REG O: Bank Stock as collateral for EO loan

Posted By: Anonymous

REG O: Bank Stock as collateral for EO loan - 01/17/03 09:21 PM

We have an executive officer that applied with us for a first mortgage and home equity loan. The loan meets the lending limits for invidual and aggregate lending. However our appriasal on the home did not come back at the amount expected. The LTV that we belived the loans would be at will not be. As an exception to the LTV underwriting requirements we make it a practice (to joe off the street) to allow them to offer up more collateral to make the loan.

Now comes the spin. The EO wants to offer bank stock (we are publicly traded) as the additional collateral.

Can we do this and not realize a Reg O or future Reg W issue?

Posted By: Pale Rider

Re: Reg O "OH No"! - 01/17/03 10:21 PM

Reg O doesn't seem to answer the question. Section 23A prohibits the offering of an affiliate of the bank's stock as collateral for a loan to that affiliate. So this may be the closest anaolgy to your question. I think I would avoid the bank stock as collateral issue, especially since the house didn't appraise for enough money. This extension of credit will really get the attention of examiners. You don't want anything unusual setting off bells and whistles. These comments are mine and will be dissavowed I am sure by my employer.
Posted By: Don_Narup

Re: Reg O "OH No"! - 01/17/03 11:03 PM

I think you will run into a problem making a loan against the banks own stock. I can't find it but I thought there was a prohibition against doing that.
Posted By: Andy_Z

Re: Reg O "OH No"! - 01/18/03 01:52 AM

See this thread and Paul's comments.