N.M. Admin. Code § 12.20.35.10 - OTHER RESIDENTIAL REAL ESTATE LOANS
A. Home loans:
(1) Authorization: An association may make,
sell, purchase, participate, or otherwise deal in loans on the security of
homes or combinations of homes and business property and on farm residences and
combinations of farm residences and commercial farm real estate,. including
nonamortized, partially-amortized, and line-of-credit loans, on which the
interest rate, the payment, the loan balance or the term to maturity may vary
as provided in this paragraph (a) [now Subsection A of 12.20.35.10 NMAC]. Such
loans shall be repayable in at least semiannual installments over a term not
exceeding 40 years, with interest payable at least semiannually except as
expressly authorized in this paragraph (a) [now Subsection A of 12.20.35.10
NMAC]. An association making a home loan shall possess only such rights and
powers as are expressly set forth, by incorporation or otherwise, in the loan
documents and as are provided by operation of law.
(2) Adjustments to rate, payment, balance or
term; refinancing: Subject to such limitations on adjustment as are set forth
in the loan contract:
(a) Adjustments to the
interest rate shall correspond directly to the movement of an interest-rate
index or of an index that measures the rate of inflation or the rate of change
in consumer disposable income, which index is readily available to and
verifiable by the borrower and is beyond the control of the association:
provided, that an association may decrease the interest rate at any
time.
(b) Adjustments to the
payment and the loan balance that do not reflect an interest-rate adjustment
may be made if (i) the adjustments reflect a change in a national or regional
index that measures the rate of inflation or the rate of change in consumer
disposable income, is readily available to and verifiable by the borrower, and
is beyond the control of the association, or (ii) in the case of a payment
adjustment, the adjustment reflects a change in the loan balance or is made
pursuant to a formula, or to a schedule specifying the percentage or dollar
change in the payment and set forth in the contract.
(c) Any combination of indices or a moving
average of index values may be used as an index, and an association may use
more than one index during the term of a loan.
(d) A loan contract may provide for the
deferral and capitalization of a portion of interest, and may provide that a
portion of the consideration to be received by the association in return for
making the loan shall be interest in the form of a percentage of the amount by
which the current market value of the property, during the loan term or at
maturity, exceeds the original appraised value.
(e) At least 30 but not more than-120 days
prior to an adjustment and at least 90 but not more than 120 days prior to the
expected maturity of a non-or partially-amortized loan (including a -loan with
a "call" provision pursuant to subparagraph (2) (vi) of this paragraph (a))
[now Subparagraph (f) of Paragraph (2) of Subsection A of 12.20.35.10 NMAC], an
association shall provide the borrower with notice of the adjustment or of
maturity. However, where the-loan contract provides that changes in the
interest rate shall occur more frequently than changes in the payment, the
association need not notify the borrower of changes in the rate, nor of changes
in the loan balance or term resulting from a rate change, until notice of a
payment adjustment. is given. (For purposes of notification, a payment
adjustment is considered to occur as of the date of the interest-rate change
immediately preceding the due date of the adjusted payment). In addition, where
the loan contract sets out a schedule of payment adjustments, notice need not
be given of payment changes made pursuant to that schedule.
(f) The loan term may be adjusted only to
reflect a change in the interest rate, the payment or the loan balance.. A loan
contract may provide an association with the right to call the loan due and
payable either after a specified number of years has elapsed following closing
or upon the occurrence of a specified event external to the loan; and
(g) If at maturity of a loan that provides
for adjustments pursuant to this subparagraph (a)(2) [now Paragraph (2) of
Subsection A of 12.20.35.10 NMAC] the ratio of the loan balance to the current
market value of the security property exceeds 95 percent, the association may
offer to refinance the loan, subject to the requirements of subparagraphs
(3)(i) and (3)(iii) of this paragraph (a) [now Subparagraphs (a) and (c) of
Paragraph (3) of Subsection A of 12.20.35.10 NMAC] and other applicable
provisions of this regulation.
(3) Loan-to-value ratio: A home loan shall
not at the time of origination exceed 90 percent of the value of the security
property, except as provided in subparagraph (2)(vii) of this paragraph (a)
[now Subparagraph (g) of Paragraph (2) of Subsection A of 12.20.35.10 NMAC] and
below. During the term of the loan, the loan-to-value ratio may increase above
90 percent if the increase results from a change authorized by subparagraph (2)
of this paragraph (a) [now Paragraph (2) of Subsection A of 12.20.35.10 NMAC].
