§ 371. — Real estate loans.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC371]
TITLE 12--BANKS AND BANKING
CHAPTER 3--FEDERAL RESERVE SYSTEM
SUBCHAPTER X--POWERS AND DUTIES OF MEMBER BANKS
Sec. 371. Real estate loans
(a) Authorization to make real estate loans; orders, rules, and
regulations of Comptroller of the Currency
Any national banking association may make, arrange, purchase or sell
loans or extensions of credit secured by liens on interests in real
estate, subject to section 1828(o) of this title and such restrictions
and requirements as the Comptroller of the Currency may prescribe by
regulation or order.
(b) Eligibility for discount as commercial paper of notes representing
loans financing construction of residential or farm buildings;
prerequisites
Notes representing loans made under this section to finance the
construction of residential or farm buildings and having maturities not
to exceed nine months shall be eligible for discount as commercial paper
within the terms of the first paragraph of section 343 of this title if
accompanied by a valid and binding agreement to advance the full amount
of the loan upon the completion of the building entered into by an
individual, partnership, association, or corporation acceptable to the
discounting bank.
(Dec. 23, 1913, ch. 6, Sec. 24, 38 Stat. 273; Sept. 7, 1916, ch. 461, 39
Stat. 754; Feb. 25, 1927, ch. 191, Sec. 16, 44 Stat. 1232; June 27,
1934, ch. 847, Sec. 505, 48 Stat. 1263; Aug. 23, 1935, ch. 614, title
II, Sec. 208, title III, Sec. 328, 49 Stat. 706, 717; Mar. 28, 1941, ch.
31, Sec. 8, 55 Stat. 62; July 22, 1937, ch. 517, Sec. 15(a), as added
Aug. 14, 1946, ch. 964, Sec. 5, 60 Stat. 1079; May 25, 1948, ch. 334,
Sec. 9, 62 Stat. 265; Oct. 25, 1949, ch. 729, Sec. 6, 63 Stat. 906; Apr.
20, 1950, ch. 94, title V, Sec. 502, 64 Stat. 80; Sept. 1, 1951, ch.
378, title II, Sec. 207, title V, Sec. 503, 65 Stat. 303, 312; Aug. 15,
1953, ch. 510, 67 Stat. 613; July 22, 1954, ch. 561, 68 Stat. 525; Aug.
28, 1937, ch. 870, Sec. 10(f), as added Aug. 17, 1954, ch. 751,
Sec. 1(4), 68 Stat. 736; Aug. 11, 1955, ch. 781, Secs. 1, 2, 69 Stat.
633, 634; Pub. L. 85-536, Sec. 3, July 18, 1958, 72 Stat. 396; Pub. L.
86-251, Sec. 4, Sept. 9, 1959, 73 Stat. 489; Pub. L. 87-70, title VIII,
Sec. 804(c), title IX, Sec. 902, June 30, 1961, 75 Stat. 188, 191; Pub.
L. 87-717, Sept. 28, 1962, 76 Stat. 662; Pub. L. 88-341, June 30, 1964,
78 Stat. 233; Pub. L. 88-560, title X, Sec. 1004, Sept. 2, 1964, 78
Stat. 807; Pub. L. 89-117, title II, Sec. 201(b)(2), title XI,
Sec. 1111, Aug. 10, 1965, 79 Stat. 465, 509; Pub. L. 89-754, title V,
Sec. 504(a)(2), Nov. 3, 1966, 80 Stat. 1277; Pub. L. 90-19, Sec. 26, May
25, 1967, 81 Stat. 28; Pub. L. 90-448, title IV, Sec. 416(b), title
XVII, Sec. 1718, Aug. 1, 1968, 82 Stat. 518, 609; Pub. L. 91-351, title
VII, Sec. 704, July 24, 1970, 84 Stat. 462; Pub. L. 91-609, title VII,
Sec. 727(c), Dec. 31, 1970, 84 Stat. 1803; Pub. L. 93-383, title VII,
Sec. 711, title VIII, Sec. 802(i)(1), Aug. 22, 1974, 88 Stat. 716, 725;
Pub. L. 97-320, title IV, Sec. 403(a), Oct. 15, 1982, 96 Stat. 1510;
Pub. L. 102-242, title III, Sec. 304(b), Dec. 19, 1991, 105 Stat. 2354.)
