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transmitted, whether instantaneously or otherwise, to a financial institution and which, for activation and account or deposit access, is dependent upon the use of a machine-readable instrument in the possession and control of the holder of such account or deposit. The term "remote service unit" includes, without limitation, both "on-line" computer terminals and "off-line" cash dispensing machines, but does not include terminals or teller machines using passbooks regardless of whether the passbooks are machine-readable. A remote service unit is not a branch office, satellite office or other type of office, facility or agency of a Federal association within the meaning of §§ 545.14, 545.14-1, 545.14-2, 545.14-3, 545.14-4, 545.14-5 or 545.15.

(2) The term "State" means the States of the Union, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands.

(3) The term "Supervisory Agent" means the President of the Federal Home Loan Bank of the district in which the home office of the Federal association is located or any other officer or employee of such Bank designated by the Board as agent as provided by §§ 501.10 and 501.11 of this chapter.

(k) Termination. This section and any approval granted under this section shall automatically terminate at the close of July 31, 1975.

(Sec. 2, Pub. L. 93-100, 87 Stat. 342) [39 FR 23991, June 28, 1974, as amended at 39 FR 26286, July 18, 1974]

$545.5 Give-aways.

(a) Scope of section. The provisions of this section shall be applicable to a Federal association when, and only when, (1) such association is doing business in a State hereinafter referred to in this sentence, (2) there is in effect a statutory provision of such State authorizing a specified official of such State to impose on domestic associations of such State, by regulation, a restriction or prohibition equivalent to that imposed on Federal associations by paragraph (b) of this section, if, during the period of any such restriction or prohibition, Federal associations doing business in such State are not permitted to use the subject matter of such restriction or prohibition to a greater extent than domestic associations of such State are permitted to do pursuant to such official's regulations, and (3) there is in effect a regulation of such official, pursuant to such statute, impos

ing such a restriction or prohibition as is hereinbefore referred to in this sentence. Nothing in this section shall impose on any Federal association any restriction or prohibition to which such association would not be subject under regulation of such official, authorized by statute of such State, if such association were a domestic association of such State.

(b) General prohibition. No Federal association shall condition the distribution of a give-away on the recipient's possessing, opening, or adding to a savings account, or maintaining a minimum balance therein.

(c) Prohibition on advertising. Except as provided in paragraph (d) of this section, no Federal association shall refer in any of its advertisements to any give-away, other than printed material of an educational or informational nature of a cost not exceeding $2.50 or a coin bank not exceeding said cost.

(d) Exception. The provisions of paragraph (c) of this section shall not prohibit a Federal association which has not opened an office prior to the effective date of this section from referring to give-aways in its advertisements for a single period of 30 days ending not more than one year after the opening of its first office.

(e) Additional prohibitions. No Federal association shall enter into any agreement or understanding with, or accept funds for investment in savings accounts from, any broker or other person engaging in activities that are prohibited by the preceding provisions of this section if done by an association.

(f) Effect on other provisions. The provisions of this section shall be cumulative to, and shall not affect the applicability to any Federal association of, the provisions of § 563.24 of this chapter (Rules and Regulations for Insurance of Accounts).

(g) Definitions. As used in this section:

(1) The term "doing business" has the meaning which it has under the statutory provision referred to in paragraph (a) (2) of this section, and the term "domestic association" means such savings and loan, building and loan, and homestead associations and cooperative banks as are domestic associations within the meaning of such statutory provision;

(2) The term "giveaway" means any merchandise or other thing of value, or services performed in whole or in part outside the premises of an association,

furnished the recipient as a gift or premium or as a result of a drawing or contest or otherwise without adequate payment; the term does not, however, include (1) provision by an association, for its members, of safe deposit facilities at no cost or at a reduced rental, regardless of the location of such facilities, or (ii) reimbursement by an association of its members for all or any part of amounts paid by such members for safe deposit facilities located outside the premises of the association; and

(3) The term "State" means the States of the Union, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands.

(26 F.R. 8053, Aug. 29, 1961, as amended at 87 F.R. 13247, July 6, 1972]

LOANS

§ 545.6 Real estate loans.

§ 545.6-1 Lending powers under sections 13 and 14 of Charter K.

