(a)Original Real Estate Loans. Subject to this chapter and to rules and regulations promulgated by the commissioner, every association has the power to originate real estate loans of the following types:
Terms Used In Tennessee Code 45-3-701
Amortization: Paying off a loan by regular installments.
Association: means a capital stock or mutual savings and loan association. See Tennessee Code 45-3-104
Bank: means any person, as hereinafter defined, doing a banking business subject to the laws of this or any other jurisdiction and, for the purposes of supervision, examination and liquidation, includes industrial investment companies and industrial banks authorized by chapter 5 of this title. See Tennessee Code 45-1-103
Deposit: means a deposit of money, bonds or other things of value, creating a debtor-creditor relationship. See Tennessee Code 45-1-103
Home: means a structure designed for residential use by not more than four (4) families or a single condominium unit, including common elements pertinent thereto, designed for residential use by one (1) family in a multiple dwelling unit structure or complex, and includes fixtures. See Tennessee Code 45-3-104
Home property: means real estate on which there is located, or will be located, a home. See Tennessee Code 45-3-104
Interest: means that part of the net income, retained earnings, or surplus of an association that is payable to or credited to holders of deposit accounts. See Tennessee Code 45-3-104
Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
Net worth: means the aggregate of all loan contracts of an association, plus the aggregate value of all other assets of the association, less the aggregate amount of deposit accounts of depositors, including interest credited to the accounts, and less any other liabilities of the association. See Tennessee Code 45-3-104
Primarily residential property: means real estate on which there is located, or will be located pursuant to a real estate loan, any of the following: (A) A structure or structures designed or used primarily for residential rather than nonresidential purposes and consisting of more than one (1) dwelling unit. See Tennessee Code 45-3-104
Real estate loan: means any loan or other obligation secured by a lien on real estate in any state held in fee or in a leasehold extending or renewable automatically for a period of at least ten (10) years beyond the date scheduled for the final principal payment of the loan or obligation, or any transactions out of which a lien or claim is created against the real estate, including, inter alia, the purchase of the real estate in fee by an association and the concurrent or immediate sale thereof on installment contract. See Tennessee Code 45-3-104
United States: includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
(1) Real estate loans on real estate that constitutes home property or primarily residential property and upon which has been constructed an existing and completed home or homes or other structure or structures designed or used primarily for residential purposes; provided, that the amount of the loans shall not exceed one hundred percent (100%) of the value of the real estate security for the loans, or another percentage that the commissioner may prescribe;(2) Real estate loans to finance the acquisition and development of real estate as home property or primarily residential property; provided, that the amount of the loan shall not exceed seventy-five percent (75%) of the value of the real estate security for the loans, or another percentage that the commissioner may prescribe, as of the completion of the development of the real estate into building lots or sites ready for construction;(3) Real estate loans to finance the construction of a home or homes or other structure or structures designed or used primarily for residential purposes on real estate that constitutes home property or primarily residential property, which loans may be inclusive or exclusive of loans to finance the acquisition and development of the real estate; provided, that the amount of the loan shall not exceed eighty percent (80%) of the value of the real estate security for the loans as of the completion of the construction of the homes or other structures, or other percentage that the commissioner may prescribe; and(4) Real estate loans on other improved real estate; provided, that the amount of the loan shall not exceed eighty percent (80%) of the value of the real estate security for the loans, or another percentage that the commissioner may prescribe.(b)Restrictions on Real Estate Loans. No association shall make a real estate loan to one (1) borrower if the sum of the amount of the loan and the total balance of all outstanding real estate loans owed to the association by the borrower exceeds an amount equal to ten percent (10%) of the association’s deposit liability, or an amount equal to the sum of the association’s net worth, whichever amount is less.(c)Methods or Plans of Repayment and Variations in Interest.(1) An association shall agree in writing with its borrowers as to the method or plan by which indebtedness shall be repaid. Repayments may be, but are not required to be, in level periodic installments. The agreements may provide for variations in the interest rates payable in connection with the indebtedness; provided, that the variations are in proportion to variations in the weighted average cost of savings, borrowings, and Federal Home Loan Bank advances as to Tennessee members of the Federal Home Loan Bank of Cincinnati as computed from statistics tabulated by the Federal Home Loan Bank of Cincinnati, or in proportion to another standard that the commissioner may approve. Where the term of a loan is for no more than three (3) years, and the loan is not set up with a monthly amortization, then the association and its borrower may agree in writing to utilize any other index for the variations.(2)(A) An association, in exercising its rights pursuant to a variable interest rate clause, may:
(i) Change the amount of the periodic installment payments of an amortized loan;(ii) Reduce or extend the maturity date; or(iii) A combination of both subdivisions (c)(2)(A)(i) and (ii).(B) An association, at least thirty (30) days prior to the effective date of any change pursuant to subdivision (c)(2)(A), shall notify the borrower in writing of the change and its effects on the amount of periodic installment payments and/or on the maturity date of the installments. Notice shall be deemed given when it is deposited in the United States mail, postage prepaid, addressed to the persons personally liable to pay the indebtedness, as those persons’ names and addresses appear on the association’s records at the time of the giving of notice.(d)Power to Deal in Real Estate Loans. Every association may purchase real estate loans upon security of the same character and amount against which an association may make an original loan.(e)Participation in Real Estate Loans. Every association may participate with other lenders in real estate loans, whether by purchase, sale or joint origination, of any type that the association could originate.
