§ 561.4 Trust estate.

The term "trust estate" means the interest of a beneficiary in an irrevocable express trust, whether created by trust instrument or statute, but does not include any interest retained by the settlor.

(Sec. 405, 48 Stat. 1259, as amended; 12 U.S.C. 1728) [32 FR. 10415, July 14, 1967]

§ 561.5 Public unit.

The term "public unit" means the United States, any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, the Virgin Islands, any county, any municipality or any political subdivision thereof.

(Sec. 405, 48 Stat. 1259, as amended; 12 U.S.C. 1728) [32 F.R. 10415, July 14, 1967] § 561.5a Political subdivision.

The term "political subdivision" includes any subdivision of a public unit, as defined in § 561.5, or any principal department of such public unit, (a) the creation of which subdivision or department has been expressly authorized by state statute, (b) to which some functions of government have been delegated by state statute, and (c) to which funds have been allocated by statute or ordinance for its exclusive use and control. It also includes drainage, irrigation, navigation, improvement, levee, sanitary, school or power districts and bridge or port authorities and other special districts created by state statute or compacts between the states. Excluded from the term are subordinate or nonautonomous divisions, agencies or within principal departments. [34 FR. 247, Jan. 8, 1969]

§ 561.5b Independent activity.

boards

The term "independent activity" means any activity other than one directed solely at increasing insurance coverage.

(Sec. 405, 48 Stat. 1259, as amended; 12 U.S.C. 1728) [32 FR. 10415, July 14, 1967] § 561.6 All insured accounts.

The term "all insured accounts" means the aggregate of all insured accounts of $20,000 or under, plus the sum of $20,000 for each insured account of more than $20,000.

[23 FR. 9911, Dec. 23, 1958, as amended at 35 FR. 179, Jan. 6, 1970]

§ 561.7 Principal office.

The term "principal office" means the home office of an institution established as such in conformity with the laws under which the insured institution is organized.

§ 561.8 Without recourse.

The term "without recourse" means, in connection with the sale of a loan or a participation interest in a loan, without any agreement or arrangement under which the purchaser is to be entitled to receive from the seller any sum of money or thing of value, whether tangible or intangible (including any substitution), upon default in payment of any loan or mortgage involved or any part thereof or to withhold or to have withheld from the seller any sum of money or any such thing of value by way of security against any such default. [36 F.R. 10724, June 2, 1971]

The term "premium" means the premium provided for by subsection (b) of section 404 of the National Housing Act, as amended. It does not includes or refer to additional premiums provided for by subsection (c) of said section 404. [38 FR 22956, Aug. 28, 1973]

§ 561.10 Primary Reserve; Secondary Reserve.

The term "Primary Reserve" means the Primary Reserve referred to in subsection (a) of section 404 of the National Housing Act, as amended, and the term "Secondary Reserve" means the Secondary Reserve referred to in said subsection (a).

[27 F.R. 4662, May 17, 1962]

§ 561.11 Savings accounts.

The term "savings accounts" means withdrawable or repurchasable shares, investment certificates, deposits, or savings accounts held by insured members in an institution insured by the Corporation.

[29 F.R. 44, Jan. 3, 1964] § 561.12

Closing date.

The term "closing date" means any annual or semiannual closing date. [29 F.R. 44, Jan. 3, 1964]

§ 561.13 Net worth.

The term "net worth" means the sum of all reserve accounts (except specific or valuation reserves), retained earnings,

capital stock, and any other nonwithdrawable accounts of an insured institution. For purposes of satisfying the annual closing net worth requirement of § 563.13(b) of this subchapter, there may be included as net worth, up to a limit of 20 percent of such net worth requirement, the principal amount of any subordinated debt securities (the amount of which shall be calculated as provided in § 563.8 of this subchapter) issued upon written approval by the Corporation of an application submitted pursuant to § 563.8-1 of this subchapter, as long as the remaining period to maturity (or time of any required sinking fund or other prepayment or reserve allocation, with respect to the amount of such prepayment or reserve) is not less than 1 year. For purposes of satisfying any net worth requirement of the Corporation other than the annual closing net worth requirement of § 563.13(b), there may be included as net worth, to the extent explicitly authorized in writing by the Corporation, the principal amount of any subordinated debt securities issued pursuant to § 563.8-1 or otherwise with the specific prior written approval of the Corporation.

[38 FR 6058, Mar. 6, 1973]

§ 561.14 Adjusted net worth.