Any Federal association which has Charter K may, under sections 13 and 14 thereof, make the following types of loans on the security of first liens on improved real estate and the use by such an association of loan plans, practices, and procedures which comply with the applicable provisions of §§ 545.6 to 545.6-13, are hereby approved by the Board:

(a) Homes or combination of homes and business property-(1) Monthly installment loans; flexible payment loans. Subject to the limitations of § 545.6-7, monthly installment loans and flexible payment loans may be made on homes or combination of homes and business property for an amount not in excess of 75 percent of the value thereof, repayable monthly within 30 years or, if an insured or guaranteed loan, within the period acceptable to the insuring or guaranteeing agency: Provided, That when the members of such an association have authorized loans to be made for an amount exceeding 75 percent of the value, such loans may be made up to the percentage of value authorized by the members but not in excess of:

(i) 80 percent of the value, if the loan is not an insured or guaranteed loan;

(ii) The maximum percentage of the value acceptable to the insuring agency, if an insured loan;

(iii) 80 percent of the value, plus the amount guaranteed if a guaranteed loan.

(2) Other installment loans. Loans that such an association may make on a

monthly installment basis may also be made with interest payable at least semiannually and with regular periodic principal installments payable at least annually in an amount sufficient to retire the debt, interest and principal, within 15 years: Provided, That insured or guaranteed loans may be repayable upon such terms as are acceptable to the insuring or guaranteeing agency.

(3) Loans without full amortization. Any loan of a type that such an association may make on a monthly installment basis may also be made without full amortization of principal, but with interest payable at least semiannually, for an amount not in excess of 50 percent of the value of the security and for a term of not more than 5 years: Provided, That except as to loans made pursuant to paragraph (a) (3) (ii) of this section the requirements of this paragraph with respect to semiannual payment of interest and the limitations of this subparagraph with respect to maximum percentage or other amounts and maximums terms of loans shall not be applicable to insured or guaranteed loans: Provided further, That, when the members of such association have authorized loans to be made without full amortization for an amount exceeding 50 percent of the value, such loans may be made up to the percentage of value authorized by the members but not in excess of:

(i) 60 percent of the value and for a term of not more than 3 years;

(ii) 80 percent of the value and for a term of not more than 18 months, if such loan is made for the purpose of facilitating the trade-in or exchange of home or combination of home and business properties: Provided, That, with regard to loans made pursuant to this paragraph (a) (3) (ii), the aggregate amount which such an association may invest in such loans shall not at any time exceed 5 percent of such association's assets; and the term "first liens" includes the assignment of the whole of the beneficial interest in a trust having a corporate trustee whereunder real estate held in the trust can be subjected to the satisfaction of the obligation or obligations secured with the same priority as a first mortgage, a first deed of trust, or a first trust deed in the jurisdiction where the real estate is located.

(4) Loans in excess of 80 percent of value. The limitation of 80 percent set forth in paragraph (a) (1) (i) of this section shall be 90 percent in the case of any

monthly installment loan or flexible payment loan with respect to which the following requirements are met:

(1) The loan is made upon the security of a first lien upon a single-family dwelling; the amount by which such a loan exceeds 80 percent of the value of the improved real estate shall not be disbursed until construction has been completed, and, if such single-family dwelling is being constructed for sale, until the property has been sold and title has been conveyed to a purchaser who has executed an agreement with the association assuming and agreeing to pay the loan;

(ii) The amount of the loan does not exceed the lesser of: (a) $55,000, or $68,750 with respect to single-family dwellings in Alaska, Guam and Hawaii, (b) 90 percent of the value of the real estate securing the loan or (c) 90 percent of the purchase price of such security property;

(iii) The loan contract requires that, in addition to interest and principal payments on the loan, the equivalent of one-twelfth of the estimated annual taxes and assessments on the real estate security be paid monthly in advance to the association;

(iv) The borrower, including a purchaser who assumes the loan, has executed a certification in writing stating (a) that no lien or charge upon such property, other than the lien of the association or liens or charges which will be discharged from the proceeds of the loan, has been given or executed by the borrower or has been contracted or agreed to be so given or executed, and (b) that the borrower is actually occupying the property as the borrower's principal dwelling or that the borrower in good faith intends to do so;

(v) If the loan is sought or assumed for the purpose of enabling a purchaser to acquire the security property, the vendor or vendors have executed a certification in writing stating that no lien or charge upon such property, other than the lien of the association or liens or charges which will be discharged from the proceeds of the loan, has been given or executed to the vendor or vendors by the purchaser or has been contracted or agreed to be so given or executed;

(vi) If the loan is sought or assumed for the purpose of enabling a purchaser to acquire the security property, the purchaser and the vendor or vendors have jointly executed a certification in writing stating the purchase price of the security

property and the items comprising such price;

