Appendix A to Part 32 - Interpretations
12:1.0.1.1.29.0.28.10.20 : Appendix A
Appendix A to Part 32 - Interpretations Section 1. Interrelation of
General Limitation With Exception for Loans To Develop Domestic
Residential Housing Units
1. The § 32.3(d)(2) exception for loans to one borrower to
develop domestic residential housing units is characterized in the
regulation as an “alternative” limit. This exceptional $30,000,000
or 30 percent limitation does not operate in addition to the 15
percent General Limitation or the 10 percent additional amount a
savings association may loan to one borrower secured by readily
marketable collateral, but serves as the uppermost limitation on a
savings association's lending to any one person once a savings
association employs this exception.
Example:Savings Association A's lending limitation as calculated
under the 15 percent General Limitation is $800, 000. If Savings
Association A lends Y $800,000 for commercial purposes, Savings
Association A cannot lend Y an additional $1,600,000, or 30 percent
of capital and surplus, to develop residential housing units under
the paragraph § 32.3(d)(2) exception. The § 32.3(d)(2) exception
operates as the uppermost limitation on all lending to one borrower
(for savings associations that may employ this exception) and
includes any amounts loaned to the same borrower under the General
Limitation. Savings Association A, therefore, may lend only an
additional $800,000 to Y, provided § 32.3(d)(2) prerequisites have
been met. The amount loaned under the authority of the General
Limitation ($800,000), when added to the amount loaned under the
exception ($800,000), yields a sum that does not exceed the 30
percent uppermost limitation ($1,600,000).
2. a. This result does not change even if the facts are altered
to assume that some or all of the $800,000 amount of lending
permissible under the General Limitation's 15 percent basket is not
used, or is devoted to the development of domestic residential
housing units.
b. In other words, using the above example, if Savings
Association A lends Y $400,000 for commercial purposes and $300,000
for residential purposes - both of which would be permitted under
its $800,000 General Limitation - Savings Association A's remaining
permissible lending to Y would be: first, an additional $100,000
under the General Limitation, and then another $800,000 to develop
domestic residential housing units if the savings association meets
the paragraph § 32.3(d)(2) prerequisites. (The latter is $800,000
because in no event may the total lending to Y exceed 30 percent of
unimpaired capital and unimpaired surplus). If Savings Association
A did not lend Y the remaining $100,000 permissible under the
General Limitation, its permissible loans to develop domestic
residential housing units under § 32.3(d)(2) would be $900,000
instead of $800,000 (the total loans to Y would still equal
$1,600,000).
3. In short, under the § 32.3(d)(2) exception, the 30 percent or
$30,000,000 limit will always operate as the uppermost limitation,
unless the savings association does not avail itself of the
exception and merely relies upon its General Limitation.
Section 2. Interrelationship Between the General Limitation and the
150 Percent Aggregate Limit on Loans to All Borrowers To Develop
Domestic Residential Housing Units
Numerous questions have been received regarding the allocation
of loans between the different lending limit “baskets,”
i.e., the 15 percent General Limitation basket and the 30
percent Residential Development basket. In general, the inquiries
concern the manner in which a savings association may “move” a loan
from the General Limitation basket to the Residential Development
basket. The following example is intended to provide guidance:
Example:Savings Association A's General Limitation under § 32.3(a)
is $15 million. In January, Savings Association A makes a $10
million loan to Borrower to develop domestic residential housing
units. At the time the loan was made, Savings Association A had not
received approval under an order issued by the appropriate Federal
banking agency to avail itself of the residential development
exception to lending limits. Therefore, the $10 million loan is
made under Savings Association A's General Limitation.
2. In June, Savings Association A receives authorization to lend
under the Residential Development exception. In July, Savings
Association A lends $3 million to Borrower to develop domestic
residential housing units. In August, Borrower seeks an additional
$12 million commercial loan from Savings Association A. Savings
Association A cannot make the loan to Borrower, however, because it
already has an outstanding $10 million loan to Borrower that counts
against Savings Association A's General Limitation of $15 million.
Thus, Savings Association A may lend only up to an additional $5
million to Borrower under the General Limitation.
3. However, Savings Association A may be able to reallocate the
$10 million loan it made to Borrower in January to its Residential
Development basket provided that: (1) Savings Association A has
obtained authority under an order issued by the appropriate Federal
banking agency to avail itself of the additional lending authority
for residential development and maintains compliance with all
prerequisites to such lending authority; (2) the original $10
million loan made in January constitutes a loan to develop domestic
residential housing units as defined; and (3) the housing unit(s)
constructed with the funds from the January loan remain in a stage
of “development” at the time Savings Association A reallocates the
loan to the domestic residential housing basket. The project must
be in a stage of acquisition, development, construction,
rehabilitation, or conversion in order for the loan to be
reallocated.
4. If Savings Association A is able to reallocate the $10
million loan made to Borrower in January to its Residential
Development basket, it may make the $12 million commercial loan
requested by Borrower in August. Once the January loan is
reallocated to the Residential Development basket, however, the $10
million loan counts towards Savings Association A's 150 percent
aggregate limitation on loans to all borrowers under the
residential development basket (§ 32.3(d)(2)).
5. If Savings Association A reallocates the January loan to its
domestic residential housing basket and makes an additional $12
million commercial loan to Borrower, Savings Association A's totals
under the respective limitations would be: $12 million under the
General Limitation; and $13 million under the Residential
Development limitation. The full $13 million residential
development loan counts toward Savings Association A's aggregate
150 percent limitation.
[77 FR 37282, June 21, 2012]