Current through Reg. 49, No. 38; September 20, 2024
(a) Policies. Each
savings association must establish written policies approved by its board
establishing prudent credit underwriting and loan documentation standards. Such
standards must be designed to identify potential safety and soundness concerns
and ensure that action is taken to address those concerns before they pose a
risk to the savings association's capital. Credit underwriting standards should
consider the nature of the markets in which loans will be made; provide for
consideration, prior to credit commitment, of the borrower's overall financial
condition and resources, the financial stability of any guarantor, the nature
and value of underlying collateral, and the borrower's character and
willingness to repay as agreed; establish a system of independent, ongoing
credit review and appropriate communication to senior management and the board;
take adequate account of concentration of credit risk; and are appropriate to
the size of the savings association and the scope of its lending
activities.
(b) Loan Documentation
Standards. Loan documentation standards must be established and maintained to
enable the savings association to make informed lending decisions and assess
risk, as necessary, on an ongoing basis; identify the purpose of the loan and
source of repayment, and assess the ability of the borrower to repay the
indebtedness in a timely manner; ensure that any claim against a borrower is
legally enforceable; demonstrate appropriate administration and monitoring of a
loan; and consider the size and complexity of a loan. The following documents
are generally appropriate and can be used as a guideline for prudent lending;
however, unless such documents are specifically required by other state and
federal statutes or regulations, there may be alternative documents equally
suitable in satisfying the safety and soundness intent of this section which
the savings association may substitute and still address the safety and
soundness concern:
(1) an application for the
loan, signed and dated by the borrower or their agent (and if the borrower is a
corporation, a board resolution authorizing the loan), which discloses the
purpose for which the loan is sought, the identity of the security property,
and the source of funds which will be used to repay the loan;
(2) a statement signed by the borrower or
their agent, or a copy of the executed contract, disclosing the actual price at
which the security is being purchased by the borrower, if the loan is made for
the purpose of financing the purchase of the security for the loan;
(3) current financial statements signed by
the borrower and all guarantors and/or current documented credit reports
disclosing the financial ability of the borrower and guarantors (a current
financial statement is as of a date on or before 180 days prior to the date the
application is filed) together with written certification by the borrower and
guarantors that no material adverse changes in financial condition have
occurred since the financial statement was prepared;
(4) a loan approval sheet (which may be part
of the loan application form) indicating the amount and terms of the loan, the
date of loan approval, by whom approved, the signatures of the persons
approving the loan, and any conditions of approval;
(5) a loan disbursement statement or other
documentation, indicating the date, amount, and ultimate recipient of every
disbursement of the proceeds of such loan (this requirement is not met by
showing one or more disbursements to a title company or other escrow agent, but
for a construction loan, this requirement may be met by documenting bona fide
construction draw disbursements to the general contractor of the project, upon
their completion of an affidavit stating that all bills for labor and materials
have been paid as of the date of the disbursement);
(6) a loan settlement statement, indicating
in detail the expenses, fees, and charges the borrower or borrowers have paid
in connection with such loan;
(7)
the promissory note or notes containing the borrower's obligation to repay duly
executed by the borrower and all guaranty agreements duly executed by the
guarantors (a copy of the note or notes may be kept in the loan file, if the
original notes are stored for safekeeping in another location at the savings
association);
(8) the original
mortgage, deed of trust, or other instrument creating or constituting the lien
securing the loan;
(9) for real
estate loans, an attorney's opinion letter based on an abstract of title, or a
policy of title insurance, or binder of same, issued by a title company
authorized to insure titles in the state in which the security for the loan is
located, showing that the lien securing such loan meets the applicable
requirements of this chapter for liens securing the loan in question;
(10) evidence that the insurable improvements
of the real estate are insured against loss by a fire and extended coverage
policy or its equivalent issued by an insurance company authorized to do
business in the state in which the real estate security is located and naming
the savings association as a co-insured, as its interest may appear;
(11) for real estate loans, an appraisal or
evaluation completed in accordance with the requirements of
12 C.F.R. §
323.1, et seq.;
(12) for personal property loans, a detailed
explanation of how the savings association arrived at the appraised or market
value of the security property;
(13) any loan agreement or other ancillary
documents relating to the loan; and
(14) any documents required by the Texas
Credit Title (Finance Code §
301.001 et
seq.).
(c) Unsecured
Loans. Documentation guidelines for unsecured loans under this chapter would
generally include the documents in subsection (b)(1) and (3) - (7) of this
section.
(d) Loan documentation
which meets the documentation requirements of the applicable agency meets the
requirements of this section for any loan of which at least 80% of the
principal is guaranteed by the United States or any agency or instrumentality
thereof.
(e) Closing Agent. A
savings association may designate as escrow agent an attorney or a title
company, either of which must be duly licensed in the state where the
transaction is closed. However, where an escrow agent is used, all original
documents must be forwarded to the savings association on or before 5 business
days after the date of closing, or immediately after recording, for those
documents which require filing of record.
(f) Permanent Loan File Requirements.
(1) Loan documentation must be in the
possession of the savings association or an escrow agent designated by the
savings association before funding, together with a signed certification by an
officer or employee that the loan documentation was complete before funding and
such documents and records must be placed in one permanent loan file
immediately upon receipt by the savings association.
(2) The permanent loan file required by this
section must be located at an office of the savings association. Duplicate loan
files or other files containing loan documentation not required by this rule
may be maintained at the savings association's discretion. Files for loans
which are fully secured by accounts at the association may be maintained at the
office where the loan was originated.
(3) The permanent loan file must contain
evidence that the savings association obtained the prompt recording in the
proper records of every mortgage, deed of trust, or other instrument creating,
constituting or transferring any lien securing in whole or part any loan made
under this chapter, or the savings association's interest therein. This
requirement does not apply to loan participations purchased by the savings
association.
(4) Where the proceeds
of a loan are disbursed over the term of the loan in the form of draws by the
borrower, the documentation supporting each draw must be part of the permanent
file.
(5) When a savings
association purchases whole loans or participations in loans, it must cause the
assignment or transfer of its interest in the liens securing such loans to be
in recordable form and maintained in the permanent file. If such loans are
serviced by others, the servicing agreement must be a part of the permanent
file. The savings association must obtain a certification from the seller of
the loan or participation that the seller is in possession of all documents
required by this section.
(g) The records of the savings association
must reflect that the board has by appropriate resolution established
procedures for the approval of all loans, loan commitments or letters of credit
made by the savings association and specifically fixing the authority and
responsibility for preliminary loan approval by officers and employees of the
savings association. Loans originating in branch offices, loan offices, or
agencies must be approved in the same manner as loans originating in the
principal office.
(h) A savings
association must maintain a register of all outstanding loan commitments,
including commitments to purchase loans or participations, containing the name
and address of the customer to whom the commitment is made, dollar amount of
the commitment, and a summary of all material terms of the commitment, with a
description of any written documents evidencing the loan commitment.
