Section 1161.36. Real estate loans

(A) A savings bank may make, invest in, sell, purchase, participate, or otherwise deal in loans to members and others on such terms as are provided by the savings bank, subject to the provisions of this section and section 1161.38 of the Revised Code.

(B) Loans may be made upon the security of real estate that is improved residential property, a combination of residential and business property, or a farm under cultivation, as follows:

(1) The amount loaned upon any one property shall not exceed ninety per cent of the appraised value, except as otherwise provided in divisions (B)(2) and (3) of this section.

(2) The maximum amount loaned upon any one property shall be ninety-five per cent of the appraised value of the security property if all of the following criteria are met:

(a) The loan contract requires that, in addition to principal and interest payments on the loan, one-twelfth of the estimated annual taxes and assessments on the security property be paid monthly in advance.

(b) The borrower has executed a certificate stating that the borrower occupies or in good faith intends to occupy the property or one dwelling on the property as his principal residence.

(3) The maximum loan to value ratios under divisions (B)(1) and (2) of this section shall not be applicable if one or more of the following criteria apply:

(a) That portion of the loan in excess of ninety-five per cent is insured or guaranteed by a mortgage insurance company acceptable to the superintendent of savings banks, or the savings bank establishes and maintains a specific reserve of one per cent of the original principal balance until reduced to ninety per cent of the value of the security property;

(b) The loan is secured by a single-family dwelling or a one-family condominium unit and it is:

(i) Made under regulations for the housing opportunity allowance program authorized by the "Emergency Home Finance Act of 1970," 47 Stat. 736, 12 U.S.C. 1437, as amended;

(ii) Insured or guaranteed by an agency or instrumentality of this state.

(4) For purposes of this section, "value" means market value. Loans made pursuant to divisions (B)(1), (2), and (3) of this section shall be payable in weekly, monthly, quarterly, semiannual, or annual installments sufficient to retire the loan within forty years or less. For purposes of this section, "installments" means regular periodic payments, equal or unequal, sufficient to retire the debt, interest and principal, within the contract period. The contracts may be granted without provision for amortization or may provide for periods of negative amortization. Payments on all installment loans, except construction loans, shall begin not later than ninety days after the advance of the loan. On installment construction loans, the payments shall begin not later than thirty-six months after the date of the first advance for construction.

(C) Loans may be made on the security of building lots and sites that, by reason of off-site or other improvements as are available and common to the area, are ready for the construction on each building lot or site of a structure designed primarily for residential use. These loans shall comply with the following requirements:

(1) Single-family-dwelling loans for a borrower's principal residence, as evidenced by a borrower's certification of intention executed at the time the loan is made, shall not exceed seventy-five per cent of the value of the security property and shall be repayable within fifteen years, with interest payable at least semiannually. The loan contract shall provide for monthly payments sufficient to amortize at least thirty per cent of the original principal amount before the end of the loan term.

(2) Loans other than for a borrower's principal residence shall not exceed seventy-five per cent of the value of the security property and shall be repayable within five years, with interest payable at least semiannually beginning not more than one year after the initial disbursement.

(D) Loans may be made on the security of unimproved real estate but the loans shall not exceed sixty-six and two-thirds per cent of the value of the security property, and shall be repayable within three years with interest payable at least semiannually.

(E) A savings bank may make a collateral loan to the extent that it could make or purchase the underlying assigned loans under applicable law and regulations. For purposes of this division, a "collateral loan" means a loan which is secured by an assignment of loans.

(F) Notwithstanding the limitations set forth in any other section of the Revised Code, a savings bank may impose a prepayment penalty. On a loan secured by a lien upon a home occupied or to be occupied by the borrower, the prepayment penalty shall comply with the following:

(1) The loan contract shall expressly provide for a prepayment penalty.

(2) If the loan contract provides that the interest rate may be adjusted periodically, no prepayment penalty may be imposed within ninety days following notice of an adjustment to the borrower.

(3) If the savings bank gives written notice to the borrower that the loan is due pursuant to a due-on-sale clause, or commences a foreclosure proceeding to enforce a due-on-sale clause or to seek payment in full as a result of invoking the clause, no prepayment penalty may be imposed.

Effective Date: 10-23-1991