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2005 SESSION
057261776Be it enacted by the General Assembly of Virginia:
1. That §§ 6.1-63 and 6.1-66 of the Code of Virginia are amended and reenacted as follows:
§ 6.1-63. Limitation on amount of loans secured by real estate generally.
A. No bank shall make any loan secured by real estate when
such loan together with all prior liens and encumbrances on
such real estate exceeds fifty percent of the appraised value of the real
estate securing such loan, unless such loan is (i) amortized by regular
periodic payments of principal and interest, in equal or unequal amounts, due
at least as regularly as annually in amounts which would pay the loan in full
over a period of forty years and two months or less, or (ii) amortized by
payments of principal due at least as regularly as annually, which are not less
than three and one-half percent annually of the original principal of the loan
and in either of such events, the amount of the loan, together
with all prior liens or encumbrances on such real estate shall not exceed ninety, exceeds 90 percent of the appraised
value of the real estate securing such loan.
B. The Commissioner of Financial Institutions may
authorize, upon such terms and conditions deemed appropriate by him, investment
in loans secured by real estate, providing for lesser payments during the early
periods of maturity of such loans.
C. The appraisals necessitated by this
section shall be required if the loan shall equal or exceed an amount
established from time to time by the Commissioner of Financial Institutions
who, in establishing such amount, shall take into consideration the
requirements imposed on banks under applicable federal regulations. Such
appraisals shall be in writing, signed by the appraisers, and shall be retained
in the files of the bank, subject to examination of bank examiners. The
appraisers so appointed shall be experienced persons competent to appraise real
estate in the locality where the real estate is located.
DC. Any
bank may make loans secured by real estate that do not comply with the
limitations and restrictions in this section if the total unpaid amount of the
loan such loans, exclusive of the loans
which subsequently comply with such limitations and restrictions, does not exceed
ten10
percent of the total amount of loans secured by real estate.
ED. The
provisions of this section relating to ratio of loan to appraised value,
amortization, and appraisal shall not relate to the case where:
1. The real estate security is taken solely as an abundance of caution on terms which are not more favorable than they would be in absence of such a lien on real estate;
2. A real estate security conveyance is taken by or ancillary to the assignment of lease obligations upon which the bank is relying primarily and prudently;
3. A subsequent transaction results from an existing extension of credit providing (i) that the borrower has performed satisfactorily, (ii) there is no advance of new money, except as formerly agreed, (iii) the credit standing of the borrower is not deteriorating, and (iv) there is no obvious and noticeable deterioration of marketing conditions or the physical assets which provide collateral security to the bank; or
4. A lien upon real estate is taken to secure a prior advance which was not secured by such real estate.
FE. In
cases where an appraisal by a state-certified or state-licensed appraiser is
not required, under this or other sections of this chapter in a real
estate-related financial transaction, the bank as a matter of prudence may take
and preserve a reasonable appraisal, valuation or analysis of real estate or
real property in connection with such transaction.
GF. The
State Corporation Commission may by order or regulation eliminate loans or
specific categories of loans from the requirements of this section.
§ 6.1-66. Certain loans for home improvement purposes not considered loans secured by real estate.
Loans made to home owners for maintenance, repair,
landscaping, modernization, alteration, improvement, furnishings and equipment
to their homes, whether or not secured, shall not be considered as loans
secured by real estate within the meaning of § 6.1-63, provided each such loan
shall be payable in approximately equal monthly installments, shall not be for a
term longer than twelve12 years,
and shall not exceed an amount specified in accordance with subsection C B
of § 6.1-63. Such home loans may otherwise be made under the provisions of §§
6.1-63, 6.1-64 or § 6.1-65. If such loan is in excess of the amount specified
under subsection C B of §
6.1-63, unless the taking of real estate security is solely in the abundance of
caution and the terms are not more favorable than in the absence of such a real
estate lien, an appraisal as required by §§ 6.1-63, 6.1-64 or § 6.1-65 shall be
required by the bank.