PRIOR PRINTER'S NOS. 917, 1276 PRINTER'S NO. 1320
No. 826 Session of 1979
INTRODUCED BY MESSINGER, KUSSE, SCHAEFER, SCANLON, LYNCH,
ANDREWS, HANKINS, ROMANELLI AND FUMO, JUNE 18, 1979
AS AMENDED ON SECOND CONSIDERATION, NOVEMBER 13, 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. Subsection (e) of section 505, act of November
3 30, 1965 (P.L.847, No.356), known as the "Banking Code of 1965,"
4 amended September 27, 1973 (P.L.251, No.72), is amended and a
5 subsection is added to read:
6 Section 505. Real Estate Loans
7 * * *
8 (e) Excepted loans--The restrictions and requirements of this
9 section shall not apply to:
10 (i) [a loan secured by a lien on a dwelling for not more
11 than four families, guaranteed at least to the extent of
12 twenty percent thereof, or for which a written commitment for
13 such guarantee has been issued, by the Veterans
14 Administration pursuant to the Veterans' Benefits Act,] a
15 loan secured by a lien on a dwelling for not more than four
16 families, in which the total of the borrowers equity and any
17 guarantee or written commitment for such guarantee issued by
18 the Veterans Administration pursuant to the Veterans'
19 Benefits Act, equals twenty percent or more of the principal
20 amount of the loan,
21 (ii) a loan secured by a lien on business property,
22 [guaranteed at least to the extent of one-third thereof, or
23 for which a] in which the total of the borrowers equity and
24 any guarantee or written commitment for such guarantee [has
25 been] issued by the Veterans Administration pursuant to the
26 Veterans' Benefits Act equals one-third or more of the
27 principal amount of the loan,
28 (iii) a loan insured, or for which a written commitment
29 to insure has been issued, pursuant to national housing
30 legislation, or a loan for repair, alteration or improvement
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1 of real estate made pursuant to section 506(a)(ii),
2 (iv) a loan insured, or for which a written commitment to
3 insure has been issued, by the Farmers Home Administration
4 pursuant to the Consolidated Farmers Home Administration Act,
5 (v) an investment security, or
6 (vi) a loan which the savings bank is authorized to make
7 and in connection with which it takes a real estate lien as
8 security in the exercise of prudence but as to which it is
9 relying for repayment on:
10 (A) the general credit of the obligor or of an
11 installment buyer or of a lessee of the real estate,
12 (B) collateral other than the real estate lien,
13 (C) a guaranty, or an agreement to take over or
14 purchase the loan in the event of default, by a
15 financially responsible person other than a person
16 engaged in the business of guaranteeing real estate
17 loans, or
18 (D) an agreement by a financially responsible person
19 to take over or purchase the loan, or to provide funds
20 for payment thereof, within a period of five years from
21 the date of the loan
22 and there is a certificate of reliance setting forth the
23 applicable facts.
24 (f) Maximum rates--Loans including variable interest rate
25 loans may be made at rates of interest as authorized by the act
26 of January 30, 1974 (P.L.13, No.6), referred to as the Loan
27 Interest and Protection Law, or any other statute or at a
28 maximum rate of interest not in excess of the maximum lawful
29 interest rate permitted to be charged by a National Bank located
30 in Pennsylvania under 12 U.S.C. § 85.
