2023 Laws of Puerto Rico › TITLE THREE - Executive (§§ 1 — 9311) › Chapter 33 - Retirement of Government Personnel (§§ 761 — 830q) › § 779a - Employees Retirement System—Employee loans

(a) The funds of the System may be invested in loans to permanent employees who are members of the System for the construction, expansion, or acquisition of their own homes, or the refinancing thereof, as well as in personal loans under the following terms and conditions:
(1) Mortgage loans.— The system may grant mortgage loans subject to the following conditions:
(A) The maximum amount to be loaned in each case shall not exceed the maximum limit fixed by the Board of Trustees from time to time taking the conditions of the housing market into consideration. Each loan shall not be greater than three (3) times the annual salary of the employee and of his spouse plus the total of the individual contributions that the employee has credited on the date the loan is processed plus those of his/her spouse if she/he participates in the system.
(B) The loan shall not exceed ninety percent (90%) of the value of the real property acquired, as per an appraisal performed by the system, or the property to be constructed with the proceeds of the loan, nor may it be extended for more than thirty (30) years.
(C) The loan shall be secured by a first mortgage on the real property for whose acquisition, extension, or refinancing the loan was made, for the contributions accrued and to be accrued on behalf of the borrower in the System, and in the amount that may correspond to the estate or the person the borrower would have designated as a beneficiary in case of death of the borrower, as provided in §§ 773 and 774 or 786-10 of this title. Said contributions and amounts may be applied by the Administrator to the repayment of any of the participant’s debts with the System, subject to the priority established § 785a of this title.
(D) When a home construction loan is granted, the borrower and the contractor shall give the system a bond or surety in which the Retirement System is the beneficiary as security while the construction is in process and the corresponding mortgage deed is executed in addition to the collateral security of the monthly salary of the borrower from which the sum he has pledged to pay will be deducted monthly and from the guarantees stipulated in paragraph (C) of this clause.
(E) The payment of premiums on account of insurance policies, payment of taxes, deed and appraisal expenses related to the real property mortgaged to secure the loan, as well as all administrative expenses, shall be included in the debt and shall be proportionally deducted each month along with the deduction to cover the payment of principal and interest.
(F) The system shall regulate the rate of interest under which it will grant mortgage loans.
(G) The Board may authorize the Administrator to sell or pledge the System’s loan portfolio according to the terms and conditions that the Administrator deems appropriate and beneficial for the investment plan of the System. The buyer of such mortgage loans shall be entitled to the same tax benefits granted to the System under this section.
(H) The interest accrued on the loans secured by these mortgages shall be exempt from all kinds of taxation.
(I) The system may establish, through regulations, one or more insurance plans in connection with any loans of any nature that the system may grant its members. The system may act as insurer in any one of these plans. For such purposes, the Board is hereby empowered to authorize that the amounts it determines as necessary to establish the special reserve funds for each one of the insurance plans be taken from the general funds of the system with the approval of the Secretary of the Treasury. The sums thus taken shall be repaid to the general funds of the system, as the special funds thus created accumulate the necessary reserves from income derived from the premiums to be collected from those insured by each one of the plans.
(J) The system shall set aside, from its funds, the amount of three million dollars ($3,000,000) per year in order to grant mortgage loans for the acquisition of vacant lots. The loan shall be secured by a first mortgage on the real estate for whose acquisition the loan was made. The term of the loan shall not exceed fifteen (15) years. Said loans shall be granted at the rate of interest in effect in the market or, pursuant to the conditions which apply to other types of mortgage loans offered by the Retirement System.
For this type of loan the system shall establish a maximum amount to be granted per loan, which must be fixed in relation to the average price of land in the various rural or urban areas of Puerto Rico; and the following conditions shall be established:
(i) The land to be acquired shall be located in an area classified as residential or, in case it is not classified, in an area which at best would most probably be classified as residential.
(ii) The land to be acquired through the loan shall adjust to the dimensions proper to a residence, that is to say, because of its size, it may not be considered as an estate
(iii) The dwelling built shall constitute the primary residence of the borrower.
The Board of Trustees shall adopt specific regulations for the administration of this investment on loans for the acquisition of vacant lots, providing other necessary requirements which propitiate better conditions for this investment.
(2) Personal loans.— The system may grant personal loans subject to the following:
(A) Personal loans to participants and pensioners of the system. Regardless of what is provided by any other act, the Board shall determine through regulations, the conditions and procedures that are pertinent to the granting of these loans, including the fixing of the interest rate and late charges.
(B) The system is also authorized to invest in personal loans to pensioners for a sum that shall not be less than five hundred dollars ($500), nor more than five thousand dollars ($5,000), for the sole purpose of providing them with a source of financing for the down payment of homes for the exclusive use of the pensioner.
(C) The Board may authorize the Administrator to sell or pledge the System’s loan portfolio according to the terms and conditions that the Administrator deems appropriate and beneficial for the investment plan of the System. The buyer of such mortgage loans shall be entitled to the same tax benefits granted to the System under this section.
(D) The interest accrued on the loans secured by these mortgages shall be exempt from all kinds of taxation.
(b) The total amount of the mortgage and personal loans authorized in clauses (a) and (b) of subsection (1) of this section to be originated in the loan portfolio of the System may not exceed twenty-five percent (25%) of the total resources of the System.
(c) Every employer shall remit to the Administration all the amounts deducted monthly from its participating employees for the corresponding payment of their personal, cultural, or mortgage loans granted by the System within fifteen days following the end of the month to which the deductions apply. Every employer shall remit to the Cooperative Bank of Puerto Rico or the savings and credit unions that shall not participate in the program to be developed by the Cooperative Bank, as provided in § 785a of this title, the amounts deducted monthly from its participating employees for the corresponding payment of the loans granted by the savings and credit unions and the Cooperative Bank of Puerto Rico, as provided in § 785a of this title, within fifteen days following the end of the month to which the deductions apply.
History —May 15, 1951, No. 447, p. 1298, added as § 19A on June 29, 1988, No. 46, § 2; Feb. 16, 1990, No. 1, § 13; Aug. 12, 1995, No. 205, § 1; renumbered as § 4-106 and amended on Sept. 24, 1999, No. 305, § 35; Sept. 18, 2011, No. 196, §§ 2, 3.