Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 4 - DEPARTMENT OF SAVINGS AND MORTGAGE LENDING › Chapter 60 - SAVINGS ASSOCIATIONS › Subchapter D - LOANS, INVESTMENTS, SAVINGS, AND DEPOSITS › Division 1 - AUTHORIZED LOANS AND INVESTMENTS › Section 60.305 - Loan Policies and Documentation

Current through Reg. 49, No. 28; July 12, 2024
(a) Policies. Each
					 savings association 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 association'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 association and the scope of its lending
					 activities.
(b) Loan Documentation
					 Standards. Loan documentation standards must be established and maintained to
					 enable the savings association 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 association 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 on or before 180 days prior to the date 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, and any conditions of approval;
(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
					 association);
(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 association 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 association 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.).