of a commercial loan
or extension of credit, including a contingent obligation to purchase
collateral that secures a commercial loan, is aggregated with other
direct commercial loans or extensions of credit to such a drawer,
endorser, or guarantor.
(j) Commercial Loans to One Borrower Limit. The total
aggregate dollar amount of commercial loans by a credit union to any
borrower at one time may not exceed the greater of fifteen (15) percent
of the credit union's net worth or $100,000, plus an additional ten
(10) percent of the credit union's net worth if the amount that exceeds
the credit union's fifteen (15) percent general limit is fully secured
at all times with a perfected security interest in readily marketable
collateral. Any insured or guaranteed portion of a commercial loan
made through a program in which a federal or state agency (or its
political subdivision) insures repayment, guarantees repayment, or
provides an advance commitment to purchase the commercial loan in
full, is excluded from this limit.
(k) Finance Code Limitation. In addition to the other
limitations of this section, a credit union may not make a loan to
a member or a business interest of the member if the loan would cause
the aggregate amount of loans to the member and the member's business
interests to exceed an amount equal to 10 percent of the credit union's
total assets as provided by TEX. FIN. CODE §124.003.
(l) Commercial Loans Regarding Federal or State Guaranteed
Loan Programs. A credit union may follow the loan requirements and
limits of a guaranteed loan program for loans that are part of a loan
program in which a federal or state agency (or its political subdivision)
insures repayment, guarantees repayment, or provides an advance commitment
to purchase the loan in full if that program has requirements that
are less restrictive than those required by this section.
(m) Transitional Provisions.
(1) Waivers. Upon the effective date of this section,
any waiver approved by the Department concerning a credit union's
commercial lending activity is rendered moot, except for waivers granted
for the commercial loan to one borrower limit. Borrowing relationships
granted by waivers will be grandfathered however, the debt associated
with those relationships may not be increased.
(2) Administrative Constraints. Limitations or other
conditions imposed on a credit union in any written directive from
the Department are unaffected by the adoption of this section. As
of the effective date of this section, all such limitations or other
conditions remain in place until such time as they are modified by
the Department.
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Source Note: The provisions of this §91.709 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be effective February 23, 2003, 28 TexReg 1377; amended to be effective March 6, 2005, 30 TexReg 1065; amended to be effective November 24, 2016, 41 TexReg 9099; amended to be effective November 5, 2018, 43 TexReg 7343 |