The term "adjusted net worth" means net worth less 15 percent of scheduled items in 1964 and less 20 percent of scheduled items thereafter. [29 F.R. 44, Jan. 3, 1964]

§ 561.15 Scheduled items.

The term "scheduled items" means: (a) Slow loans (other than loans specified in paragraph (b) of this section),

(b) 20 percent of slow loans which are insured or guaranteed or which are secured by a first lien on low-rent housing, and 20 percent of guaranteed obligations upon which one or more interest payments due have not been paid,

(c) The total amount invested in real estate owned as a result of foreclosure, or acquired by deed in lieu of foreclosure, and any other real estate owned on which a contract purchaser has defaulted and the contract canceled, other than real state owned pending transfer to an insuring or guaranteeing agency of the U.S. Government.

(d) Loans secured by, and contracts for the sale of, real estate described in paragraph (c) of this section and real estate previously owned or held by an

insured institution for development or investment purposes (other than insured loans, guaranteed loans, or contracts or loans having the benefit of a guaranty by the Federal Savings and Loan Insurance Corporation) during the period that such loans or contracts

(1) have remaining periods to the expiration of their terms in excess of the maximum terms permitted under otherwise applicable lending limitations, or, in the absence of otherwise applicable lending limitations, in excess of 30 years; except that only 20 percent of the unpaid principal balance of any such loan or contract will be included in "scheduled items" if all of the following requirements are met:

(i) The real estate securing the loan or sold under the contract is residential real estate (as defined in paragraph (i) of this section);

(ii) The loan or contract requires equal or substantially equal, regular monthly payments which include both principal and interest, sufficient to amortize the entire debt, principal and interest, within the term of the loan or contract;

(iii) All contractually required payments (including payments for insurance and taxes, whether or not in escrow) have been made for a continuous period of 60 months without a delay of more than 30 days in the making of any one of the last 12 of such payments;

(iv) The loan or contract has a remaining term of not more than 35 years; and

(v) An officer of the insured institution owning such loan or contract and an appraiser who meets the requirements of paragraph (d) of § 563.10 of this subchapter have certified (as of the time such loan or contract last became eligible for this exceptional treatment) to the effect that (a) the real estate securing the loan or sold under the contract has an economic life commensurate with the remaining term of such loan or contract and has a current value in an amount sufficient to protect such insured institution against loss on such loan or contract if the borrower or purchaser ceases to make payments on such loan or contract and (b) the value of the real estate securing the loan or sold under the contract has not decreased during the immediately preceding 3-year period of time and the expected trend is not downward; or

(2) have unpaid principal balances in excess of the maximum amounts permitted under otherwise applicable lending limitations, or, in the absence of otherwise applicable lending limitations, in excess of 90 percent of the value of the real estate securing such loans or sold under such contracts; except that only 20 percent of the unpaid principal balance of any such loan or contract will be included in "scheduled items" if all of the following requirements are met: (i) The real estate securing the loan or sold under the contract is residential real estate (as defined in paragraph (i) of this section);

(ii) The loan or contract requires equal, or substantially equal, regular monthly payments which include both principal and interest, sufficient to amortize the entire debt, principal and interest, within the term of the loan or contract; and

(li) All contractually required payments (including payments for insurance and taxes, whether or not in escrow) have been made for a continuous period of 36 months without a delay of more than 30 days in the making of any one of the last 12 of such payments.

(e) Any investment securities upon which one or more interest payments due have not been paid (other than guaranteed obligations),

(f) Deposits in a bank, loans of Federal funds to a bank, or savings accounts in a savings and loan association, under the control or in the possession of an appropriate supervisory authority, and

(g) Real estate acquired in exchange for any of the scheduled items described above.

(h) Real estate transferred by an insured Institution to a service corporation referred to in § 545.9-1 of this chapter, or to any other corporation in which an insured institution has an investment, to the same extent that it, or the amount invested therein, would be counted as a scheduled item, if it had not been so transferred, under paragraphs (c), (d), and (g) of this section.

(1) As used in this section, the term "residential real estate" means real estate (1) improved by a structure or structures designed primarily for residential use and (2) having at least 80 percent of its total value comprised of the land and improvements attributable to such residential use, but such term shall

not include nursing homes, homes for the aging, and mobile home parks. [30 F.R. 6517, May 12, 1965, as amended at 33 FR. 11261, Aug. 8, 1968; 35 F.R. 7377, May 12, 1970; 36 F.R. 9501, May 26, 1971; 36 F.R. 20360, Oct. 21, 1971; 37 FR. 28892, Dec. 30, 1972; 38 FR 32128, Nov. 21, 1973; 39 FR 6, Jan. 2, 1974; 39 FR 7300, Feb. 26, 1974] § 561.16 Slow loans.

