One of our execs is having a new principal residence constructed. The construction loan is not here, but we have agreed to the perm which will be sold on the secondary market. The officer is due to close and move into the new residence next month. Meanwhile, while he's trying to sell the old residence, he wants to move the loan from an outside finance company to our bank and set it up to pay interest only until it sells. Does that loan fall under the $100,000 limitation rule under Reg O?

I would say it falls under the $100,000 limitation.

Upon further pondering......if we wait until the officer's new home is sold on the secondary market and paid off, we could then move (purchase) the loan on the former residence (not subject to the $100,000 cap) because the residence would then be the officers' secondary residence. The officer is relocating to a city away from the Bank's home offices and could feasibly use his old residence as a secondary home since he has to visit the home office frequently. He would not be renting or leasing the home to anyone, but it WOULD be for sale.

Any opinion?

The first loan made would qualify for the residential exemption. Subsequent loans would fall under the $100,000 limitation.

This makes sense to me - only one residence allowed, but since it is not defined in the regulation (that I found), can an EO have more than one residence? Someone is going to ask.

You can have more than one residence, sure...but you can't claim both as exempt for Reg O purposes.

Thanks RR joker, any idea where I can find that?

(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; and
(ii) In the case of a refinancing, that only the amount thereof used to repay the original extension of credit, together with the closing costs of the refinancing, and any additional amount thereof used for any of the purposes enumerated in this paragraph (c)(2), are included within this category of credit;

My understanding is it is keyed to the above in bold. A bit ambiguous, based on singular vs any plural implication, but I believe you could confirm this with your regulator.

Thanks RR joker.

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Just what the EO ordered. Thanks Randy!