Amendments
1991--Subsec. (a). Pub. L. 102-242 substituted ``section 1828(o) of
this title and such restrictions and requirements as the Comptroller of
the Currency may prescribe by regulation or order'' for ``such terms,
conditions, and limitations as may be prescribed by the Comptroller of
the Currency by order, rule, or regulation''.
1982--Subsec. (a). Pub. L. 97-320 amended subsec. (a) generally.
Prior to amendment subsec. (a) read as follows:
``(1) Any national banking association may make real estate loans,
secured by liens upon unimproved real estate, upon improved real estate,
including improved farmland and improved business and residential
properties, and upon real estate to be improved by a building or
buildings to be constructed or in the process of construction, in an
amount which when added to the amount unpaid upon prior mortgages,
liens, encumbrances, if any, upon such real estate does not exceed the
respective proportions of appraised value as provided in this section. A
loan secured by real estate within the meaning of this section shall be
in the form of an obligation or obligations secured by a mortgage, trust
deed, or other instrument, which shall constitute a lien on real estate
in fee or, under such rules and regulations as may be prescribed by the
Comptroller of the Currency, on a leasehold under a lease which does not
expire for at least ten years beyond the maturity date of the loan, and
any national banking association may purchase or sell any obligations so
secured in whole or in part. The amount of any such loan hereafter made
shall not exceed 66\2/3\ per centum of the appraised value if such real
estate is unimproved, 75 per centum of the appraised value if such real
estate is improved by offsite improvements such as streets, water,
sewers, or other utilities, 75 per centum of the appraised value if such
real estate is in the process of being improved by a building or
buildings to be constructed or in the process of construction, or 90 per
centum of the appraised value if such real estate is improved by a
building or buildings. If any such loan exceeds 75 per centum of the
appraised value of the real estate or if the real estate is improved
with a one- to four-family dwelling, installment payments shall be
required which are sufficient to amortize the entire principal of the
loan within a period of not more than thirty years.
``(2) The limitations and restrictions set forth in paragraph (1)
shall not prevent the renewal or extension of loans heretofore made and
shall not apply to real estate loans (A) which are insured under the
provisions of the National Housing Act [12 U.S.C. 1701 et seq.], (B)
which are insured by the Secretary of Agriculture pursuant to title I of
the Bankhead-Jones Farm Tenant Act, or the Act of August 28, 1937, as
amended, or title V of the Housing Act of 1949, as amended, [42 U.S.C.
1471 et seq.], or (C) which are guaranteed by the Secretary of Housing
and Urban Development, for the payment of the obligations of which the
full faith and credit of the United States is pledged, and such
limitations and restrictions shall not apply to real estate loans which
are fully guaranteed or insured by a State, or any agency or
instrumentality thereof, or by a State authority for the payment of the
obligations of which the faith and credit of the State is pledged, if
under the terms of the guaranty or insurance agreement the association
will be assured of repayment in accordance with the terms of the loan,
or to any loan at least 20 per centum of which is guaranteed under
chapter 37 of title 38, or to obligations guaranteed under section 1440
of title 42.
``(3) Loans which are guaranteed or insured as described in
paragraph (2) shall not be taken into account in determining the amount
of real estate loans which a national banking association may make in
relation to its capital and surplus or its time and savings deposits or
in determining, the amount of real estate loans secured by other than
first liens. Where the collateral for any loan consists partly of real
estate security and partly of other security, including a guaranty or
endorsement by or an obligation or commitment of a person other than the
borrower, only the amount by which the loan exceeds the value as
collateral of such other security shall be considered a loan upon the
security of real estate, and in no event shall a loan be considered as a
real estate loan where there is a valid and binding agreement which is
entered into by a financially responsible lender or other party either
directly with the association or which is for the benefit of or has been
assigned to the association and pursuant to which agreement the lender
or other party is required to advance to the association within sixty
months from the date of the making of such loan the full amount of the
loan to be made by the association upon the security of real estate.
Except as otherwise provided, no such association shall make real estate
loans in an aggregate sum in excess of the amount of the capital stock
of such association paid in and unimpaired plus the amount of its
unimpaired surplus fund, or in excess of the amount of its time and
savings deposits, whichever is greater: Provided, That the amount unpaid
upon real estate loans secured by other than first liens, when added to
the amount unpaid upon prior mortgages, liens, and encumbrances, shall
not exceed in an aggregate sum 20 per centum of the amount of the
capital stock of such association paid in and unimpaired plus 20 per
centum of the amount of its unimpaired surplus fund.''
