PRIOR PRINTER'S NO. 917 PRINTER'S NO. 1276
No. 826 Session of 1979
INTRODUCED BY MESSINGER, KUSSE, SCHAEFER, SCANLON, LYNCH,
ANDREWS, HANKINS, ROMANELLI AND FUMO, JUNE 18, 1979
SENATOR MESSINGER, BUSINESS AND COMMERCE, AS AMENDED,
OCTOBER 29, 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 WITH RESPECT TO AMENDMENTS CONTAINED HEREIN TO SECTION 506, <--
19 THE GENERAL ASSEMBLY RECOGNIZES AN INCREASING PUBLIC DEMAND AND
20 COMMUNITY NEED FOR LOANS FOR THE PURPOSE OF REPAIR, ALTERATION
21 AND IMPROVEMENT OF RESIDENTIAL PROPERTIES AND THEREFORE INTENDS
22 TO INCREASE THE AVAILABILITY OF SUCH LOANS TO A GREATER SEGMENT
23 OF THE PUBLIC BY SUPPLEMENTING AND EXPANDING EXISTING HOME
24 IMPROVEMENT LENDING OPTIONS.
25 The General Assembly of the Commonwealth of Pennsylvania
1 hereby enacts as follows:
2 Section 1. Subsections (d) and SUBSECTION (e) of section <--
3 505, act of November 30, 1965 (P.L.847, No.356), known as the
4 "Banking Code of 1965," subsection (d) amended November 27, 1968 <--
5 (P.L.1104, No.345), and subsection (e) amended September 27,
6 1973 (P.L.251, No.72), are IS amended and a subsection is added <--
7 to read:
8 Section 505. Real Estate Loans
9 * * *
10 (d) Requirements in connection with loans--The requirements <--
11 for a loan subject to this section shall be:
12 (i) the loan shall be evidenced by a bond, note or other
13 obligation and the lien securing such loan shall be obtained
14 by a mortgage, deed of trust or judgment;
15 (ii) the lien shall be a first lien (except for a lien of
16 taxes, assessments or charges which are not yet due or which
17 are payable without penalty) unless all prior liens are held
18 by the savings bank and the aggregate of all loans by the
19 savings bank secured by liens on the real estate satisfy all
20 other requirements of this section pertaining to such loans;
21 (iii) the value of the real estate shall be determined by
22 an appraisal signed by two reputable persons who shall:
23 (A) be trustees of the savings bank or selected in a
24 manner authorized by the trustees,
25 (B) be familiar with real estate values in the
26 vicinity where the real estate is located, and
27 (C) inspect the real estate and state its value to
28 the best of their judgment in a written report which must
29 be preserved in the records of the savings bank. In the
30 event the appraisers arrive at different conclusions as
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1 to the value of the real estate, it shall be permissible
2 to use the average of their two appraisals to determine
3 the value of the real estate: Provided, however, That
4 each valuation is stated in the report, or in the
5 alternative,
6 (D) the value of the real estate shall be determined
7 by a real estate appraiser qualified in the state where
8 the real estate is located who shall inspect the real
9 estate and state its value to the best of his judgment in
10 a written report signed by him which must be preserved in
11 the records of the institution.
12 (iv) insurance against loss from fire on all buildings on
13 the real estate which are included in the appraised value,
14 issued by insurers acceptable to the savings bank and
15 authorized to do business where the real estate is located
16 and in form and amount satisfactory to the savings bank,
17 shall be maintained during the term of the loan by or at the
18 expense of the borrower, except that the savings bank may at
19 its own expense maintain such insurance covering only its
20 interest as lender; and
21 (v) the borrower shall pay all expenses in connection
22 with the loan for title insurance, searches and certificates,
23 appraisal fees and fees for preparation and recording of
24 documents.
