Current through Register 2024 Notice Reg. No. 52, December 27, 2024
(a) An obligation secured by real property
shall comply with all the following:
(1) The
obligation shall be secured by either:
(A) A
first lien on a parcel of unimproved real property, provided the principal
balance of the obligation is not more than 60 percent of the appraised value of
the parcel and the term is not more than 30 years.
(B) A first or junior lien on a piece of
improved real property, including the land and improvements thereon, provided
the total amount of obligations secured by liens on the real property at the
time the lien is perfected is not more than 80 percent of the appraised value
of the improved real property and the term is not more than 40 years in the
case of a first lien, or 30 years in the case of a junior lien. In calculating
the total amount of obligations secured by liens on the improved real property
for the purposes of this Subparagraph, amounts in excess of 80 percent of the
appraised value of the improved real property shall be excluded to the extent
the excess is insured by an agency or instrumentality of the federal government
or by a private mortgage insurance company admitted in
California.
(2) In case
the obligation is secured by a first lien, a title insurance policy shall be
obtained which designates the credit union as the insured, warrants the
priority and validity of the credit union's security interest, and does not
contain any exception which would preclude the credit union from obtaining
marketable title to the real property security in the event of
default.
(3) In case the obligation
is secured by one or more junior liens on a piece of real property and the
aggregate of all junior liens held by the credit union on the piece of real
property does not exceed $100,000, an abbreviated loan guarantee or fidelity
lenders abbreviated guarantee issued by a title insurance company shall be
obtained, unless the credit union obtains a title insurance policy of the type
described in (2) of this subparagraph. As used in the previous sentence, an
abbreviated loan guarantee or a fidelity lenders abbreviated guarantee refers
to a limited guarantee issued by a title insurance company with respect to the
priority and validity of the credit union's security interest which includes,
at a minimum, a title search for all record owners and lienholders and a
liability amount at least equal to the principal balance of the
obligation.
(4) In case the
obligation is secured by one or more junior liens on a piece of real property
and the aggregate of all junior liens held by the credit union on the piece of
real property exceeds $100,000, a title insurance policy of the type described
in (2) of this subparagraph shall be obtained.
(5) Unless waived in writing by the credit
committee or credit manager, adequate hazard insurance on the real property
shall be maintained during the term of the obligation. The requirement for
adequate hazard insurance may not be waived if the principal balance of the
obligation exceeds the unsecured lending limits prescribed by the California
Credit Union Law or the credit union's written lending policies.
(6) The promissory note and deed of trust
shall include a due-on-sale clause.
(7) The board of directors of the credit
union shall have established a limit on the amount of total obligations which
may be secured by real property, and the obligation does not cause the credit
union to exceed the limit.
(b) For the purpose of determining whether an
obligation is secured by a first lien on real property as specified in
Subdivision (a) of this Section, none of the following shall be deemed to be a
prior encumbrance unless any installment or payment thereunder other than a
rental or royalty under a lease, is due and delinquent:
(1) The lien of any tax, assessment, or bond
levied or issued by any state or territory of the United States or by any
district, political subdivision, or municipal corporation thereof, except the
lien of an assessment levied against a particular parcel of real property and
of any bond given or issued pursuant to law in lieu of the payment of such
assessment.
(2) A lien created by a
contract and given to secure the payment for water to be furnished under such
contract for the irrigation of the real property or any part thereof.
(3) The lien of a bond given or issued
pursuant to law in lieu of the payment of an assessment levied against a
particular parcel of real property and the lien of any assessment levied to pay
the bond, if the unpaid balance of the bond and the amount of the obligation
combined do not exceed the percentage of the appraised value of the real
property specified in the applicable provision of Paragraph (1) of Subdivision
(a) of this Section.
(4) A lien
given to secure the payment of any assessment or subscription to meet the
requirements of any law of the United States in respect to any irrigation
project of the United States in any state or territory of the United States
which may be levied, made, or received by any corporation or association formed
to carry out the provisions of any such law, if the unpaid balance of the
assessment or subscription and the amount of the obligation combined do not
exceed the percentage of the appraised value of the real property specified in
the applicable provision of Paragraph (1) of Subdivision (a) of this
Section.