The supervisor will assume continued compliance with the loan-to-value ratio
limitations where the original ratio met the requirements of this subparagraph
(3) [now Paragraph (3) of Subsection A of 12.20.35.10 NMAC], but in no event
may the loan balance exceed 125 percent of the original appraised value of the
property during the term of the loan unless pursuant to subparagraph (2)(ii)(a)
of this paragraph (a) [now Subparagraph (a) of Paragraph (2) of Subsection A of
12.20.35.10 NMAC] or unless the loan contract provides that the payment shall
be adjusted at least once each five years, beginning no later than the tenth
year of the loan, to a level sufficient to amortize the loan at the
then-existing interest rate and loan balance over the remaining term of the
loan. The 125-percent limitation shall not apply to that portion of a loan
balance that is interest received in the form of a percentage of the
appreciation in value of the security property pursuant to subparagraph (2)(iv)
of this paragraph (a) [now Subparagraph (d) of Paragraph (2) of Subsection A of
12.20.35.10 NMAC]. Notwithstanding the foregoing, the loan-to-value ratio at
the time of origination may be up to 95 percent if:
(a) the loan contract requires that, in
addition to full or partial amortization of the loan, the pro rata portion,
based on the number of installments due annually, of estimated annual taxes and
assessments on the security property be paid in advance to the association with
each installment payment;
(b) the
borrower, including a purchaser who assumes the loan, has executed a
certificate stating that the borrower' , occupies, or in good faith intends to
occupy the property (or one dwelling on the property) as the borrower's
principal residence; and
(c) during
the time that the unpaid balance of the loan exceeds 90 percent of the value of
the security property, determined at the time of origination, the part of such
balance exceeding 80 percent of value is guaranteed or insured by a mortgage
insurance company which the federal home loan mortgage corporation has
determined to be a "qualified private insurer"; provided, however, that any
unpaid loan balance sedured by a pledged savings account shall not be required
to be guaranteed or insured under this provision.
(4) Loan to facilitate trade-in or exchange:
Loans made to facilitate the trade-in or exchange of security property shall
not exceed 90 percent of value and shall be repayable within 18
months.
(5) Pledged-account loans:
Loans made on the. combined security of real estate and savings accounts may be
made in excess of the maximum loan-to-value ratios specified in this paragraph
(a) [now Subsection A of 12.20.35.10 NMAC], with such excess secured by savings
accounts: provided, that loans that exceed 90 percent of the value of the
combined security are subject to the following restrictions:
(a) the loan shall not exceed the appraised
value of the real estate;
(b) the
savings account shall consist only of funds belonging to the borrower, members
of his family, or his employer; and
(c) the association shall fully disclose to
the prospective borrower the differences (including interest, private-mortgage
insurance costs, and equity interest) between a loan secured by real estate and
savings and a loan secured by real estate alone.
(6) Loans on cooperatives: Such loans may be
made under this paragraph (a) [now Subsection A of 12.20.35.10 NMAC], subject
to the following requirements:
(a) Loans on
the security of cooperative housing developments ("blanket" loans): The
association shall require that the cooperative housing development maintain
reserves at least equal to those required for comparable developments insured
by the federal housing administration.
(b) Loans on individual cooperative units:
Such loans may be made on the security of (i) a security interest in stock
membership certificate, or other evidence of ownership issued to a stockholder
or member by a cooperative housing organization and (ii) an assignment of the
borrower's interest in the proprietary lease or occupancy agreement issued by
such organization.
B. Multifamily dwelling loans: Loans on the
security of other dwelling units, combinations of dwelling units, including
homes, and business property involving only minor or incidental business use,
shall not exceed 90 percent of the value of the security property and shall be
repayable within 30 years, with interest payable at least semiannually;
provided, that loans which are not fully amortized shall be repayable with
principal and interest payments sufficient to meet a 30-year amortization
schedule, and nonamortized loans shall be repayable within five
years.
C. Loan on uni improved real
estate ("acquisition" loans): Loans on the security of unimproved real estate
as defined in Section 541.29 of the regulations for the federal savings and
loan system shall not exceed 66 2/3 percent of the value of the security
property, and shall be repayable in 3 years with interest payable at least
semiannually.
D. Development loans:
(1) Loans to finance development of land
shall not exceed 75 percent of the value of 'the security property and shall be
repayable within 5 years, with interest payable at least semiannually. The loan
documentation shall contain a preliminary development plan that is satisfactory
to the association.
