PRINTER'S NO. 917
No. 826 Session of 1979
INTRODUCED BY MESSINGER, KUSSE, SCHAEFER, SCANLON, LYNCH,
ANDREWS, HANKINS, ROMANELLI AND FUMO, JUNE 18, 1979
REFERRED TO BUSINESS AND COMMERCE, JUNE 18, 1979
AN ACT
1 Amending the act of November 30, 1965 (P.L.847, No.356),
2 entitled "An act relating to and regulating the business of
3 banking and the exercise by corporations of fiduciary powers;
4 affecting persons engaged in the business of banking and
5 corporations exercising fiduciary powers and affiliates of
6 such persons; affecting the shareholders of such persons and
7 the directors, trustees, officers, attorneys and employes of
8 such persons and of the affiliates of such persons; affecting
9 national banks located in the Commonwealth; affecting persons
10 dealing with persons engaged in the business of banking,
11 corporations exercising fiduciary powers and national banks;
12 conferring powers and imposing duties on the Banking Board,
13 on certain departments and officers of the Commonwealth and
14 on courts, prothonotaries, clerks and recorders of deeds;
15 providing penalties; and repealing certain acts and parts of
16 acts," further providing for real estate loans, mobile home
17 financing and subordinated securities.
18 The General Assembly of the Commonwealth of Pennsylvania
19 hereby enacts as follows:
20 Section 1. Subsections (d) and (e) of section 505, act of
21 November 30, 1965 (P.L.847, No.356), known as the "Banking Code
22 of 1965," subsection (d) amended November 27, 1968 (P.L.1104,
23 No.345), and subsection (e) amended September 27, 1973 (P.L.251,
24 No.72), are amended to read:
25 Section 505. Real Estate Loans
1 * * *
2 (d) Requirements in connection with loans--The requirements
3 for a loan subject to this section shall be:
4 (i) the loan shall be evidenced by a bond, note or other
5 obligation and the lien securing such loan shall be obtained
6 by a mortgage, deed of trust or judgment;
7 (ii) the lien shall be a first lien (except for a lien of
8 taxes, assessments or charges which are not yet due or which
9 are payable without penalty) unless all prior liens are held
10 by the savings bank and the aggregate of all loans by the
11 savings bank secured by liens on the real estate satisfy all
12 other requirements of this section pertaining to such loans;
13 (iii) the value of the real estate shall be determined by
14 an appraisal signed by two reputable persons who shall:
15 (A) be trustees of the savings bank or selected in a
16 manner authorized by the trustees,
17 (B) be familiar with real estate values in the
18 vicinity where the real estate is located, and
19 (C) inspect the real estate and state its value to
20 the best of their judgment in a written report which must
21 be preserved in the records of the savings bank. In the
22 event the appraisers arrive at different conclusions as
23 to the value of the real estate, it shall be permissible
24 to use the average of their two appraisals to determine
25 the value of the real estate: Provided, however, That
26 each valuation is stated in the report, or in the
27 alternative,
28 (D) the value of the real estate shall be determined
29 by a real estate appraiser qualified in the state where
30 the real estate is located who shall inspect the real
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1 estate and state its value to the best of his judgment in
2 a written report signed by him which must be preserved in
3 the records of the institution.
4 (iv) insurance against loss from fire on all buildings on
5 the real estate which are included in the appraised value,
6 issued by insurers acceptable to the savings bank and
7 authorized to do business where the real estate is located
8 and in form and amount satisfactory to the savings bank,
9 shall be maintained during the term of the loan by or at the
10 expense of the borrower, except that the savings bank may at
11 its own expense maintain such insurance covering only its
12 interest as lender; and
13 (v) the borrower shall pay all expenses in connection
14 with the loan for title insurance, searches and certificates,
15 appraisal fees and fees for preparation and recording of
16 documents.
17 (e) Excepted loans--The restrictions and requirements of this
18 section shall not apply to:
19 (i) [a loan secured by a lien on a dwelling for not more
20 than four families, guaranteed at least to the extent of
21 twenty percent thereof, or for which a written commitment for
22 such guarantee has been issued, by the Veterans
23 Administration pursuant to the Veterans' Benefits Act,] a
24 loan secured by a lien on a dwelling for not more than four
25 families, in which the total of the borrowers equity and any
26 guarantee or written commitment for such guarantee issued by
27 the Veterans Administration pursuant to the Veterans' Benefit
28 Act, equals twenty percent or more of the principal amount of
29 the loan,
30 (ii) a loan secured by a lien on business property,
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1 [guaranteed at least to the extent of one-third thereof, or
2 for which a] in which the total of the borrowers equity and
3 any guarantee or written commitment for such guarantee [has
4 been] issued by the Veterans Administration pursuant to the
5 Veterans' Benefits Act equals one-third or more of the
6 principal amount of the loan,
7 (iii) a loan insured, or for which a written commitment
8 to insure has been issued, pursuant to national housing
9 legislation, or a loan for repair, alteration or improvement
10 of real estate made pursuant to section 506(a)(ii),
11 (iv) a loan insured, or for which a written commitment to
12 insure has been issued, by the Farmers Home Administration
13 pursuant to the Consolidated Farmers Home Administration Act,
14 (v) an investment security, or
15 (vi) a loan which the savings bank is authorized to make
16 and in connection with which it takes a real estate lien as
17 security in the exercise of prudence but as to which it is
18 relying for repayment on:
19 (A) the general credit of the obligor or of an
20 installment buyer or of a lessee of the real estate,
21 (B) collateral other than the real estate lien,
22 (C) a guaranty, or an agreement to take over or
23 purchase the loan in the event of default, by a
24 financially responsible person other than a person
25 engaged in the business of guaranteeing real estate
26 loans, or
27 (D) an agreement by a financially responsible person
28 to take over or purchase the loan, or to provide funds
29 for payment thereof, within a period of five years from
30 the date of the loan
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1 and there is a certificate of reliance setting forth the
2 applicable facts.