(c) Unless a
lesser percentage is ordered by the Commissioner, the total of loans and line
of credit loan advances outstanding which are secured by liens on real property
shall not exceed 40% of the total of all of the credit union's outstanding
loans and advances. However, a credit union that has gross assets of
$20,000,000 or more, a written asset liability plan or policy in effect, and
has made real property loans for more than four years, may exclude from this
40% limitation the following loans:
(1) Any
loans meeting the standards of the Federal National Mortgage Association or
Federal Home Loan Mortgage Corporation.
(2) Any loans saleable in the secondary
market as evidenced by commitments to buy by a buyer in the secondary
market.
(3) Any line of credit
loans.
(4) Any loans which contain
provisions to adjust the amount of each payment, the number of monthly
payments, or both, as is necessary because of changes in the interest rate
charged and which are secured by a mortgage or deed of trust on real property
which has or will have not more than four residential units.
(5) Any loans for which the promissory note
contains an option or series of options by the credit union to call the loan
during a sixty day period commencing not sooner than two years, nor later than
seven years, from the date of each option period, there are no penalties for
prepayment by the borrower, and the following written disclosure, or its
substantial equivalent, is given to the borrower:
"Notice of Year ___ Call Option
"Your lender has the right to call this loan due on [the or
each] ___ anniversary of the loan. The lender may exercise this right any time
during the thirty-day period immediately following [the or each] ___
anniversary date of the loan.
"If the lender exercises its right to call the loan, upon
receipt of notice, YOU WILL BE REQUIRED TO PAY THE LOAN IN FULL (OR ARRANGE NEW
FINANCING) WITHIN NINETY (90) DAYS. You should be aware that interest rates in
effect at the time of the call may be substantially higher than the interest
rate on the original loan. "It cannot be predicted at this time whether or not
the lender will exercise the option; however, it will generally be to the
lender's advantage to exercise the option if an increase in interest rates has
occurred or is anticipated, if the term of the loan extends significantly
beyond the option date, or if other reasons exist making the call of the loan
advantageous to the lender."
(d) Except for Paragraph (7) of Subdivision
(a) and as otherwise provided in this Subdivision, Subdivision (a) of this
Section does not apply to any of the following obligations secured by real
property:
(1) An obligation with a principal
balance of $50,000 or less, provided, however, that all junior liens on a piece
of real property will be counted for the purpose of applying the $100,000
threshold described in Paragraphs (3) and (4) of Subdivision (a).
(2) An obligation which conforms to the
eligibility requirements established by the Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation for sale in the secondary
mortgage market. The credit union shall maintain documents for each obligation
made pursuant to this Paragraph which demonstrate that the obligation meets the
eligibility requirements.
(3) An
obligation which is an alternative mortgage transaction, as defined pursuant to
Title VIII of the Garn-St. Germain Depository Institutions Act of 1982
(12 U.S.C. §
3801, et seq.) and any applicable
regulations, guidelines and policies adopted thereunder. The credit union shall
maintain documents for each obligation made pursuant to this Paragraph which
demonstrate that the obligation meets the applicable federal requirements
relating to the alternative mortgage transaction.
(4) An obligation which is secured by real
property and which is a member business loan, as defined in Part 723 of the
regulations of the National Credit Union Administration (12 C.F.R. Part
723).
(e) Any obligation
for which adequate documentation is not maintained pursuant to the requirements
of Paragraphs (2) and (3) of Subdivision (d) of this Section shall be subject
to the requirements of Subdivision (a) of this Section.
(f) This Section shall apply to any
obligation secured by real property which is created, renewed, extended,
renegotiated, or otherwise modified, on or after the effective date of this
Section; provided, however, that this Section does not affect any authorization
contained in a written variance or waiver of this Section which was issued by
the Commissioner prior to the effective date of this Section and which is still
in effect.
1. Change
without regulatory effect renumbering and amending former section 976 to new
section 30.802 filed 8-19-97 pursuant to section 100, title 1, California Code
of Regulations (Register 97, No. 34).
2. Repealer and new section
filed 2-27-2003; operative 3-29-2003 (Register 2003, No.
9).
Note: Authority cited: Section
14201,
Financial Code. Reference: Sections
14950,
14953 and
15100,
Financial Code.
