Current through Register Vol. 35, No. 18, September 24, 2024
A. It is the state
investment council's objective in making resources available for the purchase
of participations in loans to achieve a yield consistent with the safety and
soundness of such investments. With this in mind, the state investment officer
may purchase from eligible New Mexico financial institutions a participation
interest of up to eighty percent in any loan secured by a first mortgage or a
deed of trust on real property located in New Mexico of an eligible business
entity, or its subsidiary, which is operating or shall use the loan proceeds to
commence operations within New Mexico, plus any other guarantees or collateral
that may be judged by the eligible institution or the state investment officer
to be prudent. Real property is defined as "land and attached buildings, but
excludes all interests which may be secured by a security interest under
Article 9 of the Uniform Commercial Code, and mineral resource
values".
B. In accordance with the
provisions of the statute, loan proceeds shall be used exclusively for the
purpose of expanding or establishing businesses in New Mexico. The use of loan
proceeds may include the refinancing of a business' existing loans outstanding
only if the loan is for expansion purposes. However, if a portion of the loan
proceeds are used to repay an existing loan and payment of principal and
interest on the loan is not paid within ninety days from the due date, the
originating institution shall buy back the state's participation interest in
the loan.
C. Loan origination fees,
servicing fees and any other fees to be charged the borrower shall be reviewed
by the state investment officer.
D.
The amount invested in New Mexico real property related business loans shall
not exceed ten percent of the severance tax permanent fund, and shall be
included in any minimum amount of severance tax permanent fund investments
required to be placed in New Mexico certificates of deposit.
E. Loans which are being offered to the state
investment officer for consideration for participation are subject to the
following requirements:
(1) Eligible business
entities shall not include public utilities, financial institutions, shopping
centers, apartment buildings, or other such passive investments. The decision
as to whether a business investment is considered a passive investment shall be
determined by the state investment officer.
(2) The minimum loan amount shall be five
hundred thousand dollars ($500,000.00) and may be met by a single institution
packaging up to five separate loans to satisfy the requirements of this
Subsection. The maximum loan amount shall be two million dollars
($2,000,000.00).
(3) Loan
maturities shall not be less than five years or more than fifteen years. The
loan shall be fully amortized over the maturity period and may not include any
balloon payments.
(4) The maximum
loan-to-value ratio shall be seventy-five percent based on a current MAI
appraisal of the real property, or an equivalent appraisal, as approved by the
state investment officer. The appraisal shall be completed no more than six
months prior to the loan origination date.
(5) Interest rates shall be fixed for five
years and shall be adjusted at every fifth anniversary. The yield on the
states' participation interest shall never be less than the greater of the then
prevailing yield on United States treasury securities of five year maturity,
plus two and one-half percent or the yield received by the lending institution,
calculated exclusive of servicing fees.
(6) If the payment of principal or interest
is not made within ninety days from the due date, and before payment has not
been made for one hundred and eighty days from the due date, the originating
institution shall buy back the state's participation interest in the loan,
substitute another qualifying loan, or begin foreclosure proceedings unless the
payment is extended pursuant to an agreement between the originating
institution and the state investment officer. If foreclosure proceedings are
commenced, the state and the originating institution shall share in proportion
to their participation interest in the legal and other foreclosure expenses.
Any investment loss incurred as a result of foreclosure sale shall also be
shared proportionately. Under no circumstance shall the state be liable for
more than the amount of its investment in the participation.
(7) The loan agreement between the borrower
and the originating institution must include a due on sale clause if the
business is sold.
(8) The state
investment officer will consider the following industries to insure
diversification across the state in the loan participation program. A
twenty-five percent maximum may be invested from the total amount allocated
from the severance tax permanent fund in any one of the following classes of
industries:
(a) agriculture, forestry, fishing
and related processing;
(b)
mining;
(c) construction;
(d) manufacturing;
(e) transportation;
(f) wholesale trade;
(g) retail trade;
(h) services.
(9) In addition, funds available to the state
investment officer for purchase of participations in loans secured by a first
mortgage or deed of trust shall be allocated considering but not limited to the
following:
(a) the financial condition of the
financial institution offering to sell loan participations; such condition
shall be based on the quarterly evaluation of financial condition, as
determined under the state investment council's certificate of deposit
collateral policies, with preference given to institutions evaluated as class A
and class B. Class D institutions will not receive funds.
(b) The amount of total loan participations
purchased from a single institution shall not exceed ten percent of the maximum
total funds authorized for investment in loan participations.
(c) The percentage a county or geographic
area's population is to the total population of the state as determined by the
most recent decennial census or official population estimates, prepared by the
U.S. census bureau, department of commerce.
(10) Before the state investment officer
purchases a participation in a loan or package of loans all documents will be
subject to review and approval by the office of the attorney general. The state
investment officer may employ the services of a private attorney to review and
prepare documents on the investment office's behalf if he finds it to be
necessary. The cost of such attorney will be paid for by the institution
selling the participation and may be passed on to the borrower.
