NY Banking L § 380 (2021)
2021 New York Laws BNK - Banking Article 10 - Savings and Loan Associations 380 - Power to Make Loans.

§ 380. Power to make loans. 1. A savings and loan association may make a loan upon the security of a mortgage of the type authorized to be made by  a savings bank by subdivisions five-a and six of section two hundred thirty-five  of  this  chapter,  subject  to  such  regulations  as  the superintendent of financial services may prescribe.   1-b.  A  savings  and  loan  association  may  also  lend its funds to borrowers  therefrom  upon  their  promissory  notes  payable   to   the association which are:  (a)  secured  by  one  or  more  mortgages in which a savings and loan association may invest; provided however, that the amount loaned is  not in  excess  of  ninety  per  centum of the principal sum secured by such mortgage or  mortgages.  The  assignment  of  every  mortgage  taken  as security for any such note shall be recorded or registered in the office of the proper recording officer of the county in which the real property described in such mortgage is located, unless such mortgage or mortgages have been so assigned by a savings and loan association;  (b) secured by any of the stocks and bonds in which a savings and loan association  may  invest, except stocks eligible for investment pursuant to the provisions of  subdivision  twenty-six  of  section  two  hundred thirty-five  of  this  chapter; provided however, that the amount of the loan is not in excess of ninety per centum of the market value  of  such stocks and bonds;  (c)  made by a savings bank which has been incorporated three years or more.  (d) secured by any of the stocks eligible for investment by a  savings and   loan   association  pursuant  to  the  provisions  of  subdivision twenty-six of section two hundred thirty-five of this chapter;  provided however,  that (1) the amount of the loan is not in excess of the lesser of (i) eighty-five per centum of the market value  of  such  stocks,  or (ii) the maximum loan value of such stocks determined in accordance with Federal  Reserve Regulation U and the supplement thereto of the board of governors of the federal reserve system and as if the savings  and  loan association  were  a member bank of such system extending credit secured by such stocks for their purchase as margin stock, and (2) the amount of such loan, together with the aggregate amount outstanding of  all  loans made  pursuant to this paragraph and the aggregate amount of investments in stock eligible for investment  by  a  savings  and  loan  association pursuant  to  the  provisions  of  subdivision twenty-six of section two hundred thirty-five of this chapter,  shall  not  exceed  the  aggregate limitations  set  forth in subdivision twenty-six of section two hundred thirty-five of this chapter;   2. A savings and loan association may lend its funds  to  its  members upon  their  notes as follows: (a) secured by the transfer and pledge to the association of shares of any savings and loan association or by  the assignment  to the association of a time deposit in any savings and loan association, the withdrawal value of which, in either case, shall not be less than the amount of any such loan.  (b) Representing loans and advances  of  credit  for  the  purpose  of financing  alterations,  repairs  and improvements upon or in connection with, or as the superintendent may authorize the equipping  of  existing structures, and the building of new structures, upon urban, suburban, or rural   real   property   (including  the  restoration,  rehabilitation, rebuilding, and replacement of such improvements which have been damaged or destroyed by earthquake, conflagration, tornado, hurricane,  cyclone, flood,  or  other  catastrophe),  by the owners thereof or by lessees of such real property under a lease expiring not less than six months after the maturity of the loan or  advance  of  credit  or  by  lessees  under proprietary  leases  from  a  corporation  or partnership formed for the  purpose of the cooperative ownership of real estate, provided:  (1)  the amount of such loan, advance of credit, or purchase made for the purpose of  financing  the  alteration,  repair,  equipping  or  improvement  of existing  structure  or  the  building  of new structure does not exceed twenty thousand dollars; (2) the maturity thereof does  not  exceed  one hundred  twenty-one  months;  (3)  the  rate  which  may  be paid by the borrower for interest, discount, and fees of  all  kinds  in  connection with the transaction shall be the rate or rates agreed to by the savings and loan association and the borrower; and (4) the loan shall be paid in equal  or  substantially  equal monthly installments calculated from the date of the note; provided,  however,  that  in  addition  thereto,  the savings  and  loan  association may contract to charge the borrower: (i) the fees payable