1161.38 Procedures for real estate loans.

A savings bank shall observe the following procedures in making real estate loans:

(A) The savings bank 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 savings bank. This section does not prevent a savings bank organized under this chapter 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 the real estate and become a part of the security, the real estate is "improved" within the meaning of division (B) of section 1161.36 and section 1161.37 of the Revised Code and the value of the improvements shall be included in the appraisal value of the real estate. As used in this division, "improvements" does not include "development" as defined in division (F) of section 1161.39 of the Revised Code.

(D) No savings bank shall grant a mortgage loan unless it has first obtained a written application, signed by the applicant borrower or the applicant borrower's 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 that are adapted to the use being made of the land and building and that 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 information and data concerning the appraised property to substantiate the market value of the security described in the report. The reports shall be kept by the savings bank in such form as to be available at all times to the examiners or other agents of the superintendent of financial institutions.



(a) Except as provided in division (G)(1)(b) of this section, no savings bank shall make loans or extensions of credit to any one borrower that, in the aggregate, exceed fifteen per cent of the saving bank's unimpaired capital and surplus or five hundred thousand dollars, whichever is greater.

(b) A savings bank may extend additional credit to any one borrower in an amount equal to ten per cent of the savings bank's unimpaired capital and unimpaired surplus, if this additional loan is secured by readily marketable collateral having at all times a current value of at least one hundred per cent of the amount of the loan. If the value of the collateral falls below one hundred per cent of the outstanding loan, the loan becomes subject to the general limitation provided in division (G)(1)(a) of this section.

(c) Loans or extensions of credit that exceed the general limitation provided in division (G)(1)(a) of this section shall be brought into conformance with that division within five business days.

(2) The superintendent of financial institutions shall adopt rules, in accordance with Chapter 119. of the Revised Code, to establish standards governing loans or the extension of credit to one borrower. The rules shall be consistent with and not less stringent than any rules adopted by the federal deposit insurance corporation and the regulations issued by the office of the comptroller of the currency, 12 C.F.R. Part 32, as amended, dealing with limitations on loans and extensions of credit to one borrower.


(1) No savings bank, directly or indirectly, shall make any loan to any of its officers, directors, shareholders, controlling persons, or to members of their immediate families, or to any corporation, partnership, trust, or other form of business entity in which any of its officers, directors, shareholders, or controlling persons have any interest, except as authorized pursuant to section 22(h) of the "Federal Reserve Act of 1913," 38 Stat. 251, 48 Stat. 182, and 92 Stat. 3644, 12 U.S.C. 221 , 375a , and 375b , as amended, and in accordance with the rules and regulations issued thereunder.

(2) No savings bank shall make any loan, or otherwise extend credit, or engage in any transaction with any of its affiliates, except as authorized under sections 23A and 23B of the "Federal Reserve Act of 1913," 38 Stat. 251, 48 Stat. 183, and 101 Stat. 564, 12 U.S.C. 221 , 371c , and 371c-1 , as amended.

(I) The limitations and conditions imposed by this chapter do not apply to a purchase money mortgage taken by a savings bank upon real estate sold by it, to a mortgage held by a savings bank to secure a debt previously contracted, or to prevent or diminish loss with respect to loans or renewals of the loans.

(J) The limitations contained in this chapter, relating to maximum loan terms and loan-to-value ratios, do not apply to any loan on the security of a first lien on real estate that 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 a savings bank on the security of this real estate shall exceed ninety per cent of the amount of the appraisal or, in lieu of the appraisal, ninety per cent of the purchase price if the real estate is to be purchased by a local public housing authority. This section applies to a loan on this 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 the act.

(K) In determining compliance with maximum loan-to-value ratios in this chapter, at the time of making a loan, a savings bank shall add together the unpaid amount of all mortgages, liens, or other encumbrances on the security property having priority over the savings bank's mortgage, and shall not make the loan unless the total unpaid balance of the 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: 09-29-1999