Subsec. (b). Pub. L. 97-320 redesignated subsec. (d) as (b) and
struck out former subsec. (b) ``Any national banking association may
make real estate loans secured by liens upon forest tracts which are
properly managed in all respects. Such loans shall be in the form of an
obligation or obligations secured by mortgage, trust deed, or other such
instrument; and any national banking association may purchase or sell
any obligations so secured in whole or in part. The amount of any such
loan, when added to the amount unpaid upon prior mortgages, liens, and
encumbrances, if any, shall not exceed 66\2/3\ per centum of the
appraised fair market value of the growing timber, lands, and
improvements thereon offered as security and the loan shall be made upon
such terms and conditions as to assure that at no time shall the loan
balance, when added to the amount unpaid upon prior mortgages, liens,
and encumbrances, if any, exceed 66\2/3\ per centum of the original
appraised total value of the property then remaining. No such loan shall
be made for a longer term than three years; except that any such loan
may be made for a term not longer than fifteen years if the loan is
secured by an amortized mortgage, deed of trust, or other such
instrument under the terms of which the installment payments are
sufficient to amortize the principal of the loan within a period of not
more than fifteen years and at a rate at least 6\2/3\ per centum per
annum. All such loans secured by liens upon forest tracts shall be
included in the permissible aggregate of all real estate loans and, when
secured by other than first liens, in the permissible aggregate of all
real estate loans secured by other than first liens, prescribed in
subsection (a) of this section, but no national banking association
shall make forest tract loans in an aggregate sum in excess of 50 per
centum of its capital stock paid in and unimpaired plus 50 per centum of
its unimpaired surplus fund.''
Subsec. (c). Pub. L. 97-320 struck out subsec. (c) ``Loans made to
finance the construction of a building or buildings and having
maturities of not to exceed sixty months where there is a valid and
binding agreement entered into by a financially responsible lender or
other party to advance the full amount of the bank's loan upon
completion of the building or buildings, and loans made to finance the
construction of residential or farm buildings and having maturities of
not to exceed sixty months, may be considered as real estate loans if
the loans qualify under this section, or such loans may be classed as
commercial loans whether or not secured by a mortgage or similar lien on
the real estate upon which the building or buildings are being
constructed, at the option of each national banking association that may
have an interest in such loan: Provided, That no national banking
association shall invest in, or be liable on, any such loans classed as
commercial loans under this subsection in an aggregate amount in excess
of 100 per centum of its actually paid-in and unimpaired capital plus
100 per centum of its unimpaired surplus fund.''
Subsec. (d). Pub. L. 97-320 redesignated subsec. (d) as (b).
Subsec. (e). Pub. L. 97-320 struck out subsec. (e) ``Loans made to
any borrower (i) where the association looks for repayment by relying
primarily on the borrower's general credit standing and forecast of
income, with or without other security, or (ii) secured by an assignment
of rents under a lease, and where, in either case described in clause
(i) or (ii) above, the association wishes to take a mortgage, deed of
trust, or other instrument upon real estate (whether or not constituting
a first lien) as a precaution against contingencies, and loans in which
the Small Business Administration cooperates through agreements to
participate on an immediate or deferred or guaranteed basis under the
Small Business Act [15 U.S.C. 631 et seq.], shall not be considered as
real estate loans within the meaning of this section but shall be
classed as commercial loans.''
Subsec. (f). Pub. L. 97-320 struck out subsec. (f) ``Any national
banking association may make loans upon the security of real estate that
do not comply with the limitations and restrictions in this section, if
the total unpaid amount loaned, exclusive of loans which subsequently
comply with such limitations and restrictions, does not exceed 10 per
centum of the amount that a national banking association may invest in
real estate loans. The total unpaid amount so loaned shall be included
in the aggregate sum that such association may invest in real estate
loans.''
Subsec. (g). Pub. L. 97-320 struck out subsec. (g) ``Loans made
pursuant to this section shall be subject to such conditions and
limitations as the Comptroller of the Currency may prescribe by rule or
regulation.''
1974--Subsec. (a). Pub. L. 93-383, Secs. 711, 802(i)(1), designated
unlettered first par. as subsec. (a), substantially revised provisions
relating to real estate loans by associations, and inserted reference to
obligations guaranteed by section 1440 of title 42.
Subsecs. (b) to (f). Pub. L. 93-383, Sec. 711, designated unlettered
second, third, fourth, and fifth pars. as subsecs. (b) to (f) and
substantially revised provisions relating to real estate loans secured
by liens upon forest tracts, loans made to finance the construction of
buildings, notes representing loans, repayment of loans, and waiver of
restrictions and limitations.