to the appropriate public officer to perfect  any  lien or  other security interest taken to secure the loan or the premium, not in excess of such filing fee, payable for any insurance in lieu of  such filing;  (ii)  in case of default, and in accordance with the provisions of the instrument evidencing the obligation, either a fine in an  amount not  to exceed five cents per dollar on any installment which has become due and remained unpaid for a period in excess of ten days, but no  such fine  shall  exceed five dollars and only one fine shall be collected on any such installment regardless of the period during which it remains in default, and provided further that should the aggregate  of  such  fines collected  in  connection  with  any  loan exceed two per centum of such loan, or  in  any  event  twenty-five  dollars,  the  savings  and  loan association  shall  refund such excess to the borrower within sixty days after the loan is paid in full, or, subject to an allowance of  unearned interest  attributable to the amount in default, interest on each amount past due at a rate not in  excess  of  the  rate  provided  for  in  the instrument  evidencing  the  obligation;  (iii) the actual expenditures, including reasonable attorney's fees, for necessary court  process;  and (iv) in case the savings and loan association insures a borrower under a credit unemployment insurance policy, group life insurance policy, group health  insurance  policy,  group  accident  insurance  policy, or group health and accident insurance policy, or requires insurance on  personal property securing any such loan, an amount not in excess of the premiums chargeable  in accordance with rate schedules then in effect and on file with the superintendent of financial services for such insurance by  the insurer.    No  savings and loan association shall require a borrower to purchase shares in the association, or to purchase  shares  in  lieu  of regular  periodic  installment  payments,  or  to do or refrain from any other act which would entail  additional  expense  or  sacrifice,  as  a condition  precedent  to  granting a loan or advance of credit under the authority of this paragraph.  Notwithstanding  the  provisions  of  this paragraph  no  refund of excess fines shall be required if it amounts to less than one dollar.  (c) Representing loans and advances  of  credit  for  the  purpose  of defraying  the  cost of attendance of one or more students the income of whose family is fifteen thousand dollars or more per year  at  the  time the  loan  or  loan commitment is made at a university or college or for the purpose of defraying the cost of attendance of one or more  students at  an  elementary  or secondary school providing education required for minors; provided, however, that no  such  loan  shall  bring  the  total unpaid  principal balances of any one or more loans made by such savings and loan association to the borrower pursuant to this  paragraph  to  an amount  in  excess of thirty thousand dollars; and further provided that the maturity of any such loan does not exceed  eighty-five  months;  and further  provided  that  the  rate which may be paid by the borrower for interest, discount, and  fees  of  all  kinds  in  connection  with  the  transaction shall be the rate or rates agreed to by the savings and loan association  and the borrower, reckoned on each loan or advance from the date thereof, calculated on any of  the  following  bases:  (i)  on  the unpaid  principal  amount  of  such loans and advances from time to time outstanding, or (ii) for each month on an  average  balance  outstanding determined  by  dividing  by  two  the  sum  of  the  balances of unpaid principal of such loans and advances outstanding  on  two  dates  during such  month,  as  specified  in such agreement; the first of which dates being not later than the fifteenth day of  such  month  and  the  second being not earlier than the sixteenth day of such month and not less than ten  nor  more  than  twenty days after the first day, or (iii) for each month on a fixed amount selected from a schedule, which fixed amount may exceed the average daily balance under (i) above, or the average balance if determined under (ii) above, by a differential of not more than  five dollars,  provided  the  same  fixed  amount  is also used for computing interest for any month for which such balance exceeds said fixed  amount by any amount up to at least the same differential; and further provided that  the  loan  shall  be  paid in equal or substantially equal monthly installments calculated from the date of the note. No  fee,  commission, expense,  or  other charge whatsoever shall be taken, received, reserved or contracted for in addition to the rate of interest authorized by this paragraph except (i) the fees payable to the appropriate public  officer to  perfect any lien or other security interest taken to secure