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#31262 - 09/05/02 06:21 PM Reg. O - home loan/bridge loan
Andy_Z Offline
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Andy_Z
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We have an insider wanting to build a new home. We have his current home financed for $190M. He has a debt on rental property with us of $75M and the new debt proposed (construction to be rolled into perm) will be $221.5M.

His current home is under contract but doesn't close until Dec. 1, 2002. "A residence" is an exception under the loan limits for insiders. The reg doesn't state this exception applies to "the residence" or the "primary residence" of the insider.

If we start construction now, would both "residence" loans be combined for an unlimited amount (allowing for legal lending limits) or would one kick into the $100M cap?

I am inclined to believe that the bridge period is OK, but would be more comfortable with a cite.
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AndyZ CRCM
My opinions are not necessarily my employers.
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Lending Compliance
#31263 - 09/05/02 07:40 PM Re: Reg. O - home loan/bridge loan
Ted Dreyer Offline
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Ted Dreyer
Joined: Apr 2001
Posts: 2,245
Andy: First of all, is this insider an executive officer? I'm assuming it is since you're concerned with the 215.5 residence exemption. If so, this is one time when the statute contains more information than the regulation. 12 USC 375a (2) covers the residence provision for executive officers and says:
"2) Mortgage loans
A member bank may make a loan to any executive officer of the bank if, at the time the loan is made -

(A) it is secured by a first lien on a dwelling which is expected, after the making of the loan, to be owned by the officer and used by him as his residence, and

(B) no other loan by the bank to the officer under authority of this paragraph is outstanding."

I think subsection (B) is a problem for you in the situation that you describe.

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#31264 - 09/05/02 09:35 PM Re: Reg. O - home loan/bridge loan
Andy_Z Offline
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Andy_Z
Joined: Oct 2000
Posts: 27,590
On the Net
Yes. Thank you, Ted. I have discovered that you may (state law allowing) have as many residences as you want, but only one loan. So Texas law makes our situation unworkable, as it is.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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