1151.292 Procedures for real estate loans.

A savings and loan association shall observe the following procedures in making real estate loans:

(A) The association may make loans upon obligations secured by a mortgage or deed of trust on real estate, which mortgage or deed of trust shall be made directly to the association. This section does not prevent an association organized under Chapter 1151. of the Revised Code from accepting additional security when the primary and principal security is a mortgage or deed of trust on real estate.

(B) The title of the borrower shall be a fee simple title or a leasehold or subleasehold estate in real property extending or renewable automatically or at the option of the holder for five years after maturity of the loan, if, in the event of default, the real estate could be used to satisfy the obligation with the same priority as a mortgage or a deed of trust in the jurisdiction where the real estate is located.

(C) In respect to any loan made upon the security of real estate, if it is agreed or contemplated that improvements will be made on such real estate and become a part of such security, such real estate is "improved" within the meaning of division (A) of section 1151.29 and section 1151.291 of the Revised Code and the value of such improvements shall be included in the appraisal value of such real estate; provided however, that as used in this division, the term "improvements" does not include "development" as specified in division (F) of section 1151.293 of the Revised Code.

(D) No such association shall grant a mortgage loan unless it has first obtained a written application, signed by the applicant borrower or his agent, the form and contents of which shall disclose the purpose for which the loan is sought and the identity of the security property. The records for each loan shall contain a written report of the financial ability and credit standing of the borrower.

(E) Machinery and equipment in a building which are adapted to the use being made of the land and building, and which are intended to be permanent additions thereto, will constitute a portion of the real estate for purposes of this chapter and may be appraised in calculating the maximum permissible loan for purposes of this chapter notwithstanding that the law of this state is otherwise for tax or other special purposes.

(F) The records for each loan shall include an appraisal report prepared and signed by an appraisal committee, or by a qualified appraiser designated by its board of directors, prior to the approval of an application for a loan, and shall include information and data concerning the appraised property to substantiate the market value of the security described in such report. Such reports shall be kept by the association in such form as to be available at all times to the examiners or other agents of the superintendent.

(G) No association shall have loans outstanding to any one borrower which, in the aggregate, exceed the lesser of ten per cent of its withdrawable accounts or an amount equal to the sum of its nonwithdrawable accounts, surplus, undivided profits, and reserves, except any association may grant one or more loans aggregating not more than five hundred thousand dollars to one borrower regardless of the above limitations. For purposes of this division, "one borrower" means:

(1) Any person or entity which is, or which upon the making of a loan will become obligor on a real estate loan;

(2) Nominees of such obligor;

(3) All persons, trusts, partnerships, syndicates, and corporations of which such obligor is a nominee or a beneficiary, partner, member, or record [member of record] or beneficial stockholder owning ten per cent or more of the capital stock;

(4) If such obligor is a trust, partnership, syndicate, or corporation, all trusts, partnerships, syndicates, and corporations of which any beneficiary, partner, member, or record [member of record] or beneficial stockholder owning ten per cent or more of the capital stock, is also a beneficiary, partner, member, or record [member of record] or beneficial stockholder owning ten per cent or more of the capital stock of such obligor.

(H) Without the prior written approval of the superintendent, no association shall, directly or indirectly, make any loan, except a consumer loan under section 1151.298 of the Revised Code, to any of its officers, directors, employees, controlling persons, or their spouses, or to any partnership in which any such officer, director, employee, controlling person, or his spouse has any interest, or to any corporation in which any of such parties are stockholders, except that with the prior approval of the association's directors not interested in such loan except as directors, a loan may be made to a corporation in which none of the association's officers, directors, employees, controlling persons, or their spouses own more than fifteen per cent of the total outstanding stock and in which the stock owned by all such parties does not exceed twenty-five per cent of the total outstanding stock, and any director, officer, employee, or controlling person of the association may be granted a loan on the home or combination of home and business property owned and occupied by him. For purposes of this division, "controlling person" includes any attorney or firm of attorneys regularly serving the association in the capacity of attorney at law. All provisions of this division apply to the purchase or sale of any real estate, mortgage loan, or other kind of investment.

(I) The limitations and conditions imposed by Chapter 1151. of the Revised Code do not apply to a purchase money mortgage taken by an association upon real estate sold by it, to a mortgage held by an association to secure a debt previously contracted, or to prevent or diminish loss with respect to loans or renewals of such loans.

(J) The limitations contained in Chapter 1151. of the Revised Code, relating to maximum loan terms and loan-to-value ratios, shall not be applicable to any loan on the security of a first lien on real estate which is being constructed, remodeled, rehabilitated, modernized, or renovated, to be the subject of an annual contributions contract for low-rent housing under the "United States Housing Act of 1937," 50 Stat. 888, 42 U.S.C. 1401, as amended. No loan by an association on the security of such real estate shall exceed ninety per cent of the amount of the appraisal or, in lieu of such appraisal, ninety per cent of the purchase price if the real estate is to be purchased by a local public housing authority. This section shall be applicable to a loan on such real estate only when it is first constructed, remodeled, rehabilitated, modernized, or renovated, or when it first becomes the subject of a contributions contract under said act.

(K) In determining compliance with maximum loan-to-value ratios in this chapter, at the time of making a loan an association shall add together the unpaid amount of all mortgages, liens, or other encumbrances on the security property having priority over the association's mortgage, and shall not make such loan unless the total unpaid balance of such prior mortgages, liens, and other encumbrances, including the one to be made but excluding loans that will be paid off out of the proceeds of the new loan, does not exceed applicable maximum loan-to-value ratios prescribed in this chapter, as indicated by documentation retained in the loan file.

Effective Date: 07-14-1987