the loan or the premium, not in excess  of  such  filing  fee,  payable  for  any insurance  in  lieu  of  such  filing;  (ii)  in case of default, and in accordance  with  the  provisions  of  the  instrument  evidencing   the obligation,  either  a  fine  in  an amount not to exceed five cents per dollar on any installment which has become due and remained unpaid for a period in excess of ten days, but no such fine shall exceed five dollars and only one fine shall be collected on any such installment  regardless of  the  period during which it remains in default, and provided further that should the aggregate of such fines collected in connection with any loan exceed two per centum of such loan, or  in  any  event  twenty-five dollars,  the  savings  and loan association shall refund such excess to the borrower within sixty days after the  loan  is  paid  in  full,  or, subject  to an allowance of unearned interest attributable to the amount in default, interest on each amount past due at a rate not in excess  of the rate provided for in the instrument evidencing the obligation; (iii) the  actual  expenditures,  including  reasonable  attorney's  fees, for necessary  court  process;  and  (iv)  in  case  the  savings  and  loan association  insures  a  borrower  under a credit unemployment insurance policy, group life insurance  policy,  group  health  insurance  policy, group  accident insurance policy, or group health and accident insurance policy, or requires insurance on personal  property  securing  any  such loan,  an  amount not in excess of the premiums chargeable in accordance with rate schedules then in effect and on file with  the  superintendent of  financial services for such insurance by the insurer. No savings and loan association shall require a borrower to place any sum  on  deposit, or to make deposits in lieu of regular periodic installment payments, or to  do or refrain from doing any other act which would entail additional expense or sacrifice, as a condition precedent to  granting  a  loan  or advance  of  credit  under the authority of this paragraph, except under such terms and conditions as the superintendent may from  time  to  time approve.  Notwithstanding  the provisions of this paragraph no refund of excess fines shall be required if it amounts to less than one dollar.  (d) Representing loans secured by mobile home chattel paper evidencing a monetary obligation incurred to finance the purchase of a mobile  home located  at  the  time  of such purchase, or to be located within ninety  days, at a semipermanent site within the state or in a contiguous  state and  to  be  maintained  as  a residence of the borrower, the borrower's spouse, child, grandchild, parent or grandparent.  (1) For this paragraph:  (i)  "mobile  home  chattel  paper"  means  written evidence of both a monetary obligation and a security  interest  of  first  priority  in  a mobile home and any equipment installed, or to be installed therein, and  (ii)   "mobile   home"  or  "manufactured  home"  means  a  structure, transportable in one or more sections, which in the traveling  mode,  is eight  body  feet or more in width or forty body feet or more in length, or when erected on site, is three hundred twenty or  more  square  feet, and  which  is built on a permanent chassis and designed to be used as a dwelling with or  without  a  permanent  foundation  when  connected  to required utilities, and includes the plumbing, heating, air-conditioning and electrical systems contained therein.  (2)  If the loan is for the purpose of financing the purchase of a new mobile home,  (i) it shall mature not later than two hundred forty months after  the date thereof, and  (ii)  the amount advanced to the borrower shall not exceed one hundred per cent of the sum of (a)  the  purchase  price  of  such  mobile  home (including  any  installed  equipment)  plus  (b)  the  price of any new equipment installed or to be installed by the dealer.  (3) If the loan is for the purpose of financing the purchase of a used mobile home,  (i) it shall mature not later than two hundred forty months after  the date thereof, and  (ii)  the amount advanced to the borrower shall not exceed one hundred per cent of  the  purchase  price  of  the  mobile  home  actually  paid (including any installed equipment).  (4)  The loan shall be payable in equal or substantially equal monthly installments calculated from the date of the loan. Interest,  which  may be  taken  in advance, may be charged thereon, computed from the date of the loan to the date of the last installment payable thereunder, if  the loan  has  a  maturity, (i) not exceeding thirty-seven months, at a rate not to exceed six dollars per annum discount per one hundred dollars  of the  face amount or ten dollars if the interest so computed is less than that amount, or (ii) exceeding thirty-seven months, at  a  rate  not  to exceed  five  dollars  per annum discount per one hundred dollars of the face amount provided that the interest charged, if  the  amount  thereof exceeds  ten  dollars,  shall  not  exceed one per cent per month on the unpaid principal balance.  (5) The authorized interest shall be inclusive of all charges incident to investigating and making any loan. No fee,  commission,  expense,  or other  charge  shall  be  permitted  except  that  the  savings and loan association may contract to charge the borrower (i) the fees payable  to a public officer to perfect any lien or other security interest taken to secure  the  loan,  or  the  premium,  not in excess of such filing fee, payable for any insurance in lieu  of  such  filing;  (ii)  in  case  of default,   and   in   accordance  with  the  instrument  evidencing  the obligation, either a fine in an amount not to exceed five  per  cent  on any installment which has become due and remained unpaid for a period in excess  of ten days, but no such fine shall exceed five dollars and only one fine shall be collected on any such installment  regardless  of  the duration  of the default, and provided further that should the aggregate of such fines collected in connection with any loan exceed two per  cent of  such  loan  or twenty-five dollars, the savings and loan association shall refund such excess within sixty days after the  loan  is  paid  in  full,  or,  subject to an allowance of unearned interest attributable to the amount in default, interest on each amount past due at a rate not in excess of one per cent per  month  during  the  delinquency;  (iii)  the actual  expenditures, including reasonable attorney's fees for necessary court process, and (iv) in case the savings and loan association insures a borrower under a credit  unemployment  insurance  policy,  group  life insurance,  health insurance, accident insurance, or health and accident insurance policy, or requires insurance on the  property  securing  such loan,  an  amount  not in excess of the premiums lawfully chargeable. No savings and loan association shall require a borrower to purchase shares in the association, or to purchase shares in lieu  of  regular  periodic installment payments, or to do or refrain from doing any other act which would entail additional expense or sacrifice, as a condition to granting a  loan  under this paragraph except as the superintendent may from time to time approve. No refund of excess fines need be made if it amounts to less than one dollar.  (6) As a condition of any loan made pursuant to  this  paragraph,  the borrower  shall  certify that the mobile home, against which the loan is made, is intended to be maintained in the state or in a contiguous state as  a  residence  of  the  borrower,  the  borrower's   spouse,   child, grandchild,  parent  or  grandparent. If the mobile home shall not be so maintained on the ninetieth day next succeeding the date of the loan  or if  it  is  relocated  so  as  to no longer be located in the state or a contiguous state at any time before the first anniversary of  the  loan, the  loan  and  all  authorized charges shall become immediately due and payable subject only to the refund provisions of paragraph (d)  and  the borrower  may,  if  the  contract so provides, be required to pay, as an additional authorized charge, a penalty in an amount not to  exceed  two per cent of the face amount of the loan.  (7)  No  loan shall be made by a savings and loan association pursuant hereto if the total amount loaned  by  it  pursuant  to  this  paragraph exceeds,  or  by the making of such loan will exceed, an amount equal to five per cent of the assets of the savings and loan association.  (8) Subject to such limitations and conditions as  the  superintendent of financial services may prescribe by general regulation, a savings and loan  association  may  make a loan pursuant to this paragraph which the federal housing administrator has insured or has made  a  commitment  to insure  and  may  receive  and hold such debentures as are issued by the federal housing administrator in payment of such insurance, or which  is guaranteed  pursuant  to  the provisions of the act of congress entitled the "Servicemen's Readjustment Act  of  l944."  No  law  of  this  state prescribing  or  limiting  the  interest  rate upon loans or advances of credit or prescribing a penalty for violation thereof or prescribing the nature, amount or form of security  or  requiring  security  upon  which loans  or  advances of credit may be made or prescribing or limiting the period for which loans or advances of credit may be made or limiting the amount of any class of loans, advances of credit or purchases which  may be  made  shall  be  deemed  to  apply  to  loans, advances of credit or purchases made or  to  loans  acquired  by  purchase  pursuant  to  this subparagraph.  (e) A borrower may prepay any loan made pursuant to paragraph (b), (c) or (d) in full or, with the consent of the savings and loan association, may  refinance the loan. In the event of such prepayment or refinancing, the savings and loan association shall refund: (1) the unearned  portion of  the  interest  to  the borrower the amount of which portion shall be determined according to a generally accepted actuarial method; provided, however, that if the amount of interest previously deducted (i) was less than ten dollars, no refund shall be required; or (ii) exceeded the  sum  of  ten  dollars  and  the earned interest is less than that amount, the savings and loan association may retain such  an  additional  amount  as will  bring the earned interest to the sum of ten dollars and refund the remainder,  and provided further, that unless the loan is refinanced, no refund shall be required if it amounts to less than one dollar; and  (2) if  a  charge  was  made  to  the borrower for premiums for insuring the borrower under  a  credit  unemployment  insurance  policy,  group  life insurance  policy,  or  under  a  group  health, group accident or group health and accident insurance policy, the excess of the  charge  to  the borrower  therefor  over the premiums paid or payable by the savings and loan association, if such premiums were paid or payable by  the  savings and  loan  association  periodically,  or  the refund for such insurance premium received or receivable by the savings and loan  association,  if such  premium  was paid or payable in a lump sum by the savings and loan association, provided that no  such  refund  shall  be  required  if  it amounts  to  less  than one dollar. In the event (i) the maturity of the loan is accelerated due to the default of the borrower or otherwise  and judgment  is  obtained,  or  (ii) repayment is made pursuant to any such insurance policy, the borrower or his legal representative, as the  case may  be,  shall  be  entitled to the same refund as if the loan had been prepaid in full on the date of acceleration or repayment.   2-a. A savings and loan association may lend its  funds  to  borrowers therefrom upon their promissory notes representing loans for the purpose of  financing  the  purchase  of  or  refinancing  an existing ownership interest in certificates of stock or  other  evidence  of  an  ownership interest  in, and a proprietary lease from, a corporation or partnership formed for the purpose of the cooperative ownership of  real  estate  as provided in this subdivision.   A savings and loan association may, subject to such regulations as the superintendent  of financial services finds necessary and proper, invest to an amount not exceeding the maximum per cent of the  loans  permitted to be made on real estate improved by a single family residence occupied by  the  owner, provided that for purposes of this section the amount of the purchase price shall be deemed to equal the appraised value of  such certificate  of stock or other evidence of an ownership interest, or, in the case of a refinancing, the appraised value of certificates of  stock or  other evidence of the ownership of an interest in, and a proprietary lease from, a corporation or partnership formed for the purpose  of  the cooperative  ownership  of  real  estate, for the purpose of financing a purchase of or refinancing an existing  ownership  interest  in  such  a corporation  or  partnership;  provided  (a)  such investment is secured within ninety days from the making of  the  loan  by  an  assignment  or transfer  of the stock or other evidence of an ownership interest of the borrower and a proprietary lease; and (b) repayments  of  principal  and interest  shall  be  effected  within  the  same  number  of  years as a conventional mortgage loan previously described in this subdivision. The maximum rate of interest which may be charged, taken  or  received  upon any loan or forbearance made pursuant to this subdivision may exceed the rate  of interest prescribed by the superintendent of financial services in accordance with section fourteen-a of this chapter by  no  more  than one and one-half per cent per annum.   3.  A  savings and loan association may also lend its funds, if at any time such association has funds in excess of the amount needed for loans to its members, as follows:  (a) To other savings and loan associations.  (b) Upon bonds and mortgages and notes and mortgages upon real  estate to  the  same  extent  authorized  in  subdivision  one of this section, subject to the limitations therein.    