N.M. Admin. Code § 12.20.35.10

Current through Register Vol. 35, No. 23, December 10, 2024

Section 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.

N.M. Admin. Code § 12.20.35.10

Recompiled 10/31/03