Part 365 - RE Lending Standards

Question 1

Internal LTV limits on real estate should not exceed? (Interagency guidelines)

Answer 1

• 65% for raw land
• 75% for land development
• 80% for commercial, multi-family and other non-residential construction
• 85% for residential construction (1-4)
• 85% for improved property (e.g. agricultural land in production, non-owner occupied 1-4s, multifamily residential, and commercial property)
• No limit for owner-occupied residential loans (PMI or readily marketable over 90%)
• Government guaranteed loans and loans to be sold in secondary market without recourse are exempted

All loans in excess of these limits should not exceed 100% of total capital and commercial, agricultural, and multifamily residential loans in excess of these limits should not exceed 30% of total capital and should be reported to the Board at least quarterly.

Question 2

What does Part 365 require for institutions to include in their RE lending policies?

Answer 2

1. Documentation
2. Approval
3. Reporting requirements
4. Portfolio diversification standards
5. Prudent underwriting standards including LTV limits
6. Procedures for monitoring RE markets within the institution’s lending area
7. Loan administration procedures

Question 3

What does Part 365 require?

Answer 3

• Written policy that considers the interagency guidelines for real estate lending policies
• Safe and sound banking practices.
• Annual review of policy by BOD