§ 43.14 Definitions applicable to qualifying commercial loans, qualifying commercial real estate loans, and qualifying automobile loans. The following definitions apply for purposes of §§ 43.15 through 43.18: *Appraisal Standards Board* means the board of the Appraisal Foundation that develops, interprets, and amends the Uniform Standards of Professional Appraisal Practice (USPAP), establishing generally accepted standards for the appraisal profession.
*Automobile loan:* ( 1 ) Means any loan to an individual to finance the purchase of, and that is secured by a first lien on, a passenger car or other passenger vehicle, such as a minivan, van, sport-utility vehicle, pickup truck, or similar light truck for personal, family, or household use; and
( 2 ) Does not include any: ( i ) Loan to finance fleet sales;
( ii ) Personal cash loan secured by a previously purchased automobile;
( iii ) Loan to finance the purchase of a commercial vehicle or farm equipment that is not used for personal, family, or household purposes;
( iv ) Lease financing;
( v ) Loan to finance the purchase of a vehicle with a salvage title; or
( vi ) Loan to finance the purchase of a vehicle intended to be used for scrap or parts.
*Combined loan-to-value (CLTV) ratio* means, at the time of origination, the sum of the principal balance of a first-lien mortgage loan on the property, plus the principal balance of any junior-lien mortgage loan that, to the creditor's knowledge, would exist at the closing of the transaction and that is secured by the same property, divided by: ( 1 ) For acquisition funding, the lesser of the purchase price or the estimated market value of the real property based on an appraisal that meets the requirements set forth in § 43.17(a)(2)(ii); or
( 2 ) For refinancing, the estimated market value of the real property based on an appraisal that meets the requirements set forth in § 43.17(a)(2)(ii).
*Commercial loan* means a secured or unsecured loan to a company or an individual for business purposes, other than any: ( 1 ) Loan to purchase or refinance a one-to-four family residential property;
( 2 ) Commercial real estate loan.
*Commercial real estate (CRE) loan* means: ( 1 ) A loan secured by a property with five or more single family units, or by nonfarm nonresidential real property, the primary source (50 percent or more) of repayment for which is expected to be: ( i ) The proceeds of the sale, refinancing, or permanent financing of the property; or
( ii ) Rental income associated with the property;
( 2 ) Loans secured by improved land if the obligor owns the fee interest in the land and the land is leased to a third party who owns all improvements on the land, and the improvements are nonresidential or residential with five or more single family units; and
( 3 ) Does not include: ( i ) A land development and construction loan (including 1- to 4-family residential or commercial construction loans);
( ii ) Any other land loan; or
( iii ) An unsecured loan to a developer.
*Debt service coverage (DSC) ratio* means: ( 1 ) For qualifying leased CRE loans, qualifying multi-family loans, and other CRE loans: ( i ) The annual NOI less the annual replacement reserve of the CRE property at the time of origination of the CRE loan(s) divided by
( ii ) The sum of the borrower's annual payments for principal and interest (calculated at the fully-indexed rate) on any debt obligation.
( 2 ) For commercial loans: ( i ) The borrower's EBITDA as of the most recently completed fiscal year divided by
( ii ) The sum of the borrower's annual payments for principal and interest on all debt obligations.
*Debt to income (DTI) ratio* means the borrower's total debt, including the monthly amount due on the automobile loan, divided by the borrower's monthly income.
*Earnings before interest, taxes, depreciation, and amortization (EBITDA)* means the annual income of a business before expenses for interest, taxes, depreciation and amortization are deducted, as determined in accordance with GAAP.
*Environmental risk assessment* means a process for determining whether a property is contaminated or exposed to any condition or substance that could result in contamination that has an adverse effect on the market value of the property or the realization of the collateral value.
*First lien* means a lien or encumbrance on property that has priority over all other liens or encumbrances on the property.
*Junior lien* means a lien or encumbrance on property that is lower in priority relative to other liens or encumbrances on the property.
*Leverage ratio* means the borrower's total debt divided by the borrower's EBITDA.
*Loan-to-value (LTV) ratio* means, at the time of origination, the principal balance of a first-lien mortgage loan on the property divided by: ( 1 ) For acquisition funding, the lesser of the purchase price or the estimated market value of the real property based on an appraisal that meets the requirements set forth in § 43.17(a)(2)(ii); or
( 2 ) For refinancing, the estimated market value of the real property based on an appraisal that meets the requirements set forth in § 43.17(a)(2)(ii).
*Model year* means the year determined by the manufacturer and reflected on the vehicle's Motor Vehicle Title as part of the vehicle description.
