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#1811307 - 05/06/13 04:53 PM Subordinate Lien/Reg. O
Wore Out Offline
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Wore Out
Joined: Dec 2003
Posts: 543
Kentucky
Insider subject to Reg. O is refinancing primary residence in secondary market. There is also a 2nd on this property that was made prior to the insider being subject to Reg. O. Insider wants to also refinance the 2nd, increasing the 2nd mortgage to $480,000.

I don't typically deal with Reg. O, however, if I'm reading 215.5 correctly, the maximum amount on a RE subordinate lien is $100,000.

Am I correct? If not, can someone point me in the right direction about what the amount would be?
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Lending Compliance
#1811351 - 05/06/13 05:41 PM Re: Subordinate Lien/Reg. O Wore Out
CrookedVulture Offline
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Joined: Jul 2008
Posts: 148
Originally Posted By: Qtip
Insider subject to Reg. O is refinancing primary residence in secondary market. There is also a 2nd on this property that was made prior to the insider being subject to Reg. O. Insider wants to also refinance the 2nd, increasing the 2nd mortgage to $480,000.

I don't typically deal with Reg. O, however, if I'm reading 215.5 correctly, the maximum amount on a RE subordinate lien is $100,000.

Am I correct? If not, can someone point me in the right direction about what the amount would be?


It depends on what type of insider they are. If they're an executive officer, then yes, they'd be limited (with a few exceptions) to $100.0 on a subordinate lien. If they're a director or principal shareholder, they'll need board approval if the aggregate goes above $500.0.
Last edited by CrookedVulture; 05/06/13 05:44 PM.
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#1811353 - 05/06/13 05:44 PM Re: Subordinate Lien/Reg. O Wore Out
Wore Out Offline
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Wore Out
Joined: Dec 2003
Posts: 543
Kentucky
They are both an exectuive officer and director....so does the $100k cap apply?
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#1811356 - 05/06/13 05:46 PM Re: Subordinate Lien/Reg. O Wore Out
Dan Persfull Offline
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Dan Persfull
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Posts: 47,532
Bloomington, IN
The refinancing of the 2nd mortgage loan will be subject to the Reg O limitations.

The $100,000 other purposes limitation applies to Executive Officers.
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#1811358 - 05/06/13 05:46 PM Re: Subordinate Lien/Reg. O Wore Out
CrookedVulture Offline
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Joined: Jul 2008
Posts: 148
Yes, unless the loan meets one of the exceptions in 215.5(c)(1-3), which doesn't appear to be the case.

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#1811392 - 05/06/13 06:21 PM Re: Subordinate Lien/Reg. O Wore Out
Wore Out Offline
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Wore Out
Joined: Dec 2003
Posts: 543
Kentucky
So Dan you are saying that in my scenario, the refinancing of the 2nd mortgage would be subject to the $100k limit as the person is both an executive officer and director?

I have to get this one 100% correct before I answer...thanks!
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#1811414 - 05/06/13 06:40 PM Re: Subordinate Lien/Reg. O Wore Out
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,532
Bloomington, IN
If they are an executive officer then the $100,000 other purposes limitation applies to the subordinate lien loan.

The following gives a discussion on a second home or a HELOC but it would apply to this situation.

http://www.fdic.gov/regulations/laws/rules/4000-7340.html

If the EO needs more than $100,000 they should go elsewhere.
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The opinions expressed are mine and they are not to be taken as legal advice.

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