3 Section 2. Subsection (a) of section 506 of the act, amended
4 September 27, 1973 (P.L.251, No.72), is amended to read:
5 Section 506. Lending Powers; Direct Leasing of Personal
6 Property
7 (a) A savings bank may:
8 (i) make loans for a period not in excess of ninety days
9 on the collateral security of property in which the savings
10 bank is authorized to invest, in an amount which shall not at
11 any time exceed ninety percent of the market value of the
12 collateral;
13 (ii) make loans for repair, alteration or improvement of
14 real estate or for the purpose of mobile home financing
15 [which are insured, or for which a written commitment to
16 insure has been issued, pursuant to national housing
17 legislation, subject to a limitation for the aggregate amount
18 of such loans of five percent of the total assets of the
19 savings bank;] without the necessity for mortgage security,
20 subject to the following provisions:
21 (A) when such loans are insured or are the subject
22 of a written commitment to insure pursuant to national
23 housing legislation, they may be granted in such amounts
24 and upon such terms as are permitted by such legislation
25 or regulations issued thereunder,
26 (B) when any such loan is not insured under national
27 housing legislation, the principal amount thereof shall
28 not exceed fifteen thousand dollars ($15,000) and the
29 loan shall be evidenced by a note or other written
30 evidence of debt requiring repayment in regular monthly
19790S0826B0917 - 5 -
1 installments over a period not exceeding fifteen years
2 and thirty-two days. The note or other written evidence
3 of debt may contain a provision that if the borrower
4 shall sell the premises or assign his leasehold interest
5 therein or remove therefrom any improvements described in
6 the security agreement the entire balance remaining due
7 on the loan shall immediately become due and payable. The
8 maximum interest rate for loans made under this
9 subsection shall be the authorized interest rate for
10 loans insured under Title I of the National Housing Act.
11 In addition to the interest herein authorized a savings
12 bank may make the following charges in connection with
13 said loan:
14 (1) premiums for insurance obtained in
15 connection with the loan,
16 (2) a single delinquency charge for each
17 installment in arrears for a period of more than
18 fifteen days other than by reason of acceleration or
19 by reason of delinquency on a prior installment in an
20 amount not to exceed the lesser of five dollars ($5)
21 or five percent of the amount of the installment,
22 (3) a charge for an extension in an amount not
23 to exceed two percent of the unpaid balance of the
24 loan. Said charge may be imposed only one time during
25 the life of the loan,
26 (4) fees paid for filing documents in public
27 offices in connection with said loan, and
28 (5) actual expenditures, including reasonable
29 attorneys' fees, for proceedings to collect the
30 loans,
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1 (C) the aggregate amount of all such loans held by
2 any one savings bank at one time with or without
3 insurance under national housing legislation shall not
4 exceed twenty percent of its total assets. Any such loan
5 made without such insurance shall also conform to rules
6 and regulations which may be prescribed from time to time
7 by the department,
8 (D) a loan is authorized under subsection (a)(ii)(B)
9 only if the savings bank retains in its files written
10 evidence that the loan is not made for items declared
11 ineligible for financing by the Secretary of Housing and
12 Urban Development pursuant to Title I of the National
13 Housing Act. Such written evidence shall be retained in
14 the files of the savings bank while the loan is
15 outstanding and for a period of one year thereafter;
16 (iii) notwithstanding different provisions of any other
17 law, make loans secured by at least an equal amount of
18 deposits of the borrower in the savings bank [or] at a rate
19 of interest not less than the rate of interest paid by the
20 savings bank on said deposits, and the rate of interest
21 charged on such loans shall not be more than two percent
22 higher than the rate of interest paid by the savings bank, on
23 said deposits or make loans secured by at least an equal
24 amount of cash surrender value of life insurance;
25 (iv) make loans to borrowers who are engaged in
26 commercial, industrial or financial enterprises or who are
27 nonprofit corporations or associations for terms not less
28 than ten years--subject to the prudent man rule of section
29 504(c) of this act; and
30 (v) enter into transactions with a member or nonmember
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1 bank for the purpose of selling reserve balances of the
2 savings bank to such banks without limitation
3 but may not lend money or discount or purchase evidences of
4 indebtedness or agreements for the payment of money except as
5 provided in sections 504 and 505 and in this subsection (a).
6 * * *
7 Section 3. Subsection (b) of section 511 of the act, is
8 amended to read:
9 Section 511. Borrowings and Subordinated Securities
10 * * *
11 (b) Notes, debentures and other obligations issued by a
12 savings bank shall be deemed "subordinated securities" for the
13 purpose of this act if they:
14 (i) are subordinated in right of payment, in the event of
15 insolvency or liquidation of the savings bank, to the prior
16 payment of all deposits of the savings bank and of all claims
17 of other creditors of the savings bank except the holders of
18 securities on a parity therewith and the holders of
19 securities expressly subordinated thereto,
20 (ii) are authorized by action of at least a majority of
21 all the trustees of the savings bank,
22 (iii) contain provisions for amortization, serial
23 maturities, transfers to a sinking fund, allocation of
24 reserves or such other provisions [sufficient to pay or to
25 have paid at maturity all amounts due thereon] as the
26 department may require, and
27 (iv) are approved by the department prior to the issue
28 thereof.
29 Section 4. This act shall take effect immediately.
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