7 Tex. Admin. Code § 91.701 – Loans

(a) General. A credit union may make loans and extend credit in accordance with the Act, these rules, and other applicable law.
(b) Loans not secured by real estate. The maturity of a loan not secured by a lien on real estate may not, at the time the loan is executed, exceed 15 years unless:
1. (1) the purpose of the loan is to finance the purchase of a manufactured home and the loan is secured by a first lien, in which case the maturity may not exceed 20 years;
2. (2) the loan is at least 90% insured or guaranteed as to both principal and interest by the State of Texas or the United States or any agency or instrumentality thereof; or
3. (3) the commissioner has approved, in writing, and prior to the making of a loan or class of loans, a greater maturity for that loan or class of loans.
(c) Loans secured by real estate. For loans secured, in whole or in part, by a lien on real estate, the requirements described in this subsection shall apply unless waived in writing by the commissioner:
1. (1) Loans secured by a first lien on real estate. A loan, or any refinancing thereof, secured by a first lien on real estate shall be subject to the requirements described in this paragraph as applicable.
  1. (A) Maximum maturity; loan to value ratio.
    1. (i) A loan secured by a lien on improved residential real estate occupied by the owner shall have, at the time the loan is executed, a maximum maturity of 40 years and a loan to value ratio not greater than 95%.
    2. (ii) A loan secured by a lien on improved real estate not to be occupied by the owner shall have, at the time the loan is executed, a maximum maturity of 30 years and a loan to value ratio not greater than 80%.
    3. (iii) An interim construction loan shall have, at the time the loan is executed a maximum maturity of 18 months and the amount of the loan shall not exceed 90% of the projected appraised value at completion or the estimated cost of construction, whichever is less.
    4. (iv) Any other loan not described in clauses (i), (ii), or (iii) of this subparagraph shall have, at the time the loan is executed, a maximum maturity of 20 years and a loan to value ratio not greater than 80%.
  2. (B) Escrow; pledged accounts. A loan, other than an interim construction loan, shall have as a requirement in its terms and conditions that the borrower must pay, in addition to principal and interest, an amount to be deposited to an escrow account, or otherwise applied as provided in the credit union's loan policies, for estimated annual taxes, assessments, insurance premiums, and other charges upon the real estate securing the loan. The additional payment may be waived if an amount equal to at least the estimated annual insurance premium and annual taxes is pledged to and maintained at the credit union during the term of the loan, the loan is not in arrears or delinquent at any time, and the credit union is furnished with evidence of payment of taxes and insurance each year, or the loan to value ratio is maintained at 70% or less at all times.
  3. (C) Title opinion; Title insurance. A loan may not be made by the credit union unless it is furnished with either a written title opinion of an attorney or a satisfactory policy of title insurance in the principal amount of the loan, which policy shall be issued by a title company authorized to insure titles in this state, insuring that the lien is a first and prior lien. The validity of title for loans of less than $25,000 may be determined as prescribed by board policy.
  4. (D) Private mortgage insurance or United States government guaranteed loans. Unless a real estate loan is insured by an agency of the United States government or by a private mortgage insurance company, the maximum loan amount is 90% of the purchase price or appraised value of the property, whichever is less.
  5. (E) Property insurance. Any loan secured by a lien on improved real estate must require in its terms and conditions that fire and extended coverage be maintained in an amount not less than the loan balance (plus any amount secured by prior liens) or the replacement value of improvements, whichever is less, and that the credit union be named as loss payee.
  6. (F) Recording instruments. Every mortgage, deed of trust, or other instrument creating, constituting, or transferring a lien securing a loan shall be properly and timely recorded in the appropriate deed records.
  7. (G) Valuation. Every loan must have included in its documentation evidence of the market value of the real estate determined in accordance with written board policy or, if the amount of the loan exceeds $100,000, a report of an appraisal prepared by a state certified appraiser.
2. (2) Other real estate loans; Maximum maturity; Loan to value ratio. A loan, or any refinancing thereof, secured by a lien on real estate other than a first lien:
  1. (A) which is not an interim construction loan, shall have, at the time the loan is executed a maximum maturity of 20 years and, if occupied by the owner or will be so occupied, a loan to value ratio not greater than 90%, or in any other case 80%, except that property improvement loan to value ratios may be based upon the projected appraised value at completion; or
  2. (B) which is an interim construction loan, shall have, at the time the loan is executed, a maximum maturity of 18 months and the aggregate amount of the loan and other existing loan balances secured by the property shall not exceed 80% of the projected appraisal value at completion or the estimated cost of construction, whichever is less.
  3. (C) Property insurance. Any loan secured by a lien on improved real estate must require in its terms and conditions that fire and extended coverage be maintained in an amount not less than the loan balance (plus any amount secured by prior liens) or the replacement value of improvements, whichever is less, and that the credit union be named as loss payee.
  4. (D) Recording instruments. Every mortgage, deed of trust, or other instrument creating, constituting, or transferring a lien securing a loan shall be properly and timely recorded in the appropriate deed records, except for those instances when recording is not required under an applicable state or federal guaranty program.
  5. (E) Title opinion; Title insurance. A loan may not be made by the credit union unless it is furnished with either a written title opinion of an attorney or a satisfactory policy of title insurance in the principal amount of the loan, which policy shall be issued by a title company authorized to insure titles in this state. The validity of title for loans of less than $25,000 may be determined as prescribed by board policy.
  6. (F) Valuation. Every loan must have included in its documentation evidence of the market value of the real estate determined in accordance with written board policy or, if the amount of the loan exceeds $100,000, a report of an appraisal prepared by a state certified appraiser.
3. (3) Home improvement loans. Loans in which the proceeds are used to construct new improvements or renovate existing improvements on a homestead property must also comply with the requirements of Section 50(a)(5), Article XVI, Texas Constitution.
4. (4) Loans originated under Section 50(a)(6), Article XVI, Texas Constitution. For a loan secured by an encumbrance against the equity in a homestead property, the terms and conditions set forth in Section 50, Article XVI, Texas Constitution, will take precedence over any specific requirement contained in this section if there is an irreconcilable conflict between a constitutional provision and the provision of this section.
5. (5) Reverse mortgages. A credit union may offer reverse mortgages to its members under the terms and conditions set forth in Section 50, Article XVI, Texas Constitution. In the event of an irreconcilable conflict between any specific requirement contained in this section and a constitutional provision, the constitutional requirement shall prevail.
(d) Prohibited activity. A credit union shall not make a loan or extend credit if any commission, fee, or compensation of any type from any person or entity other than the credit union is to be received by any credit union official or employee, or an immediate family member of either, in connection with underwriting, insuring, procuring, servicing, or collecting the loan or extension of credit.
(e) Indirect financing. A credit union shall provide written notice to the commissioner at least 30 days prior to implementing a program of indirect financing of motor vehicles or other chattels.
(f) Loan policies. The board of directors shall establish, implement, and maintain prudent and reasonable written loan policies that specify guidelines and criteria to be used in making loans and extending credit consistent with this rule.

Source Note:The provisions of this §91.701 adopted to be effective March 8, 1984, 9 TexReg 1154; amended to be effective May 5, 1988, 13 TexReg 1976; amended to be effective May 9, 1989, 14 TexReg 2025; amended to be effective February 11, 1992, 17 TexReg 678; amended to be effective July 8, 1994, 19 TexReg 4936; amended to be effective December 21, 1994, 19 TexReg 9747; amended to be effective May 10, 1998, 23 TexReg 4567.