New Mexico Administrative Code › Title 2 - PUBLIC FINANCE › Chapter 60 - INVESTMENT AND DEPOSIT OF PUBLIC FUNDS › Part 27 - INVESTMENT POLICY AND GUIDELINES ON PARTICIPATION LOANS SECTION 7-25-5.1 MARKET RATE INVESTMENTS › Section 2.60.27.8 - POLICY

Current through Register Vol. 35, No. 13, July 16, 2024
A. It is the state
				investment council's objective in making resources available for the purchase
				of participations in loans to achieve a yield consistent with the safety and
				soundness of such investments. With this in mind, the state investment officer
				may purchase from eligible New Mexico financial institutions a participation
				interest of up to eighty percent in any loan secured by a first mortgage or a
				deed of trust on real property located in New Mexico of an eligible business
				entity, or its subsidiary, which is operating or shall use the loan proceeds to
				commence operations within New Mexico, plus any other guarantees or collateral
				that may be judged by the eligible institution or the state investment officer
				to be prudent. Real property is defined as "land and attached buildings, but
				excludes all interests which may be secured by a security interest under
				Article 9 of the Uniform Commercial Code, and mineral resource
				values".
B. In accordance with the
				provisions of the statute, loan proceeds shall be used exclusively for the
				purpose of expanding or establishing businesses in New Mexico. The use of loan
				proceeds may include the refinancing of a business' existing loans outstanding
				only if the loan is for expansion purposes. However, if a portion of the loan
				proceeds are used to repay an existing loan and payment of principal and
				interest on the loan is not paid within ninety days from the due date, the
				originating institution shall buy back the state's participation interest in
				the loan.
C. Loan origination fees,
				servicing fees and any other fees to be charged the borrower shall be reviewed
				by the state investment officer.
D.
				The amount invested in New Mexico real property related business loans shall
				not exceed ten percent of the severance tax permanent fund, and shall be
				included in any minimum amount of severance tax permanent fund investments
				required to be placed in New Mexico certificates of deposit.
E. Loans which are being offered to the state
				investment officer for consideration for participation are subject to the
				following requirements:
(1) Eligible business
				entities shall not include public utilities, financial institutions, shopping
				centers, apartment buildings, or other such passive investments. The decision
				as to whether a business investment is considered a passive investment shall be
				determined by the state investment officer.
(2) The minimum loan amount shall be five
				hundred thousand dollars ($500,000.00) and may be met by a single institution
				packaging up to five separate loans to satisfy the requirements of this
				Subsection. The maximum loan amount shall be two million dollars
				($2,000,000.00).
(3) Loan
				maturities shall not be less than five years or more than fifteen years. The
				loan shall be fully amortized over the maturity period and may not include any
				balloon payments.
(4) The maximum
				loan-to-value ratio shall be seventy-five percent based on a current MAI
				appraisal of the real property, or an equivalent appraisal, as approved by the
				state investment officer. The appraisal shall be completed no more than six
				months prior to the loan origination date.
(5) Interest rates shall be fixed for five
				years and shall be adjusted at every fifth anniversary. The yield on the
				states' participation interest shall never be less than the greater of the then
				prevailing yield on United States treasury securities of five year maturity,
				plus two and one-half percent or the yield received by the lending institution,
				calculated exclusive of servicing fees.
(6) If the payment of principal or interest
				is not made within ninety days from the due date, and before payment has not
				been made for one hundred and eighty days from the due date, the originating
				institution shall buy back the state's participation interest in the loan,
				substitute another qualifying loan, or begin foreclosure proceedings unless the
				payment is extended pursuant to an agreement between the originating
				institution and the state investment officer. If foreclosure proceedings are
				commenced, the state and the originating institution shall share in proportion
				to their participation interest in the legal and other foreclosure expenses.
				Any investment loss incurred as a result of foreclosure sale shall also be
				shared proportionately. Under no circumstance shall the state be liable for
				more than the amount of its investment in the participation.
(7) The loan agreement between the borrower
				and the originating institution must include a due on sale clause if the
				business is sold.
(8) The state
				investment officer will consider the following industries to insure
				diversification across the state in the loan participation program. A
				twenty-five percent maximum may be invested from the total amount allocated
				from the severance tax permanent fund in any one of the following classes of
				industries:
(a) agriculture, forestry, fishing
				and related processing;
(b)
				mining;
(c) construction;
(d) manufacturing;
(e) transportation;
(f) wholesale trade;
(g) retail trade;
(h) services.
(9) In addition, funds available to the state
				investment officer for purchase of participations in loans secured by a first
				mortgage or deed of trust shall be allocated considering but not limited to the
				following:
(a) the financial condition of the
				financial institution offering to sell loan participations; such condition
				shall be based on the quarterly evaluation of financial condition, as
				determined under the state investment council's certificate of deposit
				collateral policies, with preference given to institutions evaluated as class A
				and class B. Class D institutions will not receive funds.
(b) The amount of total loan participations
				purchased from a single institution shall not exceed ten percent of the maximum
				total funds authorized for investment in loan participations.
(c) The percentage a county or geographic
				area's population is to the total population of the state as determined by the
				most recent decennial census or official population estimates, prepared by the
				U.S. census bureau, department of commerce.
(10) Before the state investment officer
				purchases a participation in a loan or package of loans all documents will be
				subject to review and approval by the office of the attorney general. The state
				investment officer may employ the services of a private attorney to review and
				prepare documents on the investment office's behalf if he finds it to be
				necessary. The cost of such attorney will be paid for by the institution
				selling the participation and may be passed on to the borrower.