La. Admin. Code tit. 10 § III-335

Current through Register Vol. 50, No. 12, December 20, 2024

Section III-335 - Review of Representative Portion

A. Designation of Person. The board of directors shall adopt a resolution in writing designating an executive officer of the bank or qualified third party to conduct a review of a representative portion of the pool of loans to determine that the individual borrowers appear creditworthy. If the board designates an officer of the bank to conduct the review, the person designated shall be someone other than the originating officer.

B. Documentation of Sample. The person designated by the board shall document the method by which the bank selected a representative portion of loans from the pool for review. The board shall document both its review of the method chosen and its reasons for acceptance of the method of selection.

C. Board Discussion of Initial Review. Prior to purchase, the board should discuss all aspects of the purchase, including the initial review of sampling of loans within the pool, agreements to be entered into between the bank and the seller, and any additional information that is necessary for the board to make a fully informed decision. This discussion shall be fully noted within the board minutes.

D. Loan Review

1. On each loan selected for review, the following information should be documented:

a. date of review;

b. borrower's name;

c. original loan amount;

d. present balance of the loan;

e. purpose of the loan;

f. description of collateral pledged, if applicable;

g. collateral value and how obtained;

h. holder of any prior liens and the balance of same, if applicable;

i. payment history of the loan, if applicable;

j. credit history of borrower;

k. any documentation exceptions;

l. any other information deemed necessary for the proper analysis of the credit.

2. Documentation exceptions noted during the review process shall be corrected prior to the purchase. The bank shall conduct its review of the individual loans for compliance with its own underwriting standards established within its loan policy and state its reasons for acceptance of those loans which do not meet these standards.

E. Compliance with Applicable Laws. The bank shall be responsible for reviewing appraisals to determine their compliance with state and federal statutes addressing appraisal standards for loans which are above a certain level established within these statutes and are secured by real estate. The bank shall maintain a copy of all such appraisals which document its review for compliance. On those applicable loans for which the appraisal does not meet the established standards, the bank shall take all steps necessary to bring it into compliance. In addition, the bank shall also be responsible for taking reasonable steps to ensure that all other applicable laws and regulations are being followed.

F. Agreements between Seller and Bank. Any agreements to be entered into between the bank and the seller of the pool shall be reviewed by the bank's legal counsel to ensure that no unreasonable restrictions or undue risk is placed upon the bank. The agreement shall address the seller's liability for reimbursement to the bank in the event that records evidencing the bank's ownership rights are lost or misplaced.

G. Safekeeping of Records. Once the decision to purchase the loan pool is made, the bank shall take all steps necessary to ensure that notes for individual loans contained in the pool are properly identified as sold to the bank.

H. Retention of Initial Review. If the board approves and the bank purchases the pool, it shall maintain the initial review of the selected representative portion of the pool for inspection at subsequent regulatory examinations.

La. Admin. Code tit. 10, § III-335

Promulgated by the Department of Economic Development, Office of Financial Institutions, LR 19:37 (January 1993).

AUTHORITY NOTE: Promulgated in accordance with Act 1129 of 1992.