N.M. Code R. § 12.20.38.8

Current through Register Vol. 35, No. 11, June 11, 2024

Section 12.20.38.8 - TIME-SHARE LOANS

A. An association may make direct or indirect time-share loans provided that:

(1) at any one time the total investment made under this sub-part [now part] and in any consumer loans in aggregate shall not exceed 30 percent of any association's assets; and

(2) the requirements of this section are met. The authority to make a time-share loan includes the authority to originate, purchase, sell, service and participate in such loans provided that such loans conform to the provisions of this sub-part [now part] and the association's written underwriting standards.

B. If a loan that may be made under this sub-part [now part] is also authorized to be made under another regulation or statutory provision, which may have different percentage-of-assets and other limitations or requirements, an association shall have the option of choosing under which applicable provision the loan shall be made.

C. The total balances of all outstanding time-share loans to one borrower, or on which any other person may become obligated directly or indirectly, is limited to the lesser of ten percent of an association's savings accounts or 100 percent of its net worth, reduced by the amount of other loans to that same borrower.

D. In no event shall an association make, purchase, sell, service or enter into any participation transaction, directly or indirectly, in a time-share loan unless the association first obtains the following:

(1) an individual credit analysis of each time-share loan purchaser which establishes the purchaser's creditworthiness;

(2) an analysis of the time-share project which includes:

(a) the identity of the developer; a report on the principals comprising the developer, including resumes of the principals; previous time-share experience; and financial statements of the principals and any guarantors of the developer;

(b) sales history of the project which includes a description of the sales program; copies of advertising, mailers and brochures; sales projections for the next two years, and pricing structure for units;

(c) a report on any litigation pending against the project or developer;

(d) an independent appraisal of the value of any time-share unit which is the security for the note or contract being purchased;

(e) a title opinion from an attorney in the state where the project is located that the time-share estate being purchased by the purchaser meets the definition of "time-share estate" provided herein;

(f) legal documentation on the project which includes copies of the deed to the project and any other documents indicating ownership; articles of incorporation or partnership agreement; any condominium or time-share filings, if required, with the state where the project is located; by-laws of the time-share owners' association; and the project's management agreement.

(3) the original purchaser documents for each loan including the purchase and sale agreement, note, deed of trust or mortgage, credit application, any additional disclaimers or disclosures given customers; or a non-negotiable trust receipt issued by a federally insured institution indicating that the association is the true owner of the note and the security instruments; or certified or conformed copies of documents where the originals are required to be maintained in a public registry;

(4) an insurance policy issued by an insurance company with at least an "A" rating as listed in a nationally recognized insurance rating guide such as Best's. The policy shall insure with no deductibles the unpaid balance of the notes or contracts against default by the purchaser and against fraud, forgery and the mysterious disappearance of said notes or contracts;

(5) proof from the developer or dealer that it has a fidelity bond in excess of the total amount of all notes or contracts transferred from said dealer or developer to the association;

(6) a current aging schedule on each note or contract reflecting collections experience by month for the past twelve months. No association shall purchase any notes or contracts which are less than 90 days old or are more than 30 days delinquent;

(7) a copy or copies of any collection and servicing agreements and contracts for any notes or contracts which the association intends to purchase from, or take as security for any loan to, a developer or dealer. Any servicing or collection agency utilized by the association shall be independent from the developer or dealer.

E. In no event shall an association make, purchase, sell, service or enter into any participation transaction, directly or indirectly, in a time-share loan unless the time-share estate being purchased by the purchaser meets the definition of "time-share estate" as provided herein.

F. Prior to making, purchasing, participating in or accepting as security any time-share notes or contracts, the association shall have established by resolution of its board of directors underwriting standards which include, at a minimum, the requirements of Subsection 8.4 of this Sub-part [now Subsection D of 12.20.38.8 NMAC].

G. An association shall not purchase or accept as security any time-share notes or contracts unless a minimum of five percent down payment has been made by the original purchaser.

H. In making, purchasing, selling, participating in or obtaining as security any time-share notes or contracts, an association shall comply with all applicable regulations of the supervisor, the federal home loan bank board and the federal savings and loan insurance corporation.

N.M. Code R. § 12.20.38.8

10/13/83; 8/30/97; Recompiled 10/15/01