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Banking Interpretations

General Regulations of The Banking Board 80.1 and 80.2

October 25, 2006

To: [ ]

From: Alan Weinberg, Assistant Counsel

Subject: NY Statutory Interpretation


Your inquiry to Sara Kelsey, Deputy Superintendent and General Counsel, was referred to me for a reply.

Your question relates to the exemption in § 80.2(a) of the General Regulations of the Banking Board, which provides as follows:

"junior mortgage loans which equal or exceed $250,000 when combined with the outstanding unpaid principal balance on existing loans secured by the type of security described in section 80.1(c) of this Part at the time such junior mortgage loan is made, shall be exempt from the provisions of this Part."

In particular, you would like to know whether, in determining whether or not a junior loan exceeds the $250,000 threshold, one should total the junior mortgage loan with all prior first and junior lien loans, or only the prior junior lien loans (excluding any first lien loans)?

In determining whether the junior loan exceeds the $250,000 threshold, one should total the junior mortgage loan with all prior first and junior lien loans, including any first lien loans. One caveat exists, however: the outstanding unpaid principal balance on such prior loans, as stated in the quoted language above, must be " secured by the type of security described in section 80.1(c) of this Part."

Section 80.1(c) of the General Regulations of the Banking Board provides that:

(c) The term junior mortgage loan shall mean a loan or other extension of credit to a natural person secured by:

(1) a mortgage on real property which is:

(i) improved by a one-to-four-family owner-occupied residence;

(ii) subject to the lien of one or more prior mortgages or similar recorded encumbrances; or

(2) a junior interest in or junior lien on certificates of stock or other evidences of an ownership interest in, and a proprietary lease from, a corporation or partnership formed for the purpose of cooperative ownership of residential real estate.

Thus, the type of security described in this section is either:

a one-to-four-family owner-occupied residence or certificates of stock (or other evidences of an ownership interest) in, and a proprietary lease from, a corporation or partnership formed for the purpose of cooperative ownership of residential real estate.

If I can be of any further assistance, please let me know.

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