2023 Tennessee Code › Title 45 - BANKS AND FINANCIAL INSTITUTIONS (§§ 45-1-101 — 45-20-111) › Chapter 3 - SAVINGS AND LOAN ASSOCIATIONS (§§ 45-3-101 — 45-3-1508) › Part 7 - LOANS (§§ 45-3-701 — 45-3-707) › Section 45-3-701 - Real estate loans

(a)
Original Real Estate Loans.
Subject to this chapter and to rules and regulations promulgated by the commissioner, every association has the power to originate real estate loans of the following types:
(1)
Real estate loans on real estate that constitutes home property or primarily residential property and upon which has been constructed an existing and completed home or homes or other structure or structures designed or used primarily for residential purposes; provided, that the amount of the loans shall not exceed one hundred percent (100%) of the value of the real estate security for the loans, or another percentage that the commissioner may prescribe;
(2)
Real estate loans to finance the acquisition and development of real estate as home property or primarily residential property; provided, that the amount of the loan shall not exceed seventy-five percent (75%) of the value of the real estate security for the loans, or another percentage that the commissioner may prescribe, as of the completion of the development of the real estate into building lots or sites ready for construction;
(3)
Real estate loans to finance the construction of a home or homes or other structure or structures designed or used primarily for residential purposes on real estate that constitutes home property or primarily residential property, which loans may be inclusive or exclusive of loans to finance the acquisition and development of the real estate; provided, that the amount of the loan shall not exceed eighty percent (80%) of the value of the real estate security for the loans as of the completion of the construction of the homes or other structures, or other percentage that the commissioner may prescribe; and
(4)
Real estate loans on other improved real estate; provided, that the amount of the loan shall not exceed eighty percent (80%) of the value of the real estate security for the loans, or another percentage that the commissioner may prescribe.
(b)
Restrictions on Real Estate Loans.
No association shall make a real estate loan to one (1) borrower if the sum of the amount of the loan and the total balance of all outstanding real estate loans owed to the association by the borrower exceeds an amount equal to ten percent (10%) of the association's deposit liability, or an amount equal to the sum of the association's net worth, whichever amount is less.
(c)
Methods or Plans of Repayment and Variations in Interest.
(1)
An association shall agree in writing with its borrowers as to the method or plan by which indebtedness shall be repaid. Repayments may be, but are not required to be, in level periodic installments. The agreements may provide for variations in the interest rates payable in connection with the indebtedness; provided, that the variations are in proportion to variations in the weighted average cost of savings, borrowings, and Federal Home Loan Bank advances as to Tennessee members of the Federal Home Loan Bank of Cincinnati as computed from statistics tabulated by the Federal Home Loan Bank of Cincinnati, or in proportion to another standard that the commissioner may approve. Where the term of a loan is for no more than three (3) years, and the loan is not set up with a monthly amortization, then the association and its borrower may agree in writing to utilize any other index for the variations.
(2)
(A)
An association, in exercising its rights pursuant to a variable interest rate clause, may:
(i)
Change the amount of the periodic installment payments of an amortized loan;
(ii)
Reduce or extend the maturity date; or
(iii)
A combination of both subdivisions (c)(2)(A)(i) and (ii).
(B)
An association, at least thirty (30) days prior to the effective date of any change pursuant to subdivision (c)(2)(A), shall notify the borrower in writing of the change and its effects on the amount of periodic installment payments and/or on the maturity date of the installments. Notice shall be deemed given when it is deposited in the United States mail, postage prepaid, addressed to the persons personally liable to pay the indebtedness, as those persons' names and addresses appear on the association's records at the time of the giving of notice.
(d)
Power to Deal in Real Estate Loans.
Every association may purchase real estate loans upon security of the same character and amount against which an association may make an original loan.
(e)
Participation in Real Estate Loans.
Every association may participate with other lenders in real estate loans, whether by purchase, sale or joint origination, of any type that the association could originate.
Acts 1978, ch. 708, § 2.24; T.C.A., § 45-1424; Acts 1981, ch. 115, § 1.