Other Real Estate Loans

PURPOSE: This rule authorizes associations to make loans secured by real estate other than residential real estate and prescribes the conditions and limitations on those loans. (1) An association may originate, invest in, sell, purchase, participate or otherwise deal in loans secured by real estate other than residential real estate as follows: (A) First mortgage loans—Loans secured by a first lien on other real estate; (B) Second mortgage loans—Loans secured by a second lien on other real estate in the same amount as if the loan were secured by a first lien, less the unpaid balance of the first lien indebtedness, on the terms set out in this rule, provided that the total of the unpaid balance of all loans secured by each deed of trust and the maximum advances authorized under the deed of trust do not exceed the value of the security; and (C) Advances—An association may make advances on an open-ended first deed of trust held by the association, not subject to any intervening security interest of another, if the total of the unpaid balance of all loans secured by each deed of trust and the maximum advances authorized under the deed of trust do not exceed the value of the security or the advance is made for the purpose of protecting the value of the security interest of the association. (2) The aggregate amount which an association may invest in other real estate loans shall not exceed forty percent (40%) of the association’s assets. (3) Terms and Conditions. (A) All other real estate loans shall be repayable within a period not to exceed thirty (30) years from the date the loan is made, except loans made to finance the acquisition of real estate, development of real estate, or both, and loans made on the security of building lots and sites, which shall not be for a term in excess of eight (8) years. (B) Other real estate loans may be fully amortized, partially amortized or nonamortized, provided that interest is payable at least semiannually. Provisions for full amortization of the loan shall be required in the loan contract, to begin no later than five (5) years from the date of origination. Amortized construction loans for a term in excess of five (5) years must provide for repayment to begin within thirty-six (36) months from the date of origination. (C) For loans made to finance the development of real estate, loans on the security of building lots and sites, loans on unimproved real estate and construction loans, upon the release of any portion of the security property from the lien securing the loan, the principal balance of the loan shall be reduced by an amount at least equal to that portion of the outstanding loan balance attributable to the value of the property to be released. Value, is the appraised value at the time the loan was made. (D) Loan documentation for development loans shall contain a satisfactory preliminary development plan. In addition, loans to one (1) borrower made under this regulation for any one (1) development project shall not exceed three percent (3%) of the association’s assets. A development project includes all facilities that compose an integrated development plan. With respect to construction loans, associations shall reserve the right to impose limits on the number of structures under construction at a given time. Despite the limitations imposed by this section, an association may make loans to a service corporation in any amount, subject to applicable limitations on investments in those service corporations. AUTHORITY: sections 369.144, 369.229, 369.249 and 369.299, RSMo 1994.* This rule originally filed as 4 CSR 260-8.035. This rule previously filed as 4 CSR 14020.035. Original rule filed Nov. 4, 1986, effective Jan. 30, 1987. Changed to 4 CSR 140-20.035, effective July 6, 1994. Moved to 20 CSR 1140-20.035, effective Aug. 28, 2006. *Original authority: 369.144, RSMo 1971, amended 1982, 1983, 1984, 1989, 1994; 369.229, RSMo 1971, amended 1983, 1994; and 369.249 and 369.299, RSMo 1971, amended 1994.