Skip to content
BOL Conferences
Thread Options
#346879 - 04/14/05 05:10 PM Reg O - How many houses??
Suzie Offline
Platinum Poster
Suzie
Joined: Apr 2002
Posts: 662
Far North
I read the following and believe it covers more than one property, such as a primary residence and construction of a 2nd home that will be primary residence when completed or perhaps even a vacation home.

How do others interpert this citation?

Sec. 215.5 (c) A member bank is authorized to extend credit to any executive officer of the bank:
(2) In any amount to finance or refinance the purchase, construction, maintenance, or improvement of a residence of the executive officer, provided:
(i) The extension of credit is secured by a first lien on the residence and the residence is owned (or expected to be owned after the extension of credit) by the executive officer;

Thanks --
_________________________
"Whales get harpooned because they surface to spout."

Return to Top
Lending Compliance
#346880 - 04/14/05 05:48 PM Re: Reg O - How many houses??
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,228
Galveston, TX
An executive officer is only allowed one first lien loan for residential purposes. There is no requirement that it be a primary residence, just a residence (i.e., not rental). Any other first lien loan would have to fall within the "other" category to be allowed.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#346881 - 04/14/05 07:51 PM Re: Reg O - How many houses??
Suzie Offline
Platinum Poster
Suzie
Joined: Apr 2002
Posts: 662
Far North
Thanks rlcarey. I sure had that one wrong!!

Your answer raises another question. You say it need not be a primary residence. I don't doubt you but I have to convince an executive officer of this I am going to need a citation. Could someone help me with that?
_________________________
"Whales get harpooned because they surface to spout."

Return to Top
#346882 - 04/14/05 08:07 PM Re: Reg O - How many houses??
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,228
Galveston, TX
Actually, the Federal Reserve Board proposed amending section 215.5(c)(2) by inserting the word "primary" in the section so as to make it applicable only to a mortgage loan made in connection with a primary residence, but it never went anywhere. (57 Fed. Reg. 6077, February 20, 1992)

Additionally, here is one FDIC guidance document that explains it rather well.

FDIC-92-43, June 23, 1992

This is in response to your letter of May 29, 1992, pertaining to Federal Reserve Board Regulation O, 12 C.F.R. Part 215 ("Reg O"). In your letter you ask two questions:

(a) Is an extension of credit to finance the purchase, construction, maintenance or improvement of a second home of an executive officer which is secured by a first lien authorized under Reg O?

(b) Is a first lien home equity loan (revolving credit) secured by the executive officer's residence authorized under Reg O?

Section 22(g) of the Federal Reserve Act (12 U.S.C. § 375a) imposes limits and conditions on loans by member banks to their executive officers, directors and principal shareholders. This provision of the Federal Reserve Act was made applicable to non-member banks by the Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDICIA"). See section 18(j)(2) of the Federal Deposit Insurance Act, 12 U.S.C. § 1828(j)(2), as amended by section 306(k) of FDICIA. As the regulation which implements section 22(g), Reg O must therefore be applied to state chartered non-member banks by the FDIC, the federal agency responsible for their supervision.

Reg O provides that a bank is authorized to extend credit to an executive officer in any amount to finance the education of the officer's children or to finance the purchase, construction, maintenance or improvement of a residence of the officer if the residence is secured by a first lien and is owned by the executive officer. 12 C.F.R. § 215.5(c)(1) and (2). If credit is extended to an executive officer for any "other purpose," the aggregate amount of credit must not exceed $25,000 or 2.5 percent of the bank's capital and unimpaired surplus, whichever is higher, with the proviso that the amount of credit in any event may not exceed $100,000. 12 C.F.R. § 215.5(c)(3). (For purposes of compliance with the "other purpose" loan limit, non-member banks look to section 337.3(c) of the FDIC's regulations. 12 C.F.R. § 337.3(c)).

With regard to your first question, the extension of credit would be authorized under Reg O for any amount pursuant to 12 C.F.R. § 215.5(c)(2) if the second home is the only residence of the executive officer which the bank has financed and secured by a first lien. If the executive officer has already financed a first home through the bank, the loan for the second home would be subject to the "other purpose" limits of 12 C.F.R. § 337.3(c).

As far as the second question is concerned, a home equity loan secured by a first lien could be made in any amount pursuant to 12 C.F.R. § 215.5(c)(2) as long as a prior loan on the residence has not been made by the bank and the home equity loan is used for the purposes specified in that subsection, that is, the maintenance or improvement of the officer's residence. If the home equity loan is used for any other purpose, it is then subject to the limits imposed by 12 C.F.R. § 337.3(c).
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#346883 - 04/14/05 08:36 PM Re: Reg O - How many houses??
Suzie Offline
Platinum Poster
Suzie
Joined: Apr 2002
Posts: 662
Far North
This is great and I do thank you very much.
_________________________
"Whales get harpooned because they surface to spout."

Return to Top
#346884 - 11/10/05 01:51 PM Re: Reg O - How many houses??
Anonymous
Unregistered

I want to bring up an old thread for a question for rlclarey...

Where did this FDIC guidance document come from? I have been unable to locate it through internet search.

Thanks!

arye (sorry, I didn't log in when I searched and didn't want to lose the thread)

Return to Top
#346885 - 11/10/05 02:02 PM Re: Reg O - How many houses??
Dan Persfull Online
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Click here. It's about 1/3 of the way down on the page. It will start out Loan for Executive Officer's Second Home.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#346886 - 11/10/05 02:10 PM Re: Reg O - How many houses??
arye Offline
Gold Star
arye
Joined: Oct 2004
Posts: 464
Ohio
Thanks Dan...too many places with information, too little time.

As always, I appreciate your help.

Return to Top

Moderator:  Andy_Z