Article 5. Limitations And Regulations Of Loans And Purchased Obligations of California Financial Code >> Division 7. >> Chapter 3. >> Article 5.

An industrial loan company that has investment certificates outstanding shall not make any loan or purchase or discount any other obligation with a maturity of more than 60 months and 15 days unless all of the following conditions are met:
  (a) The loan or other obligation is secured.
  (b) The property, or collateral securing the loan or other obligation, is of a kind or class that has been declared eligible by regulation of the commissioner.
  (c) The aggregate principal balance of such loans and other obligations outstanding with a remaining maturity of more than 60 months and 15 days at any time shall not exceed a percentage of the aggregate principal balance due on all loans and other obligations owing to the industrial loan company by rule of the commissioner.

(a) Except as set forth in subdivisions (b) and (c), any loan or obligation made or acquired by an industrial loan company that has investment certificates outstanding that is secured primarily by real property and has an outstanding principal balance of ten thousand dollars ($10,000) or more shall be secured by real property having a fair market value, or real property and personal property combined having a fair market value, at the time the loan or other obligation is made or acquired, of at least 110 percent of the principal amount owing on the loan or obligation and on prior encumbrances, except nondelinquent tax liens, secured by the same real property with regard to loans secured solely by real property, or by both real property and personal property. Fair market value of the real property for purposes of this section shall be determined by a real property appraiser who meets the qualifications established pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Public Law 101-73, and any applicable regulations, guidelines, or policies thereunder.
  (b) Subdivision (a) does not apply to:
  (1) Any loan guaranteed in whole or in part by the Administrator of Veterans Affairs pursuant to the Servicemen's Readjustment Act of 1944 or any act of Congress supplementary or amendatory thereof.
  (2) Any loan insured by the Federal Housing Administration pursuant to the National Housing Act or any act of Congress supplementary or amendatory thereof.
  (c) Subject to all other provisions of subdivision (a) and any requirements the commissioner may impose by rule or order, the following loans may be secured by real property having a fair market value of less than 110 percent of the principal amount of the loan and prior encumbrances:
  (1) Any loan made by an industrial loan company to facilitate the sale of real property owned by the industrial loan company resulting from foreclosure or receipt of a deed in lieu of foreclosure.
  (2) Any loan renewed or modified by an industrial loan company pursuant to a clearly defined and well-documented program adopted by the board of directors of the industrial loan company to achieve orderly repayment of the loan or to maximize recovery of the loan.
  (3) Any loan or obligation saleable in the secondary market. For purposes of this paragraph, "saleable in the secondary market" means saleable to a qualified institutional buyer, as evidenced by irrevocable commitments to buy by those qualified institutional buyers.
  (4) Any loan or obligation owned for less than 90 days.
  (d) In complying with the requirement of subdivision (a), an industrial loan company may include the principal amount of private mortgage insurance.
  (e) Any loan or obligation made or acquired by an industrial loan company that has investment certificates outstanding that is secured solely by motor vehicles or other personal property shall be secured by that property having a fair market value at the time the loan or other obligation is made or acquired of at least 100 percent of the principal amount owing on the loan or obligation. The personal property held as security shall be of a class or kind that has been declared eligible by regulation of the commissioner.

An industrial loan company may make loans and acquire obligations, the proceeds of which are used for home improvements that are secured by real property having a market value of at least 100 percent of the principal amount owing on the loan being made by the industrial loan company or obligation being acquired by the industrial loan company and on prior encumbrances, except nondelinquent tax liens, secured by the same real property. Home improvements means additions, alterations, or modifications to owner-occupied property consisting of one to four dwelling units and appurtenant buildings thereto or to the real property containing same.

An industrial loan company shall file a written request for authorization to conduct business under Section 18266.1. The request shall include the following information:
  (a) A description of the company's proposed plan of business.
  (b) The character, business qualifications, and other experience of the proposed officers and managers directing the line of business for which authorization is requested.
  (c) Any other facts and circumstances bearing on the proposal that, in the opinion of the commissioner, may be relevant.

The commissioner shall approve the request made pursuant to Section 18266.2 within 30 days after filing unless the commissioner has ascertained that the company has failed to show either of the following:
  (a) That the proposed plan of business has a reasonable promise of a successful operation.
  (b) That the company has a person with the necessary business qualifications, experience or ability to direct and manage the operations of the plan of business.

An industrial loan company that has investment certificates outstanding shall not lend in the aggregate more than 5 percent of its capital stock and surplus not available for dividends as provided in Section 18319 upon the security of the stock of any one corporation and that stock may not exceed 10 percent of the outstanding stock of the corporation, or upon the security of the bonds of any one obligor except bonds of the United States or for the payment of which the credit of the United States is pledged, bonds of the State of California, or for the payment of which the credit of the State of California is pledged, and any security authorized in writing by the commissioner or any security authorized by rule of the commissioner.

An industrial loan company that has investment certificates outstanding shall not make any loan secured primarily by improved real property in a principal amount in excess of 20 percent of the company's unimpaired capital stock and surplus not available for dividends as provided in Section 18319. An industrial loan company that has investment certificates outstanding shall not make any loan secured primarily by unimproved real property in a principal amount in excess of 10 percent of the company's unimpaired capital stock and surplus not available for dividends as provided in Section 18319.

An industrial loan company may require the borrower to sign a contract of pledge, assignment, mortgage, security agreement, deed of trust, or trust receipt relating to real or personal property given by the borrower as security for the repayment of the loan and interest and charges thereon.

An industrial loan company that has investment certificates outstanding shall not make loans to, or hold the obligations of, any one person as primary obligor in an aggregate principal amount in excess of 20 percent of the unimpaired capital stock and surplus of the company not available for dividends as provided in Section 18319. Unsecured loans or obligations of any person as primary obligor made or held by a company may not, in any event, exceed in the aggregate principal amount 5 percent of the unimpaired capital stock and surplus of the company not available for dividends as provided in Section 18319.

An industrial loan company shall diversify the loans and lease obligations it makes and other obligations it acquires, both as to the types of debtors and obligors, types of collateral, and as to terms and types of repayment schedules. The requirement for diversification notwithstanding, an industrial loan company may specialize in its lending, leasing, and other authorized practices under this division. The commissioner may promulgate rules and regulations pursuant to this section.

The principal balances of loans made, or obligations purchased, by an industrial loan company that has investment certificates outstanding, which loans or obligations are secured by unimproved real property, shall not in the aggregate exceed 5 percent of the company's assets unless the commissioner consents to the taking of collateral to protect an existing jeopardized obligation.