Savings and Loan Insurance Corporation or by the Federal Deposit Insurance Corporation.

§ 545.6-4a Participation loans on real estate beyond regular lending area. In addition to its authority under § 545.6-4, any Federal association may, to the extent that it has under statute and its charter legal authority to do so, participate in making a loan, secured by first lien upon a home located beyond the association's regular lending area, of any type that it may make under this part, provided each of the lenders is an institution the accounts of which are insured by the Federal Savings and Loan Insurance Corporation, or purchase from any such institution a participation in such a loan. Any Federal association may, to the extent that it has under statute and its charter legal authority to do so, sell to any such institution, without regard to the provisions of § 545.11, a participating interest in any loan, and such sale shall not be regarded as a sale of a loan within the meaning of § 545.11. $545.6-5 Purchase of loans. Any Federal association may purchase loans of any type that it may make; it may also purchase any insured loan secured by a home or combination of home and business property located outside of its regular lending area, at an investment of not more than $35,000: Provided, That no loan may be purchased from an affiliated institution without the prior approval of the Board, or from a director, officer or employee of such association, or from any person or firm regularly serving such association in the capacity of attorney-at-law: And provided further, That if such an association increases its savings accounts as a part of any such purchase it shall obtain such approval as is required by the rules and regulations for insurance of accounts.

§ 545.6-6 Lending area. The regular lending area of a Federal association consists of the area within a radius of fifty miles from such association's home office and, in the case of a Federal association which is converted from a Statechartered institution, that territory beyond fifty miles from its home office in which such association made loans while operating under State charter. Any Federal association may make loans in its regular lending area and, within the 20-percent-of-assets limitation as defined in § 545.6-7, in other territory: Provided, That such association shall

comply with the provisions of the rules and regulations for insurance of accounts with respect to loans on the security of real estate located more than fifty miles from the association's home office. Each converted association that desires to continue to make loans beyond fifty miles from its home office in territory in which it made loans while operating under State charter shall file with the Board a map showing the territory within which such association made loans while operating under State charter. For the purpose of this section a county is the unit of "territory" in which a converted association made loans beyond a radius of 50 miles from its home office while operating under State charter.

§ 545.6-7 Real estate loans and investments subject to 20-percent-of-assets limitation. Any Federal association may make loans of the types enumerated in paragraphs (a) through (d) of this section on the security of first liens on improved real estate only when the resulting aggregate amount of the following investments does not exceed 20 percent of the association's assets:

(a) Loans in excess of $35,000, after deducting each part of any such loan, if secured by a blanket mortgage, which is apportionable in an amount not exceeding $35,000 to each home or combination of home and business property which is a part of the security;

(b) Loans on other improved real estate;

(c) Loans on improved real estate located beyond the association's regular lending area;

(d) Non-installment loans;

(e) Real estate owned, except

(1) Property owned and occupied by the association as an office;

(2) Homes or combination of homes and business property which are located within the regular lending area and which have a book value of not more than $35,000 each:

Provided, That any guaranteed loan, at least 20 percent of which is guaranteed, made by any Federal association that has amended Charter K by the addition thereto of section 14.1, or by any Federal association which has a Charter in any other form not inconsistent with the provisions of §§ 545.6 to 545.6-13 and any insured loan purchased by any such Federal association secured by a home

or combination of home and business property outside of its regular lending area at an investment of not more than $35,000, is exempt from the limitations of this section.

§ 545.6-8 Loans to directors, officers, or employees. A Federal association may not make a real estate loan to a director, officer or employee of the association, or to any attorney or firm of attorneys, regularly serving the association in the capacity of attorney-at-law, or to any partnership in which any such director, officer, employee, attorney or firm of attorneys has any interest, and no real estate loan shall be made to any corporation in which any of such parties are stockholders, except that with the prior approval of its board of directors a real estate loan may be made to a corporation in which no such party owns more than fifteen percent of the total outstanding stock and in which the stock owned by all such parties does not exceed twentyfive percent of the total outstanding stock: Provided, That nothing in this section shall prohibit a Federal association from making loans on the security of a first lien on the home or combination of home and business property owned and occupied by a director, officer or employee of an association, or by an attorney or member of a firm of attorneys regularly serving the association in the capacity of attorney-at-law.

§ 545.6-9 Appraisals. No loan shall be made by any Federal association until at least two qualified persons designated by its board of directors shall have submitted a signed appraisal of the real estate security; or, if an insured or guaranteed loan, until two qualified persons designated by the board of directors (one of whom may be the appraiser accepted by the insuring or guaranteeing agency) shall have concurred in or approved, in writing, the valuation assigned to the real estate security by the appraiser accepted by the insuring or guaranteeing agency: Provided, That any Federal association which has amended its Charter by the addition thereto of section 14.1 and any Federal association which has a charter in any other form not inconsistent with the provisions of §§ 545.6 to 545.6-13, may, when authorized by its board of directors, make any loan after a qualified person designated by such board of directors shall have submitted a signed appraisal of the real estate security and

may make any insured or guaranteed loan on the basis of a valuation of the real estate security furnished to such Federal association by the insuring or guaranteeing agency.

