Lending limits are based on loan-to-value (LTV) ratios which compare the amount of a proposed loan to the appraised value of the property. Institutions must establish their own LTV limits which should not exceed the FDIC supervisory limits: 65% on Raw Land; 75% on Land Development Construction; 80% on Commercial, Multifamily and other Nonresidential Real Estate; 85% 1-4 family residential; and 85% on Improved Property. The FDIC has not established a limit for permanent mortgage or home equity loans on owner-occupied 1 to 4 family residential property. However the recommendation is no more than 90% without credit enhancement on mortgages and Texas places State limits on home equity loans 12 C.F.R. Part 365.
It may be appropriate in individual cases for a Bank to originate or purchase loans with loan-to-value ratios in excess of the loan-to-value limits, based on the support provided by other credit factors. Such loans must be identified in the Bank’s records, and their aggregate amount reported at least quarterly to the board of directors.
The following nine types of transactions are excluded from these lending limits
•Loans guaranteed or insured by the U.S. government or its agencies, provided that the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the supervisory loan-to-value limit.
•Loans backed by the full faith and credit of a state government, provided that the amount of the assurance is at least equal to the portion of the loan that exceeds the supervisory loan-to-value limit.
•Loans guaranteed or insured by a state, municipal, or local government, or an agency thereof, provided that the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the supervisory loan-to-value limit, and provided that the lender has determined that the guarantor or insurer has the financial capacity and willingness to perform under the terms of the guaranty or insurance agreement.
•Loans that are to be sold promptly after origination, without recourse, to a financially responsible third party.
•Loans that are renewed, refinanced, or restructured without the advancement of new funds or an increase in the line of credit (except for reasonable closing costs), or loans that are renewed, refinanced, or restructured in connection with a workout situation, either with or without the advancement of new funds, where consistent with safe and sound banking practices and part of a clearly defined and well-documented program to achieve orderly liquidation of the debt, reduce risk of loss, or maximize recovery on the loan.
•Loans that facilitate the sale of real estate acquired by the lender in the ordinary course of collecting a debt previously contracted in good faith.
•Loans for which a lien on or interest in real property is taken as additional collateral through an abundance of caution by the lender (e.g., the Bank takes a blanket lien on all or substantially all of the assets of the borrower, and the value of the real property is low relative to the aggregate value of all other collateral.) See Chapter 8 for a discussion of credit-based loans secured by real estate.
•Loans, such as working capital loans, where the lender does not rely principally on real estate as security and the extension of credit is not used to acquire, develop, or construct permanent improvements on real property. See Chapter 8.
•Loans for the purpose of financing permanent improvements to real property, but not secured by the property, if such security interest is not required by prudent underwriting practice.