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Banking Interpretations

Banking Law §594

October 14, 2004

To: Michael Adinolfi
Mortgage Banking Division

From: Associate Attorney Prendergast
Legal Division

Subject: [                                ] - REIT Conversion of this company


Issue

The department received notice of the REIT conversion of the [            ].  This company currently owns two Licensed Mortgage Bankers.  Would the REIT conversion as outlined in the letters from [      ] constitute a change in control of these mortgage bankers as described in Section 594(b) of the Banking Law?

Recommendation

The REIT conversion of the corporation does constitute a change in control.

Background

The [                ]is in the process of converting to a Real Estate Investment Trust (REIT).  [          ] is converting from a holding company with stock trading on the Nasdaq National Market to a REIT with stock trading on the NYSE. [       ] currently owns two mortgage bankers.

[      ] has included the pre- and post- conversion organizational charts for further explanation of the changes.  During the conversion process, the current parent company, [      ], a [         ] Corporation, moves underneath [         ], a [       ] Corporation, on the organizational chart and [          ] becomes the ultimate parent company. At the same time, [           ] amends its name to [     ].  The directors and officers of the new parent company are all of the same directors and officers of the old subsidiary company, [             ] REIT, [            ].  The purpose of the reorganization is so that the new parent company can function as a REIT.

Reasoning

Under Section 594 of the Banking Law, any changes in control of the business of a licensee or registrant must have prior approval of the superintendent.

In this case, the two licensed mortgage bankers were the wholly-owned subsidiaries of [              ].  Following the transaction, the two licensed mortgage bankers become the subsidiaries of what was formerly known as [            ], which has been renamed [                       ].  This entity has never obtained permission from the Banking Department to own these two mortgage bankers and is required to do so under section 594 of the Banking Law.  Moreover, we need to confirm the identity of the officers and directors of this company, as well as the rest of the information we normally would obtain.  If the officers and directors of the new [             ], are the same as formerly passed upon by the Banking Department when it approved the old [                   ], the Division may be able to waive some of the change of control requirements.

Noted:______
S.A.K.  

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