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What about the collateral requirements of 223.14? We have made sure the loan meets the standards from a safety and soundness standpoint, however do we need to require additional collateral to meet the 130% requirement? That doesn’t sound like the intent of the regulation when its a true arms length transaction but I’m not sure on the collateral part.
Thanks.
All violations have been reported to the board, and appropriate safeguards are in place to prevent this from happening again. There will be follow up monitoring and audits. We were just wondering if there is anything else we should do. Thank you for your input.
Thanks Jack! So, you are saying that the 130% Reg W collateral coverage is applicable for this loan? Also, Reg O is not applicable if the credit is extended on non-preferential terms, and the proceeds of the credit are used in a bona fide transaction to acquire property, correct?
Thanks for your reply!! I forgot to mention that the new loan for the permanent financing of the dwelling is also business purpose to the same borrower as well. The borrower will be using the dwelling for rental income. Will the “other” purpose code #4 still be used since this is a business purpose loan, or will it be considered a “purchase” since it is the permanent financing and pay down of a portion of a construction line of credit?
