6.2-878 - (Effective October 1, 2010) Loans secured by real estate generally.
§ 6.2-878. (Effective October 1, 2010) Loans secured by real estate generally.
A. As used in this section, "loan secured by real estate" means anobligation executed or assumed by the borrower that is secured by mortgage,deed of trust, or similar instrument, encumbering real estate that is ownedby the borrower and upon which the bank relies as the principal security forthe loan.
B. No bank shall make any loan secured by real estate when such loan,together with all prior liens or encumbrances on such real estate, exceeds 90percent of the appraised value of the real estate securing such loan.
C. The appraisals necessitated by this section shall be required if the loanshall equal or exceed an amount established from time to time by theCommissioner. In establishing such amount, the Commissioner shall take intoconsideration the requirements imposed on banks under applicable federalregulations. Such appraisals shall be in writing, signed by the appraisers,and shall be retained in the files of the bank, subject to examination ofbank examiners. The appraisers so appointed shall be experienced personscompetent to appraise real estate in the locality where the real estate islocated.
D. Any bank may make loans secured by real estate that do not comply with thelimitations and restrictions in this section if the total unpaid amount ofsuch loans, exclusive of the loans that subsequently comply with suchlimitations and restrictions, does not exceed 10 percent of the total amountof loans secured by real estate.
E. The provisions of this section relating to ratio of loan to appraisedvalue and appraisal shall not apply if:
1. The real estate security is taken solely as an abundance of caution onterms which are not more favorable than they would be in absence of such alien on real estate;
2. A real estate security conveyance is taken by or ancillary to theassignment of lease obligations upon which the bank is relying primarily andprudently;
3. A subsequent transaction results from an existing extension of creditproviding (i) that the borrower has performed satisfactorily, (ii) there isno advance of new money, except as formerly agreed, (iii) the credit standingof the borrower is not deteriorating, and (iv) there is no obvious andnoticeable deterioration of marketing conditions or the physical assets whichprovide collateral security to the bank; or
4. A lien upon real estate is taken to secure a prior advance which was notsecured by such real estate.
F. In cases where an appraisal by a state-certified or state-licensedappraiser is not required, under this section or other sections of thischapter in a real estate-related financial transaction, the bank as a matterof prudence may take and preserve a reasonable appraisal, valuation, oranalysis of real estate or real property in connection with such transaction.
G. The Commission may by order or regulation eliminate loans or specificcategories of loans from the requirements of this section.
H. The provisions of this section shall not be construed to prohibit any bankfrom accepting, as security for a loan that it had made in good faith withoutsecurity or upon security since found to be inadequate, an obligation orobligations secured by mortgage, deed of trust, or other such instrument uponreal estate.
(Code 1950, § 6-78; 1952, c. 25; 1956, c. 622; 1960, c. 23; 1964, c. 150;1966, c. 584, §§ 6.1-63, 6.1-65; 1968, c. 549; 1972, c. 189; 1976, c. 487;1978, c. 624; 1979, c. 375; 1981, c. 271; 1982, c. 263; 1984, c. 133; 1988,c. 170; 1991, c. 160; 1992, c. 68; 1994, c. 501; 2005, c. 263; 2010, c. 794.)