(vii) The aggregate of the principal amount of any such loan and of the association's investment in the principal amount of all other loans under this paragraph and paragraph (a) (5) of this section (exclusive of loans with respect to which the unpaid principal balance has been reduced to an amount not in excess of 80 percent of the value or purchase price of the real estate, whichever is less, determined at the time the loans were made) does not exceed 30 percent of the association's assets;

(viii) The aggregate of the principal amount of the association's investment in flexible payment loans under this subparagraph and paragraph (a) (5) of this section (exclusive of loans with respect to which the unpaid principal balance has been reduced to an amount not in excess of 80 percent of the value or purchase price of the real estate, whichever is less, determined at the time the loans were made) does not exceed 5 percent of the association's assets, which 5 percent shall be included in the 30 percent of assets limitation set forth in paragraph (a) (4) (vii) of this section; and

(ix) In the case of a loan purchased by a Federal association from other than a Federal association, each certification required by paragraphs (a)(4) (iv), (v), and (vi) of this section shall contain a statement that the certification is made for the purpose of inducing a Federal savings and loan association to purchase the loan.

(5) Loans in excess of 90 percent of value. The limitation of 80 percent set forth in paragraph (a) (1) (i) of paragraph (a)(1) of this section shall be 95 percent in the case of any monthly installment loan or flexible payment loan with respect to which requirements set forth in paragraphs (a) (4) (1), (iii), (iv), (v), (vi), and (ix) of this section are met and with respect to which the following additional requirements are met:

(i) The amount of the loan does not exceed the lesser of (a) $40,000, or $50,000 with respect to single-family dwellings in Alaska, Guam and Hawaii, (b) 95 percent of the value of the real estate securing the loan, or (c) 95 percent of the purchase price of such security property;

(ii) The aggregate of the principal amount of any such loan and of the association's investment in the principal

amount of all other loans made under this subparagraph (exclusive of loans with respect to which the unpaid principal balance has been reduced to an amount not in excess of 90 percent of the value or purchase price of the real estate, whichever is less, determined at the time the loans were made) does not exceed 10 percent of the association's assets:

(iii) The aggregate of the principal amount of any such loan and of the association's investment in the principal amount of all other loans under this paragraph and paragraph (a) (4) of this section (exclusive of loans with respect to which the unpaid principal balance has been reduced to an amount not in excess of 80 percent of the value or purchase price of the real estate, whichever is less, determined at the time the loans were made) does not exceed 30 percent of the association's assets;

(iv) The aggregate of the principal amount of the association's investment in flexible payment loans under this paragraph and paragraph (a) (4) of this section (exclusive of loans with respect to which the unpaid principal balance has been reduced to an amount not in excess of 80 percent of the value or purchase price of the real estate, whichever is less, determined at the time the loans were made) does not exceed 5 percent of the association's assets, which 5 percent shall be included in the 10 percent of assets limitation set forth in paragraph (a) (5) (ii) of this section and in the 30 percent of assets limitation set forth in paragraph (a) (5) (iii) of this section; and

(v) Either

(a) That as long as the unpaid balance of such a loan is in excess of an amount equal to 90 percent of the value or purchase price of the real estate security, whichever is less, determined at the time the loan was made, that portion of the unpaid balance of such loan which is in excess of an amount equal to 80 percent of such value or purchase price of the real estate security is guaranteed or insured by a mortgage insurance company which has been determined to be a "qualified private insurer" by the Federal Home Loan Mortgage Corporation; or

(b) The association establishes and maintains a specific reserve with respect to such loan equal to one percent of the unpaid principal balance thereof until the unpaid principal balance has been reduced to an amount not in excess of 90 percent of the value or purchase price of the real estate security, whichever is less,

determined at the time the loan was made.

(6) Loans to 100 percent of value. The limitation of 80 percent set forth in paragraph (a)(1) (i) of this section shall be 100 percent in the case of any loan other than a flexible payment loan which is made on the security of a home located within the association's regular lending area if at least that portion of such loan which exceeds 80 percent of the value of the security property is insured or guaranteed by an agency or instrumentality of a State whose full faith and credit is pledged to the support of such insurance or guarantee.