The term "slow loans" means:

(a) Any loan or land contract less than 1 year old which is the equivalent of 60 day (2 months) or more contractually delinquent; or

(b) Any loan or land contract that is from 1 year to 7 years old which is the equivalent of 90 days (3 months) or more contractually delinquent; or

(c) Any loan or land contract more than 7 years old which is the equivalent of 90 days (3 months) or more contractually delinquent unless 10 out of the last 12 contractually required payments have been made; or

(d) Any mortgage loan, deed or trust, or land contract on which taxes on the security are due and unpaid for the equivalent of two or more years; or

(e) Any loan or land contract that has been modified or refinanced within the preceding 12 months while contractually delinquent, except a mortgage loan or land contract (1) more than 2 years old and less than 30 days (1 month) contractually delinquent at the time of the modification or refinancing and not previously modified or refinanced subsequent to January 1, 1964, or (2) modified or refinanced to provide for payment of real estate taxes, other governmental assessments, hazard insurance premiums or water or sewer rent or charges, if provision is made for repayment within the succeeding 12 months of the funds so advanced.

(f) In computing delinquencies for purposes of this section, any loan as to which the insured institution has the benefit of any guaranty by the Federal Savings and Loan Insurance Corporation shall be considered to be current as of the date such guaranty becomes effective with respect to that particular loan and only subsequent delinquencies shall be counted in determining whether the loan is slow.

(g) Any loan or land contract that has been made, extended, or continued beyond the term permitted by applicable lending limitations.

Provided, That any mortgage loan, deed of trust, or land contract on which the total indebtedness is less than 60 percent of the original amount, any loan on which all contractually required payments have been made during the preceding 12 months and any loan on which payments are being deferred pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940, as amended, shall not be considered to be a slow loan under this section.

[29 FR. 7088, May 28, 1964, as amended at 80 FR. 15287, Dec. 10, 1965; 81 PR. 8776, June 24, 1966; 32 FR. 17515, Dec. 7, 1967; 33 F.R. 12961, Sept. 13, 1968]

§ 561.17 Specified assets.

(a) The term "specified assets" means the total assets of an insured institution less the institution's assets which qualify as liquid assets, as defined in paragraph (g) of § 523.10 of this chapter, or would so qualify except for the maturity limitations contained in such paragraph or the pledged status of such assets, other obligations fully guaranteed as to principal and interest by the United States (including such obligations held subject to a repurchase agreement) and accrued interest thereon, obligations of, or participations or other instruments fully guaranteed as to principal and interest by, the Federal Home Loan Mortgage Corporation, Federal Home Loan Bank stock, prepaid Federal Savings and Loan Insurance Corporation premiums, loans secured by obligations referred to in subparagraphs (2) and (3) of paragraph (g) of § 523.10 of this chapter without regard to the maturities of such obligations, loans in process, loans on the security of the institution's savings accounts, investments (other than in capital stock) in other institutions insured by the Federal Savings and Loan Insurance Corporation and in institutions insured by the Federal Deposit Insurance Corporation, and less 80 percent of the institution's actual investments in insured loans, guaranteed loans, loans which are secured by a first lien on low-rent housing, and guaranteed obligations.

(b) In computing specified assets at the close of any semiannual period, any asset which is sold or disposed of in one semiannual period and then repurchased or reacquired in the next semiannual period, or purchased or acquired in one semiannual period and then sold or disposed of in the next semiannual period, shall, unless otherwise authorized by the

Corporation, be computed as if it had not been sold or disposed of, or purchased or acquired, during such initial semiannual period.

(12 U.S.C. 1425a) [29 F.R. 19236, Dec. 31, 1964, as amended at 37 F.R. 524, Jan. 13, 1972] § 561.20 Insured loan.