25 (e) Excepted loans--The restrictions and requirements of this
26 section shall not apply to:
27 (i) [a loan secured by a lien on a dwelling for not more
28 than four families, guaranteed at least to the extent of
29 twenty percent thereof, or for which a written commitment for
30 such guarantee has been issued, by the Veterans
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1 Administration pursuant to the Veterans' Benefits Act,] a
2 loan secured by a lien on a dwelling for not more than four
3 families, in which the total of the borrowers equity and any
4 guarantee or written commitment for such guarantee issued by
5 the Veterans Administration pursuant to the Veterans' Benefit
6 Act, equals twenty percent or more of the principal amount of
7 the loan,
8 (ii) a loan secured by a lien on business property,
9 [guaranteed at least to the extent of one-third thereof, or
10 for which a] in which the total of the borrowers equity and
11 any guarantee or written commitment for such guarantee [has
12 been] issued by the Veterans Administration pursuant to the
13 Veterans' Benefits Act equals one-third or more of the
14 principal amount of the loan,
15 (iii) a loan insured, or for which a written commitment
16 to insure has been issued, pursuant to national housing
17 legislation, or a loan for repair, alteration or improvement
18 of real estate made pursuant to section 506(a)(ii),
19 (iv) a loan insured, or for which a written commitment to
20 insure has been issued, by the Farmers Home Administration
21 pursuant to the Consolidated Farmers Home Administration Act,
22 (v) an investment security, or
23 (vi) a loan which the savings bank is authorized to make
24 and in connection with which it takes a real estate lien as
25 security in the exercise of prudence but as to which it is
26 relying for repayment on:
27 (A) the general credit of the obligor or of an
28 installment buyer or of a lessee of the real estate,
29 (B) collateral other than the real estate lien,
30 (C) a guaranty, or an agreement to take over or
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1 purchase the loan in the event of default, by a
2 financially responsible person other than a person
3 engaged in the business of guaranteeing real estate
4 loans, or
5 (D) an agreement by a financially responsible person
6 to take over or purchase the loan, or to provide funds
7 for payment thereof, within a period of five years from
8 the date of the loan
9 and there is a certificate of reliance setting forth the
10 applicable facts.
11 (F) MAXIMUM RATES.--LOANS INCLUDING VARIABLE INTEREST RATE <--
12 LOANS MAY BE MADE AT RATES OF INTEREST AS AUTHORIZED BY THE ACT
13 OF JANUARY 30, 1974 (P.L.13, NO.6), REFERRED TO AS THE LOAN
14 INTEREST AND PROTECTION LAW, OR ANY OTHER STATUTE OR AT A
15 MAXIMUM RATE OF INTEREST NOT IN EXCESS OF THE MAXIMUM LAWFUL
16 INTEREST RATE PERMITTED TO BE CHARGED BY A NATIONAL BANK LOCATED
17 IN PENNSYLVANIA UNDER 12 U.S.C. § 85.
18 Section 2. Subsection (a) of section 506 of the act, amended
19 September 27, 1973 (P.L.251, No.72), is amended to read:
20 Section 506. Lending Powers; Direct Leasing of Personal
21 Property
22 (a) A savings bank may:
23 (i) make loans for a period not in excess of ninety days
24 on the collateral security of property in which the savings
25 bank is authorized to invest, in an amount which shall not at
26 any time exceed ninety percent of the market value of the
27 collateral;
28 (ii) make loans for repair, alteration or improvement of
29 real estate or for the purpose of mobile home financing
30 [which are insured, or for which a written commitment to
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1 insure has been issued, pursuant to national housing
2 legislation, subject to a limitation for the aggregate amount
3 of such loans of five percent of the total assets of the
4 savings bank;] without the necessity for mortgage security,
5 subject to the following provisions:
6 (A) when such loans are insured or are the subject
7 of a written commitment to insure pursuant to national
8 housing legislation, they may be granted in such amounts
9 and upon such terms as are permitted by such legislation
10 or regulations issued thereunder,
11 (B) when any such loan is not insured under national
12 housing legislation, the principal amount thereof shall
13 not exceed fifteen thousand dollars ($15,000) THE AMOUNT <--
14 AUTHORIZED UNDER TITLE I OF THE NATIONAL HOUSING ACT and
15 the loan shall be evidenced by a note or other written
16 evidence of debt requiring repayment in regular monthly
17 installments over a period not exceeding fifteen years <--
18 and thirty-two days THAT AUTHORIZED UNDER TITLE I OF THE <--
19 NATIONAL HOUSING ACT. The note or other written evidence
20 of debt may contain a provision that if the borrower
21 shall sell the premises or assign his leasehold interest
