Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 4 - DEPARTMENT OF SAVINGS AND MORTGAGE LENDING › Chapter 75 - SAVINGS BANKS › Subchapter D - LOANS, INVESTMENTS, SAVINGS, AND DEPOSITS › Division 1 - AUTHORIZED LOANS AND INVESTMENTS › Section 75.305 - Loan Policies and Documentation

Current through Reg. 49, No. 28; July 12, 2024
(a) Policies. Each
					 savings bank must establish written policies approved by its board establishing
					 prudent credit underwriting and loan documentation standards. Such standards
					 must be designed to identify potential safety and soundness concerns and ensure
					 that action is taken to address those concerns before they pose a risk to the
					 savings bank's capital. Credit underwriting standards should consider the
					 nature of the markets in which loans will be made; provide for consideration,
					 prior to credit commitment, of the borrower's overall financial condition and
					 resources, the financial stability of any guarantor, the nature and value of
					 underlying collateral, and the borrower's character and willingness to repay as
					 agreed; establish a system of independent, ongoing credit review and
					 appropriate communication to senior management and the board; take adequate
					 account of concentration of credit risk; and are appropriate to the size of the
					 savings bank and the scope of its lending activities.
(b) Loan Documentation Standards. Loan
					 documentation standards must be established and maintained to enable the
					 savings bank to make informed lending decisions and assess risk, as necessary,
					 on an ongoing basis; identify the purpose of the loan and source of repayment,
					 and assess the ability of the borrower to repay the indebtedness in a timely
					 manner; ensure that any claim against a borrower is legally enforceable;
					 demonstrate appropriate administration and monitoring of a loan; and consider
					 the size and complexity of a loan. The following documents are generally
					 appropriate and can be used as a guideline for prudent lending; however, unless
					 such documents are specifically required by other state and federal statutes or
					 regulations, there may be alternative documents equally suitable in satisfying
					 the safety and soundness intent of this section which the savings bank may
					 substitute and still address the safety and soundness concern:
(1) an application for the loan, signed and
					 dated by the borrower or their agent (and if the borrower is a corporation, a
					 board resolution authorizing the loan), which discloses the purpose for which
					 the loan is sought, the identity of the security property, and the source of
					 funds which will be used to repay the loan;
(2) a statement signed by the borrower or
					 their agent, or a copy of the executed contract, disclosing the actual price at
					 which the security is being purchased by the borrower, if the loan is made for
					 the purpose of financing the purchase of the security for the loan;
(3) current financial statements signed by
					 the borrower and all guarantors and/or current documented credit reports
					 disclosing the financial ability of the borrower and guarantors (a current
					 financial statement is as of a date within 180 days before the application is
					 filed) together with written certification by the borrower and guarantors that
					 no material adverse changes in financial condition have occurred since the
					 financial statement was prepared;
(4) a loan approval sheet (which may be part
					 of the loan application form) indicating the amount and terms of the loan, the
					 date of loan approval, by whom approved, the signatures of the persons
					 approving the loan, any conditions of approval, and verifying that the persons
					 approving the loan have confirmed applicable limitations on loans to one
					 borrower for purposes of Finance Code §
												94.001 are
					 met;
(5) a loan disbursement
					 statement or other documentation, indicating the date, amount, and ultimate
					 recipient of every disbursement of the proceeds of such loan (this requirement
					 is not met by showing one or more disbursements to a title company or other
					 escrow agent, but for a construction loan, this requirement may be met by
					 documenting bona fide construction draw disbursements to the general contractor
					 of the project, upon their completion of an affidavit stating that all bills
					 for labor and materials have been paid as of the date of the
					 disbursement);
(6) a loan
					 settlement statement, indicating in detail the expenses, fees, and charges the
					 borrower or borrowers have paid in connection with such loan;
(7) the promissory note or notes containing
					 the borrower's obligation to repay duly executed by the borrower and all
					 guaranty agreements duly executed by the guarantors (a copy of the note or
					 notes may be kept in the loan file, if the original notes are stored for
					 safekeeping in another location at the savings bank);
(8) the original mortgage, deed of trust, or
					 other instrument creating or constituting the lien securing the loan;
(9) for real estate loans, an attorney's
					 opinion letter based on an abstract of title, or a policy of title insurance,
					 or binder of same, issued by a title company authorized to insure titles in the
					 state in which the security for the loan is located, showing that the lien
					 securing such loan meets the applicable requirements of this chapter for liens
					 securing the loan in question;
(10)
					 evidence that the insurable improvements of the real estate are insured against
					 loss by a fire and extended coverage policy or its equivalent issued by an
					 insurance company authorized to do business in the state in which the real
					 estate security is located and naming the savings bank as a co-insured, as its
					 interest may appear;
(11) for real
					 estate loans, an appraisal or evaluation completed in accordance with the
					 requirements of
					 12 C.F.R. §
													323.1, et seq.;
(12) for personal property loans, a detailed
					 explanation of how the savings bank arrived at the appraised or market value of
					 the security property;
(13) any
					 loan agreement or other ancillary documents relating to the loan; and
(14) any documents required by the Texas
					 Credit Title (Finance Code §
												301.001 et
					 seq.).