The term "insured loan” means a loan which is insured in whole or in part, or as to which the mortgagee is insured, in whole or in part, or as to which a commitment for any such insurance has been made under the provisions of the National Housing Act, or the Servicemen's Readjustment Act of 1944, or chapter 37 of title 38, United States Code, as now or hereafter amended. Such term also means an education loan which is insured by the U.S. Commissioner of Education under Part B of Title IV of the Higher Education Act of 1965 or the National Vocational Student Loan Insurance Act of 1965, as now or hereafter amended, or which is insured by a State which has pledged its full faith and credit to such insurance, or which is insured by a State or nonprofit private institution or organization with which the U.S. Commissioner of Education has a guaranty agreement under subsection (c) of section 428 of the Higher Education Act of 1965.

[33 FR. 12960, Sept. 13, 1968]

§ 561.21 Guaranteed loan.

The term "guaranteed loan" means a loan that is guaranteed, including a guarantee to repurchase, in whole or in part, or as to which a commitment to guarantee has been made, under the provisions of any of the following:

(a) The Servicemen's Readjustment Act of 1944 or Chapter 37 of title 38, United States Code;

(b) The New Communities Act of 1968; (c) Section 221 or section 224 of the Foreign Assistance Act of 1961, as in effect prior to December 30, 1969; or

(d) Section 221 or section 222 of the Foreign Assistance Act of 1961, as in effect on December 30, 1969, and thereafter.

[36 F.R. 7126, Apr. 15, 1971]

§ 561.21a Guaranteed obligation.

The term "guaranteed obligation" means an obligation that is guaranteed, in whole or in part, or as to which a commitment to guarantee has been made under the provisions of the New Communities Act of 1968.

[33 F.R. 16555, Nov. 14, 1968]

§ 561.22 Normal lending territory.

(a) Scheduled items not in excess of 4 percent. "Normal lending territory" for an insured institution which, at the close of its most recent semiannual period, had scheduled items (other than assets acquired in a merger instituted for supervisory reasons) not in excess of 4 percent of its specified assets means the territory: (1) Within the State in which such institution's principal office is located; (2) within any portion of a circle with a radius of 100 miles from such institution's principal office which is outside of the State in which such institution's principal office is located; and (3) beyond paragraph (a) (1) and (2) of this section but within which territory the institution was operating on June 27, 1934.

(b) Scheduled items in excess of 4 percent. "Normal lending territory" for an insured institution which, at the close of its most recent semiannual period, had scheduled items (other than assets acquired in a merger instituted for supervisory reasons) in excess of 4 percent of its specified assets means the territory: (1) Within the portion of the State in which the institution's principal office is located which is within a radius of 50 miles from such principal office or from each place of business which has been approved in writing by the institution's appropriate supervisory authority as a branch office, agency office, or similar place of business for such institution; (2) within any portion of a circle with a radius of 50 miles from such institution's principal office which is outside of the State in which such institution's principal office is located; and (3) beyond 50 miles from such institution's principal office but within which territory the institution was operating on June 27, 1934.

(c) Definitions. For the purpose of this section, the term "State" includes the District of Columbia, the Commonwealth of Puerto Rico, and the possessions of the United States; and a county, parish, or similar political subdivision of a State is the unit of "territory" in which the institution was operating on June 27, 1934. [38 FR 26712, Sept. 25, 1973]

§ 561.23 Low-rent housing.

The term "low-rent housing" means real estate which is, or which is being constructed, remodeled, rehabilitated, modernized, or renovated to be, the subject of an annual contributions contract for low-rent housing under the provi

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An "affiliate" of an insured institution, unless otherwise defined, includes any corporation, business trust, association or other similar organization—

(a) of which an insured institution, directly or indirectly, owns or controls either a majority of the voting shares or more than 50 per centum of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar functions; or

(b) of which control is held, directly or indirectly through stock ownership or in any other manner, by the shareholders of an insured institution who own or control either a majority of the shares of such insured institution or more than 50 per centum of the number of shares voted for the election of directors of such insured institution at the preceding election, or by trustees for the benefit of the shareholders of any such insured institution; or

(c) of which a majority of its directors, trustees, or other persons exercising similar functions are directors of any one insured institution.

[38 FR 26110, Sept. 18, 1973; 38 FR 29569, Oct. 26, 1973]

§ 561.26 Service corporation.

A "service corporation" is any corporation, the majority of the capital stock of which is owned by one or more insured institutions and which engages, directly or indirectly, in any activities similar to activities which may be engaged in by a service corporation in which a Federal savings and loan association may invest under § 545.9-1 of this chapter.

[38 FR 26110, Sept. 18, 1973; 38 FR 29569, Oct. 26, 1973]