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#706261 - 03/23/07 09:05 PM Consumer Interest Only Loans
Jan94 Offline
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Joined: Mar 2001
Posts: 828
USA
Would anyone have any information regarding a change in GA law that would prohibit a bank from making consumer interest only loans with payments in excess of 24 months without any principal payback? A bank had been told that they could no longer do this and I'm trying to get some information. Thank you.

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#706501 - 03/26/07 02:33 PM Re: Consumer Interest Only Loans Jan94
waldensouth Online
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waldensouth
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FINALLY ABOVE the gnat line
That was part of the same law that said we couldn't have HELOCs for longer than 10 years. I thought it was 5 years on interest only before we had to amortize. I'll see if I can find the exact cite.
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#706522 - 03/26/07 03:09 PM Re: Consumer Interest Only Loans waldensouth
LauraL Offline
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Joined: Jun 2005
Posts: 365
Georgia
It's five years before payback Waldensouth - you're correct.

I think the 24-month is referring to:

80-1-5-.01
(6)(b) Loans having maturities not to exceed twenty-four (24) months may be made for residential construction or development purposes where the bank holds a firm (or conditional)commitment to guarantee or insure from any instrumentality or corporation wholly-owned by the 7 United States or by any Authority of this State as indicated in Rule 80-1-5-.02(5)(b) and (c) of this regulation, or where there is a take-out agreement by any financially responsible lender to advance the full amount of the bank's loan upon completion of the dwelling.

Here's the cite for 5-year payback:

(6)(c) Temporary construction or development loans may be made by a bank for a period not to exceed sixty (60) months where the loan is made to finance the construction of residential development which will exceed nine (9) units or industrial or commercial buildings, or for a period not to exceed twenty-four (24) months where the loan is made to finance construction of nine (9) or less residential units or farm buildings or to improve and develop land preliminary to such construction, without a prior commitment to guarantee or insure or take-out agreement by an instrumentality or corporation wholly-owned by the United States or of this State or any other financially responsible lending agency.
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#707972 - 03/28/07 03:18 PM Re: Consumer Interest Only Loans LauraL
RR Joker Offline
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The Swamp
Apparently that restriction entails more than just a consumer loan restriction. It appears to speak more directly to commercial loan situations actually.
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#708220 - 03/28/07 07:26 PM Re: Consumer Interest Only Loans RR Joker
LauraL Offline
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Posts: 365
Georgia
Oops! Sorry, I am always so focused on commercial. I must have skimmed over the word "consumer". Thanks for pointing that out Joker.
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#708287 - 03/28/07 08:23 PM Re: Consumer Interest Only Loans LauraL
LauraL Offline
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Joined: Jun 2005
Posts: 365
Georgia
Okay, how about 80-1-5-.02(4)(a).

I believe that's the consumer cite.
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#708409 - 03/29/07 03:22 AM Re: Consumer Interest Only Loans LauraL
Jan94 Offline
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Posts: 828
USA
Thank you all. LauraL - I did go back and find this information but I'm still not seeing where there is a prohibition against interest only loans longer than 24 months. I am aware of the Interagency Guidance on Nontraditional Mortgages and read that interest only loans is one of the products the regulators are concerned about but don't find this situation mentioned. I thought maybe it might have been in the GA Fair Lending Act but I couldn't find anything there either.

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#708459 - 03/29/07 01:11 PM Re: Consumer Interest Only Loans Jan94
YHWB Offline
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Posts: 613
Out there
On August 21 2006 the Department issued its Final Rulemaking effective September 11. 80-1-5-.02 allows: interest only loans for single family owner-occupied residential loans which may be made for a period not to exceed ten years, after which time the loan must be amortized; real estate loans to a maximum of 40 years; and home equity lines of credit to have a final maturity of up to 10 years.

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#709036 - 03/30/07 12:15 AM Re: Consumer Interest Only Loans YHWB
Jan94 Offline
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Joined: Mar 2001
Posts: 828
USA
Thank you. I was able to go back and find that particular information, but this doesn't address my question. I'm not sure where the bank got their information so I'll go back to them to see if I can find out some more.

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#710387 - 04/03/07 02:54 PM Re: Consumer Interest Only Loans Jan94
RR Joker Offline
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The Swamp
I believe this is what has happened, Halito. Within this guidance/law...there is a limitation 1) 5 years for commercial/industrial buildings and 2) 5 years for over 9 dwellings, commercial buildings or industrial, 24 mos for less than 9 residential or farm buildings. This has to do with state loan to value restrictions.not that you can or cannot do them...and when they can and cannot be exempted from the 75% non am and 95% amort restrictions.

Try looking at 80-1-5-.02(6) for exact details. If you only read parts and not the whole, you will interpret much like your original thread insinuated, which isn't the actual meaning at all.
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#747031 - 06/05/07 07:36 PM Re: Consumer Interest Only Loans RR Joker
Anonymous
Unregistered

While we're talking loans, can someone tell me where in Georgia Code I can find the rules for using 365 accrual and not 360 accrual for consumer loans?

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#1012792 - 08/05/08 06:02 PM Re: Consumer Interest Only Loans
RR Joker Offline
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RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Have ya'll read the DBF final rules adopted 8-4-08 regarding Real Estate loans, doing away with the 10-yr limit on interest only and amort on a regular basis not to exceed 40?

Geesh...I spoke with one of our folks over at GDBF in Douglas and we interpreted it to replace the current section a and b, with the only change being eliminating the 10-yr max. Not so, apparently! What an oxymoron to use interest-only and required amort in one subject! And how confusing when section b appears to except interest only loans, among several other types...brother!

Anyway, they have asked me to write a letter to the Supervisory Manager in Atlanta...I'm fixing to attempt to get an explanation of what the heck they are really trying to say. How do you conform a contract to meet this crazy rule the way it's written!
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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