Subsec. (g). Pub. L. 93-383, Sec. 711, added subsec. (g) authorizing
the Comptroller of the Currency to prescribe rules and regulations
relating to loans.
1970--Pub. L. 91-609 authorized national banks to invest in
obligations guaranteed under part B of the Urban Growth and New
Community Development Act of 1970.
Pub. L. 91-351 substituted in cl. (3) of third sentence of first
par. ``90 per centum'' for ``80 per centum'' and ``thirty years'' for
``twenty-five years'', and in first sentence of third par. ``sixty
months'' for ``thirty-six months'' wherever appearing.
1968--Pub. L. 90-448, Sec. 416(b), substituted ``any national
banking association may make loans or purchase obligations for land
development which are secured by mortgages insured under title X of the
National Housing Act or guaranteed under title IV of the Housing and
Urban Development Act of 1968'' for ``any national banking association
may make loans for land development which are secured by mortgages
insured under title X of the National Housing Act'' in first par.
Pub. L. 90-448, Sec. 1718, substituted ``in whole or in part and at
any time or times prior to the maturity of such obligation'' for ``when
the entire amount of such obligation is sold to the association''
wherever appearing in first and second pars., ``thirty-six months'' for
``twenty-four months'' in two places in second par., and ``Loans made to
any borrower (i) where the association looks for repayment by relying
primarily on the borrower's general credit standing and forecast of
income, with or without other security, or (ii) where the association
relies on other security as collateral for the loans (including but not
limited to a guaranty of a third party), and where, in either case
described in clause (i) or (ii) above, the association wishes to take a
mortgage, deed of trust, or other instrument upon real estate (whether
or not constituting a first lien) as a precaution against contingencies,
such loans shall not be considered as real estate loans within the
meaning of this section but shall be classed as ordinary non-real-estate
loans'' for ``Loans made to manufacturing and industrial businesses
where the association looks for repayment out of the operations of the
borrower's business, relying primarily on the borrower's general credit
standing and forecast of operations, with or without other security, but
wishes to take a mortgage on the borrower's real estate as a precaution
against contingencies, shall not be considered as real estate loans
within the meaning of this section but shall be classed as ordinary
commercial loans'' in last par.
1967--Pub. L. 90-19 substituted ``Secretary of Housing and Urban
Development'' for ``Housing and Home Finance Administrator'' in first
sentence of fourth par.
1966--Pub. L. 89-754 permitted national banking associations to make
loans for group practice facilities which are secured by mortgages
insured under subchapter IX-B of chapter 13 of this title.
1965--Pub. L. 89-117 permitted national banking associations to make
loans for land development which are secured by mortgages insured under
title X of the National Housing Act and increased from 18 months to 24
months the maximum maturity of industrial, commercial, and residential
construction loans.
1964--Pub. L. 88-560 substituted in cl. (3) of third sentence of
first par. ``80'' for ``75'' per centum and ``twenty-five'' for ``20''
years.
Pub. L. 88-341 substituted ``60 per centum of the appraised fair
market value of the growing timber, lands, and improvements thereon''
for ``40 per centum of the appraised value of the economically
marketable timber'', ``60 per centum of the original appraised total
value of the property'' for ``40 per centum of the original appraised
value of the economically marketable timber'', increased the permissible
loan term from 2 to 3 years in the case of unamortized loans, from 10 to
15 years in the case of amortized loans, and decreased the annual rate
from 10 to 6\2/3\ per centum.
1962--Pub. L. 87-717 increased aggregate real estate loan limitation
from 60 to 70 per centum of a bank's time and savings deposits, and
limitation on maturities for loans made to finance the construction of
residential or farm buildings, from nine months or less to eighteen
months or less.
1961--Pub. L. 87-70 inserted ``, or title V of the Housing Act of
1949, as amended'' after ``sections 590r to 590x-3 of title 16'' in
first par., and in next to last par. inserted provisions permitting home
improvement loans which are insured under section 1709(k) or 1715k(h) of
this title to be made without regard to the first lien requirements of
this section.
1959--Pub. L. 86-251, Sec. 4(a), substituted in second sentence of
first par., ``under a lease which does not expire for at least 10 years
beyond the maturity date of the loan'' for ``(1) under a lease for not
less than ninety-nine years which is renewable or (2) under a lease
having a period of not less than fifty years to run from the date the
loan is made or acquired by the national banking association''.