3-a. A savings and loan association may also lend  its  funds  to  its members  or  their  children  who  are  attending  or planning to attend colleges in this state or elsewhere, to assist  them  in  meeting  their expenses  of  higher  education,  where  such  loans  are  made  by  the association  and  (1)  guaranteed  by  the  New  York  higher  education assistance corporation in accordance  with  the  provisions  of  article fourteen of the education law, or (2) insured or covered by a commitment to  insure  or  are  guaranteed  or covered by a commitment to guarantee issued by the federal education  commissioner  in  accordance  with  the provisions  of the act of congress entitled the "Higher Education Act of 1965". In such cases no further security for the repayment of such loans shall be required of the borrowers by the  association.  A  savings  and loan  association  may  also  lend its funds to nonmembers, for the same purposes and upon the same terms and conditions if, at  any  time,  such association  has  funds  in excess of the amount needed for loans to its members.   4. No loan shall be made under the provisions of this section upon the security of a mortgage:  (a) Which is not a first lien upon  the  property  described  therein, unless  all  prior mortgages, liens or encumbrances thereon are owned by such association; and no such prior mortgage, lien or encumbrance  shall be  sold,  transferred  or  assigned  by  such  association  until every subsequent mortgage, lien or encumbrance owned by  it  shall  have  been fully  paid  and satisfied; and further provided that whenever loans are made under both subdivisions one and three of this section upon the same real estate the limitations of amount applicable to the loan under  each subdivision shall be determined by first segregating that portion of the appraised value of the premises necessary to sustain the prior mortgage, lien  or  encumbrance,  and  the  limitation of amount applicable to the additional mortgage, lien or encumbrance shall then be  determined  with reference only to the remaining portion of the appraised value; provided further that the loan under subdivision three shall provide for equal or substantially equal periodic payments of interest and principal at least annually  in  amount  sufficient  to  pay  all  interest and effect full repayment of principal within thirty years;  (b) Except upon the written and signed  certificate  of  an  appraiser appointed  pursuant  to  policies established by the board of directors, certifying to the value of the premises according  to  such  appraiser's judgment.  Such  certificate  shall  be  filed  and  preserved among the records of the association and any member shall have access thereto;   4-a. A savings and loan association may, in addition to the  authority granted  under  any other subdivision of this section or subdivision six of section three hundred seventy-nine of this article, make a loan to  a natural person upon the security of a mortgage which is not a first lien at  the  rate or rates agreed to by the savings and loan association and the borrower, subject to  such  regulations  as  the  superintendent  of financial services may prescribe. Such regulations by the superintendent of   financial   services   may   include   such   restrictions  as  the superintendent  of  financial  services  finds  necessary   or   proper, including  without  limitation,  a  restriction  as to the percentage of total assets which may be invested in such loans or a restriction on the loan to appraisal value of property securing such loan.   For purposes of this subdivision, the term mortgage  shall  include  a lien on an existing ownership interest in certificates of stock or other evidence  of  an  ownership interest in, and a proprietary lease from, a corporation or partnership formed for the  purpose  of  the  cooperative ownership of real estate.    5.  Every  mortgage  and  every  assignment of a mortgage taken by any savings and loan association shall be immediately recorded or registered in the office of the proper recording officer of the county in which the real estate described in such  mortgage  is  located.  This  subdivision shall  not apply to a participating interest in any mortgage which shall have  been  acquired  by  a  savings  and  loan  association  under  the provisions  of  section three hundred eighty-c of the banking law if the originating mortgagee shall have recorded such mortgage or an assignment thereof in the office of the proper recording officer of the  county  in which the real estate described in such mortgage is located.   6.  Any savings and loan association may require either single premium reducing term, monthly premium reducing  term,  or  fully  paid-up  life insurance  or accident, health or disability insurance to be assigned to it by any borrower. When directed by the written order  of  a  borrower, the  cost of such insurance may be advanced and paid by the association. All such payments may be added to the unpaid balance of the loan.   7. A savings and loan association shall have the power  to  waive  its right to enforce payment of a bond or note secured by a mortgage on real property and may waive its right to obtain a deficiency judgment against the borrower in the event of foreclosure of such mortgage.