*Net operating income (NOI)* refers to the income a CRE property generates for the owner after all expenses have been deducted for federal income tax purposes, except for depreciation, debt service expenses, and federal and state income taxes, and excluding any unusual and nonrecurring items of income.
*Operating affiliate* means an affiliate of a borrower that is a lessor or similar party with respect to the commercial real estate securing the loan.
*Payments-in-kind* means payments of accrued interest that are not paid in cash when due, and instead are paid by increasing the principal balance of the loan or by providing equity in the borrowing company.
*Purchase money security interest* means a security interest in property that secures the obligation of the obligor incurred as all or part of the price of the property.
*Purchase price* means the amount paid by the borrower for the vehicle net of any incentive payments or manufacturer cash rebates.
*Qualified tenant* means: ( 1 ) A tenant with a lease who has satisfied all obligations with respect to the property in a timely manner; or
( 2 ) A tenant who originally had a lease that subsequently expired and currently is leasing the property on a month-to-month basis, has occupied the property for at least three years prior to the date of origination, and has satisfied all obligations with respect to the property in a timely manner.
*Qualifying leased CRE loan* means a CRE loan secured by commercial nonfarm real property, other than a multi-family property or a hotel, inn, or similar property: ( 1 ) That is occupied by one or more qualified tenants pursuant to a lease agreement with a term of no less than one (1) month; and
( 2 ) Where no more than 20 percent of the aggregate gross revenue of the property is payable from one or more tenants who: ( i ) Are subject to a lease that will terminate within six months following the date of origination; or
( ii ) Are not qualified tenants.
*Qualifying multi-family loan* means a CRE loan secured by any residential property (excluding a hotel, motel, inn, hospital, nursing home, or other similar facility where dwellings are not leased to residents): ( 1 ) That consists of five or more dwelling units (including apartment buildings, condominiums, cooperatives and other similar structures) primarily for residential use; and
( 2 ) Where at least 75 percent of the NOI is derived from residential rents and tenant amenities (including income from parking garages, health or swim clubs, and dry cleaning), and not from other commercial uses.
*Rental income* means: ( 1 ) Income derived from a lease or other occupancy agreement between the borrower or an operating affiliate of the borrower and a party which is not an affiliate of the borrower for the use of real property or improvements serving as collateral for the applicable loan; and
( 2 ) Other income derived from hotel, motel, dormitory, nursing home, assisted living, mini-storage warehouse or similar properties that are used primarily by parties that are not affiliates or employees of the borrower or its affiliates.
*Replacement reserve* means the monthly capital replacement or maintenance amount based on the property type, age, construction and condition of the property that is adequate to maintain the physical condition and NOI of the property.
*Salvage title* means a form of vehicle title branding, which notes that the vehicle has been severely damaged and/or deemed a total loss and uneconomical to repair by an insurance company that paid a claim on the vehicle.
*Total debt,* with respect to a borrower, means: ( 1 ) In the case of an automobile loan, the sum of: ( i ) All monthly housing payments (rent- or mortgage-related, including property taxes, insurance and home owners association fees); and
( ii ) Any of the following that is dependent upon the borrower's income for payment: ( A ) Monthly payments on other debt and lease obligations, such as credit card loans or installment loans, including the monthly amount due on the automobile loan;
( B ) Estimated monthly amortizing payments for any term debt, debts with other than monthly payments and debts not in repayment (such as deferred student loans, interest-only loans); and
( C ) Any required monthly alimony, child support or court-ordered payments; and
( 2 ) In the case of a commercial loan, the outstanding balance of all long-term debt (obligations that have a remaining maturity of more than one year) and the current portion of all debt that matures in one year or less.
*Total liabilities ratio* means the borrower's total liabilities divided by the sum of the borrower's total liabilities and equity, less the borrower's intangible assets, with each component determined in accordance with GAAP.
*Trade-in allowance* means the amount a vehicle purchaser is given as a credit at the purchase of a vehicle for the fair exchange of the borrower's existing vehicle to compensate the dealer for some portion of the vehicle purchase price, not to exceed the highest trade-in value of the existing vehicle, as determined by a nationally recognized automobile pricing agency and based on the manufacturer, year, model, features, mileage, and condition of the vehicle, less the payoff balance of any outstanding debt collateralized by the existing vehicle.
*Uniform Standards of Professional Appraisal Practice (USPAP)* means generally accepted standards for professional appraisal practice issued by the Appraisal Standards Board of the Appraisal Foundation.