(2) Upon
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" for the purposes of the preceding
sentence is the value fixed at the time the loan was made.
(3) An association may extend the time for
payment for an additional period not in excess of 3 years, but no extension may
be made unless (i) interest on the loan is current, (ii) the association's
board has before it a current appraisal of the security property, and (iii) the
outstanding principal balance of the loan is or has been reduced to an amount
not over 75 percent of the current value of the security property.
(4) The limitation on loans to one borrower
as defined in Section 563.9-3 of the Regulations for Insurance of Accounts
shall be 2 percent of an association's assets with regard to loans on any one
development project made under this paragraph (d) [now Subsection D of
12.20.35.10 NMAC]. A development project includes all primarily residential,
recreational, or other facilities in an integrated development plan.
E. Loan on building lots and
sites: Loans on the security of building lots and sites shall comply with the
following requirements:
(1) Single-family-
dwelling loans for a borrower's principal residence (as evidenced by a
borrower's certification of intention that the property will be so used) shall
not exceed 75 percent of the value of the security property and shall be
repayable within 15 years, with interest payable at least semiannually. The
loan contract shall provide for payments sufficient to amortize at least 30
percent of the original principal amount before the end of the loan
term.
(2) Loans other than for a
borrower's principal residence shall not exceed 75 percent of the value of the
security property and shall be repayable within 3 years, with semiannual
interest payments beginning not more than 1 year after the initial
disbursement.
(3) The provisions of
paragraphs (d) (2) and (3) [now Paragraphs (2) and (3) of Subsection D of
12.20.35.10 NMAC] shall apply to this paragraph (e) [now Subsection E of
12.20.35.10 NMAC].
F.
Construction loans:
(1) Construction loans on
other improved real estate (as defined in Section 541.17(b)) shall not exceed
75 percent of the value of the security property and shall be repayable in 3
years, with interest payable at least semiannually, except that for
construction of single family dwellings, loans on individual structures shall
be repayable within 18 months of initial disbursement of applicable loan
funds.
(2) Associations shall
reserve the right to impose limits on the number of structures under
construction at a given time.
(3)
The provisions of paragraphs (d) (2) and (3) [now Paragraphs (2) and (3) of
Subsection D of 12.20.35.10 NMAC] shall apply to this paragraph (f) [now
Subsection F of 12.20.35.10 NMAC], except that loan extensions for construction
of individual single- family-dwelling structures are limited to 6
months.
G.
Rehabilitation loans: Loans to finance substantial alteration, repair or
improvement of primarily residential property may be made within the maximum
loan-to-value ratios permitted for loans under paragraphs (a) and (b) of this
section [now Subsections A and B of 12.20.35.10 NMAC] and shall be repayable
within 3 years (18 months for a single family dwelling), with interest payable
at least semiannually.
H.
Combination loans:
(1) Any loans authorized by
this regulation may be combined, with the term of each loan beginning at the
end of the term of the preceding loan and interest and principal, payment
requirements as specified in the applicable paragraphs of this
regulation.
(2) Loans made on
unimproved real estate (as defined in Section 541.29 of the regulations for the
federal savings and loan system), development loans, and loans on other
improved real estate (as defined in Section 541.17 (b)) which are combined with
permanent financing loans, or are made to borrowers who have secured permanent
financing from other lenders, may be made within the maximum loan-to-value
ratios permitted for loans under paragraphs (a) and (b) [now Subsections A and
B of 12.20.35.10 NMAC] of this regulation; provided, that disbursement of. loan
proceeds in excess of 80 percent of the value of the security property shall
not be made until substantial completion of construction.
(3) With respect to a combination of loans to
finance development and loans on building lots and sites and/or construction
loans, whether or not development has been completed, (a) beginning hot more
than 3 years after the initial disbursement of loan proceeds for construction
purposes, the principal shall be amortized monthly at a rate of at least 1 1/2
percent of that portion of the loan balance applicable to any home, including
the building site, and (b) beginning not more than 4 years after such
disbursement, principal shall be amortized monthly at a rate of at least 1 1/2
percent of that portion of the loan balance not applicable to the construction
of any home and its building site.
(4) Notwithstanding any other provisions of
this regulation, a combination loan for construction inclusive of acquisition
and/or development shall be repayable within 8 years, but such loan may be
extended for an additional period not exceeding 3 years.
Notes
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