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1 Section 2. Subsection (a) of section 506 of the act, amended
2 September 27, 1973 (P.L.251, No.72), is amended to read:
3 Section 506. Lending Powers; Direct Leasing of Personal
4 Property
5 (a) A savings bank may:
6 (i) make loans for a period not in excess of ninety days
7 on the collateral security of property in which the savings
8 bank is authorized to invest, in an amount which shall not at
9 any time exceed ninety percent of the market value of the
10 collateral;
11 (ii) make loans for repair, alteration or improvement of
12 real estate or for the purpose of mobile home financing
13 [which are insured, or for which a written commitment to
14 insure has been issued, pursuant to national housing
15 legislation, subject to a limitation for the aggregate amount
16 of such loans of five percent of the total assets of the
17 savings bank;] without the necessity for mortgage security,
18 subject to the following provisions:
19 (A) when such loans are insured or are the subject of
20 a written commitment to insure pursuant to national
21 housing legislation, they may be granted in such amounts
22 and upon such terms as are permitted by such legislation
23 or regulations issued thereunder,
24 (B) when any such loan is not insured under national
25 housing legislation, the principal amount thereof shall
26 not exceed the amount authorized under Title I of the
27 National Housing Act and the loan shall be evidenced by a
28 note or other written evidence of debt requiring
29 repayment in regular monthly installments over a period
30 not exceeding that authorized under Title I of the
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1 National Housing Act. The note or other written evidence
2 of debt may contain a provision that if the borrower
3 shall sell the premises or assign his leasehold interest
4 therein or remove therefrom any improvements described in
5 the security agreement the entire balance remaining due
6 on the loan shall immediately become due and payable. The
7 annual interest rate for loans made under this subsection
8 shall not exceed the sum of the authorized interest rate
9 for loans insured under Title I of the National Housing
10 Act plus the annual rate for insurance on loans insured
11 under Title I of the National Housing Act or creditor
12 insurance applied to the loan. In addition to the
13 interest herein authorized a savings bank may make the
14 following charges in connection with said loan:
15 (1) premiums for insurance obtained in connection
16 with the loan, but not including any charge for
17 creditor insurance, if any, on such loan,
18 (2) a single delinquency charge for each
19 installment in arrears for a period of more than
20 fifteen days other than by reason of acceleration or
21 by reason of delinquency on a prior installment in an
22 amount not to exceed the lesser of five dollars ($5)
23 or five percent of the amount of the installment,
24 (3) a charge for an extension in an amount not to
25 exceed two percent of the unpaid balance of the loan.
26 Said charge may be imposed only one time during the
27 life of the loan,
28 (4) fees paid for filing documents in public
29 offices in connection with said loan, and
30 (5) actual expenditures, including reasonable
19790S0826B1320 - 5 -
1 attorneys' fees, for proceedings to collect the
2 loans,
3 (C) the aggregate amount of all such loans held by
4 any one savings bank at one time with or without
5 insurance under national housing legislation shall not
6 exceed twenty percent of its total assets. Any such loan
7 made without such insurance shall also conform to rules
8 and regulations which may be prescribed from time to time
9 by the department,
10 (D) a loan is authorized under subsection (a)(ii)(B)
11 only if the savings bank retains in its files written
12 evidence that the loan is not made for items declared <--
13 ineligible for financing by the Secretary of Housing and
14 Urban Development pursuant to OF THE TYPE THAT WOULD BE <--
15 INSURABLE UNDER Title I of the National Housing Act. Such
16 written evidence shall be retained in the files of the
17 savings bank while the loan is outstanding and for a
18 period of one year thereafter;
19 (iii) notwithstanding different provisions of any other
20 law, make loans secured by at least an equal amount of
21 deposits of the borrower in the savings bank [or] at a rate
22 of interest not less than the rate of interest paid by the
23 savings bank on said deposits, and the rate of interest
24 charged on such loans shall not be more than two percent
25 higher than the rate of interest paid by the savings bank, on
26 said deposits or make loans secured by at least an equal
27 amount of cash surrender value of life insurance;
28 (iv) make loans to borrowers who are engaged in
29 commercial, industrial or financial enterprises or who are
30 nonprofit corporations or associations for terms not less
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1 than ten years--subject to the prudent man rule of section
2 504(c) of this act; and
3 (v) enter into transactions with a member or nonmember
4 bank for the purpose of selling reserve balances of the
5 savings bank to such banks without limitation
6 but may not lend money or discount or purchase evidences of
7 indebtedness or agreements for the payment of money except as
8 provided in sections 504 and 505 and in this subsection (a).
9 * * *
10 Section 3. Subsection (b) of section 511 of the act, is
11 amended to read:
12 Section 511. Borrowings and Subordinated Securities
13 * * *
14 (b) Notes, debentures and other obligations issued by a
15 savings bank shall be deemed "subordinated securities" for the
16 purpose of this act if they:
17 (i) are subordinated in right of payment, in the event of
18 insolvency or liquidation of the savings bank, to the prior
19 payment of all deposits of the savings bank and of all claims
20 of other creditors of the savings bank except the holders of
21 securities on a parity therewith and the holders of
22 securities expressly subordinated thereto,
23 (ii) are authorized by action of at least a majority of
24 all the trustees of the savings bank,
25 (iii) contain provisions for amortization, serial
26 maturities, transfers to a sinking fund, allocation of
27 reserves or such other provisions [sufficient to pay or to
28 have paid at maturity all amounts due thereon] as the
29 department may require, and
30 (iv) are approved by the department prior to the issue
19790S0826B1320 - 7 -
1 thereof.
2 Section 4. This act shall take effect immediately.
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