Pub. L. 86-251, Sec. 4(b)(1), (2), added cl. (3) in third sentence
of first par., redesignated former cl. (3) as cl. (4), and prohibited
the application of the described limitations and restrictions to State-
guaranteed loans.
Pub. L. 86-251, Sec. 4(c), inserted provisions in third par.
classifying certain loans for construction of industrial or commercial
buildings as ordinary commercial loans and authorized investments in or
liability on loans in an amount that includes 100 per centum of its
unimpaired surplus fund.
Pub. L. 86-251, Sec. 4(d), added par. classifying certain loans to
manufacturing and industrial businesses as ordinary commercial loans.
1958--Pub. L. 85-536 amended fourth par. by striking out ``or the
Small Business Administration'' after ``Housing and Home Finance
Administrator'' and ``or the Small Business Act of 1953'' after ``or
1701g-1 of this title'', and inserting provisions exempting loans in
which the Small Business Administration cooperates through agreements to
participate on an immediate or deferred basis from the restrictions or
limitations of this section imposed upon loans secured by real estate.
1955--Act Aug. 11, 1955, Sec. 1, amended first par. generally to
increase the percentage of the loan to the appraised value of the
property from 60 to 66\2/3\ percent in the case of 40 percent amortized
residential mortgage loans not exceeding a 10-year maturity, and to
permit national banks to make a residential real-estate loan in an
amount not to exceed 66\2/3\ percent of the appraised value of the
property and for a term not longer than 20 years.
Act Aug. 11, 1955, Sec. 2, amended third par. by increasing from 6
to 9 months construction loans for the purpose of financing residential
or farm buildings.
1954--Act Aug. 17, 1954, amended third sentence of first par. by
inserting ``, or sections 590r to 590x-3 of title 16'' after ``sections
1001-1005d of title 7''.
Act July 22, 1954, amended fourth par. by inserting references to
the Small Business Administration and to the Small Business Act of 1953.
1953--Act Aug. 15, 1953, amended section by inserting new second
par. to permit the making of real estate loans secured by first liens
upon forest tracts which are properly managed.
1951--Act Sept. 1, 1951, Sec. 207, amended third sentence of first
par. by inserting a reference to subchapter X of chapter 13 of this
title.
Act Sept. 1, 1951, Sec. 503, amended third par. by inserting a
reference to the Housing and Home Finance Administrator, and references
to sections 1701g and 1701g-1 of this title.
1950--Act Apr. 20, 1950, amended third sentence of first par. by
substituting ``1748-1748g, or 1706c of this title'' for ``or 1748-1748g
of this title''.
1949--Joint Res. Oct. 25, 1949, amended first par. by striking out
second sentence and inserting new second sentence, and by inserting
``sections 1707-1715, 1736-1742, and 1748-1748g of this title'' for
``sections 1707-1715 and 1736-1742 of this title''.
1948--Act May 25, 1948, amended third par. by striking out
references to certain lending authority which the Corporation was
granted under section 604(a) of title 15, as amended in 1947, and which
it does not now have.
1946--Act Aug. 14, 1946, amended first par. by inserting ``or which
are insured by the Secretary of Agriculture pursuant to sections 1001-
1005d of title 7''.
1941--Act Mar. 28, 1941, amended third sentence of first par. by
inserting reference to sections 1736 to 1742 of this title.
1935--Act Aug. 23, 1935, amended first par. and added third par.
1934--Act June 27, 1934, amended first par. and added second par.
1927--Act Feb. 25, 1927, amended first par.
Effective Date of 1982 Amendment
Section 403(c) of Pub. L. 97-320 provided that: ``This section
[amending this section and section 92 of this title] shall take effect
upon the expiration of one hundred and eighty days after the date of its
enactment [Oct. 15, 1982].''
Repeals
Repealing provisions of Consolidated Farmers Home Administration Act
of 1961 as not having the effect of repealing the amendments to this
section enacted by act July 22, 1937, Sec. 15(a), as added Aug. 14,
1946, and Aug. 28, 1937, Sec. 10(f), as added Aug. 17, 1954, see section
341(a) of Pub. L. 87-128, title III, Aug. 8, 1961, 75 Stat. 318, set out
as a References in Other Laws note under section 1921 of Title 7,
Agriculture.
Exception as to Transfer of Functions
Functions vested by any provision of law in Comptroller of the
Currency, referred to in this section, not included in transfer of
functions to Secretary of the Treasury, see note set out under section 1
of this title.