22 therein or remove therefrom any improvements described in
23 the security agreement the entire balance remaining due
24 on the loan shall immediately become due and payable. The
25 maximum ANNUAL interest rate for loans made under this <--
26 subsection shall be the authorized interest rate for <--
27 SUBSECTION SHALL NOT EXCEED THE SUM OF THE AUTHORIZED <--
28 INTEREST RATE FOR LOANS INSURED UNDER TITLE I OF THE
29 NATIONAL HOUSING ACT PLUS THE ANNUAL RATE FOR INSURANCE
30 ON loans insured under Title I of the National Housing
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1 Act OR CREDITOR INSURANCE APPLIED TO THE LOAN. In <--
2 addition to the interest herein authorized a savings bank
3 may make the following charges in connection with said
4 loan:
5 (1) premiums for insurance obtained in
6 connection with the loan, BUT NOT INCLUDING ANY <--
7 CHARGE FOR CREDITOR INSURANCE, IF ANY, ON SUCH LOAN,
8 (2) a single delinquency charge for each
9 installment in arrears for a period of more than
10 fifteen days other than by reason of acceleration or
11 by reason of delinquency on a prior installment in an
12 amount not to exceed the lesser of five dollars ($5)
13 or five percent of the amount of the installment,
14 (3) a charge for an extension in an amount not
15 to exceed two percent of the unpaid balance of the
16 loan. Said charge may be imposed only one time during
17 the life of the loan,
18 (4) fees paid for filing documents in public
19 offices in connection with said loan, and
20 (5) actual expenditures, including reasonable
21 attorneys' fees, for proceedings to collect the
22 loans,
23 (C) the aggregate amount of all such loans held by
24 any one savings bank at one time with or without
25 insurance under national housing legislation shall not
26 exceed twenty percent of its total assets. Any such loan
27 made without such insurance shall also conform to rules
28 and regulations which may be prescribed from time to time
29 by the department,
30 (D) a loan is authorized under subsection (a)(ii)(B)
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1 only if the savings bank retains in its files written
2 evidence that the loan is not made for items declared
3 ineligible for financing by the Secretary of Housing and
4 Urban Development pursuant to Title I of the National
5 Housing Act. Such written evidence shall be retained in
6 the files of the savings bank while the loan is
7 outstanding and for a period of one year thereafter;
8 (iii) notwithstanding different provisions of any other
9 law, make loans secured by at least an equal amount of
10 deposits of the borrower in the savings bank [or] at a rate
11 of interest not less than the rate of interest paid by the
12 savings bank on said deposits, and the rate of interest
13 charged on such loans shall not be more than two percent
14 higher than the rate of interest paid by the savings bank, on
15 said deposits or make loans secured by at least an equal
16 amount of cash surrender value of life insurance;
17 (iv) make loans to borrowers who are engaged in
18 commercial, industrial or financial enterprises or who are
19 nonprofit corporations or associations for terms not less
20 than ten years--subject to the prudent man rule of section
21 504(c) of this act; and
22 (v) enter into transactions with a member or nonmember
23 bank for the purpose of selling reserve balances of the
24 savings bank to such banks without limitation
25 but may not lend money or discount or purchase evidences of
26 indebtedness or agreements for the payment of money except as
27 provided in sections 504 and 505 and in this subsection (a).
28 * * *
29 Section 3. Subsection (b) of section 511 of the act, is
30 amended to read:
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1 Section 511. Borrowings and Subordinated Securities
2 * * *
3 (b) Notes, debentures and other obligations issued by a
4 savings bank shall be deemed "subordinated securities" for the
5 purpose of this act if they:
6 (i) are subordinated in right of payment, in the event of
7 insolvency or liquidation of the savings bank, to the prior
8 payment of all deposits of the savings bank and of all claims
9 of other creditors of the savings bank except the holders of
10 securities on a parity therewith and the holders of
11 securities expressly subordinated thereto,
12 (ii) are authorized by action of at least a majority of
13 all the trustees of the savings bank,
14 (iii) contain provisions for amortization, serial
15 maturities, transfers to a sinking fund, allocation of
16 reserves or such other provisions [sufficient to pay or to
17 have paid at maturity all amounts due thereon] as the
18 department may require, and
19 (iv) are approved by the department prior to the issue
20 thereof.
21 Section 4. This act shall take effect immediately.
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