(7) Construction loans. If the members of an association have authorized loans on homes or combination of homes and business property to be made without full amortization in excess of 50 percent of the value thereof, such loans may be made for the purpose of construction up to 80 percent of the value thereof and for a term of not more than 18 months and with interest payable at least semiannually without regard to any requirement of this part for amortization of principal prior to the end of the term. Monthly installment loans and flexible payment loans under paragraph (a) (1) of this section, other installment loans under paragraph (a)(2) of this section, loans without full amortization under paragraph (a)(3) of this section, loans in excess of 80 percent of value under paragraph (a) (4) of this section and loans in excess of 90 percent of value under paragraph (a)(5) of this section may each be combined into a single loan with a loan for the purpose of construction meeting the requirements of this paragraph, and the term of the permanent loan shall be considered to begin at the end of the term allowed for construction.

(b) Other dwelling units; combination of dwelling units, including homes, and business property involving only minor or incidental business use-(1) Monthly installment loans. Subject to the limitations of § 545.6-7, installment loans may be made on other dwelling units or combinations of dwelling units, including homes, and business property involving only minor or incidental business use for an amount not in excess of 50 percent (or if authorized by the members of such an association, not in excess of 80 percent) of the value thereof, repayable monthly within 30 years, or, if an insured or guaranteed loan, not in excess of the

maximum percentage of value acceptable to the insuring or guaranteeing agency and repayable within the period acceptable to such agency.

(2) Other installment loans.-(i) Fully-amortized loans. Loans that such an association may make on a monthly installment basis may also be made with interest payable at least semiannually and with regular periodic principal installments payable at least annually in an amount sufficient to retire the debt, interest, and principal, within 15 years: Provided, That insured or guaranteed loans may be repayable upon such terms as are acceptable to the insuring or guaranteeing agency.

(ii) Partially-amortized loans. Partially-amortized monthly installment loans may be made in an amount not in excess of 80 percent of the value of the real estate.

Both monthly installment loans under paragraph (b)(1) of this section and other installment loans under paragraph (b) (2) of this section may be combined into a single loan with a loan for the purpose of construction which meets the requirements of paragraph (b) (3) (ii) of this section, and the term of the monthly installment loan shall be considered to begin at the end of the term allowed for construction.

(3) Loans without full amortization. Any loan of a type that such an association may make on a monthly installment basis may also be made without full amortization of principal, but with interest payable at least semiannually, for an amount not in excess of 50 percent of the value of the security and for a term of not more than 5 years: Provided, That the requirements of this subparagraph with respect to semiannual payment of interest and the limitations of this subparagraph with respect to maximum percentage or other amounts and maximum terms of loans shall not be applicable to insured or guaranteed loans: Provided further, That, when the members of such association have authorized loans to be made without full amortization for an amount exceeding 50 percent of the value, such loans may be made up to the percentage of value authorized by the members but not in excess of:

(i) Sixty percent of the value and for a term of not more than 3 years; and (ii) If such loan is made for the purpose of construction, 80 percent of the value and for a term of not more than

39-057-75-22

36 months without regard to any requirement of this part for amortization of principal prior to the end of the term.

(c) Other improved real estate. Subject to the limitations of § 545.6-7, a Federal association may, if permitted by the term of its charter, make loans on other improved real estate, as defined in paragraph (a) of § 541.12 of this chapter, to the extent authorized by this paragraph (c):

(1) Any monthly installment loan may be made in an amount not exceeding 75 percent, and any loan repayable on any other plan may be made in an amount not exceeding 60 percent, of the value of such real estate, except that the maximum loan-to-value ratios for loans made under §§ 545.6-16 and 545.6-18 shall be the ratios provided in those sections;

(2) Any monthly installment loan shall be repayable in not more than 25 years and any loan repayable on any other plan shall be repayable in not more than 5 years but with interest payable at least semiannually, except that the maximum loan terms for monthly installment loans made under §§ 545.6-16 and 545.618, shall be the terms provided in those sections, and such a monthly installment loan, other than a loan made under $545.6-16 and 545.6-18, may be combined into a single loan with a loan for the purpose of construction which meets the requirements of subparagraph (5) of this paragraph, and the term of the monthly installment loan shall be considered to begin at the end of the term allowed for construction;

(3) Any insured loan may be made in such amount and may be repayable upon such terms and conditions as are acceptable to the insuring agency; and

(4) Any guaranteed loan at least 20 percent of which is guaranteed, and any guaranteed loan which does not exceed the amount that the association may otherwise lend plus the amount guaranteed, may be made and may be repayable upon such terms and conditions as are acceptable to the guaranteeing agency.

(5) A loan made for the purpose of construction may be made in an amount not exceeding 75 percent of the value of such real estate and for a term of not more than 36 months without regard to any requirement of this part for amortization of principal prior to the end of the term but with interest payable at least semiannually.

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