§ 545.6-10 Initial loan charges. No director, officer, or employee of a Federal association, and no person or firm regularly serving such association in the capacity of attorney-at-law, may receive from the association or from any other source any fee or other compensation of any kind in connection with the procuring of any particular loan from or by such association. Borrowers may be required to pay the necessary initial charges in connection with the making of a loan, including the actual costs of title examination, appraisal, credit report, survey, drawing of papers, closing of the loan, and other necessary incidental services and costs in such reasonable amounts as may be fixed by the board of directors; such necessary initial charges may be collected by the association from the borrower and paid to any persons, including any such director, officer, employee, attorney or firm rendering such services: Provided, That no discount, rebate, or commission on any such charge may be received by any director, officer, or employee of a Federal association, or by any person or firm regularly serving such association in the capacity of attorney-at-law, but such discounts, rebates, or commissions, when allowed as compensation for services performed, may be received and retained by the association. Upon the closing of the loan, the association shall furnish the borrower a loan settlement statement showing in detail the charges or fees the borrower has paid or obligated himself to pay to the association or to any other person in connection with such loan; and a copy of such loan settlement statement shall be retained in the records of the association.

§ 545.6-11 Loan contract. Each loan shall be evidenced by note, bond, or other instrument and shall be secured by such security instrument as is in keeping with sound lending practices in the locality. The loan contract shall provide for full protection to the Federal association and shall be recorded; it shall provide specifically for full protection with respect to insurance, taxes, assessments, other governmental levies, maintenance, and repairs, and it may provide for an assignment of rents and for such other protec

tion as may be lawful or appropriate. Such Federal association may pay taxes, assessments, insurance premiums, and other similar charges for the protection of its interest in the property on which it has loans; all such payments may, when lawful, be added to the unpaid balance of the loan. A Federal association may require life insurance to be assigned to it by its borrowers as additional collateral for loans on the security of real estate; such association may advance premiums on any such life insurance and, when lawful, may add the premium so advanced to the unpaid balance of the loan. A Federal association may require that the equivalent of one-twelfth of the estimated annual taxes, assessments, insurance premiums, and other charges on real estate security, or any of them, be paid in advance to such association in addition to interest and principal payments on its loans, to enable the association to pay such charges as they become due from the funds so received. A Federal association shall keep a record of the status of taxes, assessments, insurance premiums, and other charges on all real estate on which such association has loans or which is owned by it. All loan instruments shall comply with applicable provisions of law, governmental regulations, and the Federal association's charter.

§ 545.6-12 Loan payments. Payments on the principal indebtedness of all loans on real estate security shall be applied direct to the reduction of such indebtedness. Payments on all monthly installment loans, other than construction loans, insured loans, and guaranteed loans, shall begin not later than sixty days after the advance of the loan; insured loans and guaranteed loans may be repayable upon terms acceptable to the insuring or guaranteeing agency and the Board hereby approves for use by any Federal association a loan plan wherein payments on any construction loans that such association may otherwise make under §§ 545.6 to 545.6-13 shall begin not later than 12 months after the date of the first advance. Borrowers from Federal associations shall have the right to prepay their loans without penalty except that the Board hereby approves for use by any Federal association, other than Federal associations that have Charter E, a loan plan wherein the association may require payment of not more than six months' advance interest on that part of the aggregate amount of all

prepayments made on a loan in any one year which exceeds 20 percent of the original principal amount of the loan: Provided, That the loan contract makes express provision therefor.

§ 545.6-13 Reserve for uncollected interest. A "Reserve for Uncollected Interest" shall be maintained equivalent to all interest in default more than 90 days.

§ 545.7 Loans on savings accounts. Any Federal association may make loans on the security of its savings accounts, whether or not the borrower is the owner of such account: Provided, That the association obtains a lien upon, or a pledge of, such savings account as security therefor. No such loan may exceed the withdrawal amount of the savings aucount securing the loan or the maximum percentage thereof which the association is authorized by its charter to lend upon such security, whichever is less, and no such loan may be made when the association has any application for withdrawal which has been on file more than 30 days and not reached for payment.

Any Fed

§ 545.8 Unsecured loans. eral association that has amended Charter K by the addition thereto of section 14.1 and any Federal association which has a charter in any other form not inconsistent with the provisions of this section may, upon adoption of such a loan plan by its board of directors, make or purchase:

(a) Any unsecured loan at least 20 percent of which is guaranteed under the provisions of the Servicemen's Readjustment Act of 1944, as now or hereafter amended;

(b) Simple-interest, discount, or gross-charge loans for property alteration, repair, or improvement without the security of a lien upon such property: Provided, That:

(1) The net proceeds of any such loan do not exceed $3,500;

(2) The property is located in such association's regular lending area as defined in § 545.6-6;

(3) Each such loan is evidenced by one or more negotiable notes, bonds, or other written evidences of debt;

(4) The resulting aggregate amount of all such loans does not exceed an amount equal to 15 percent of such association's assets;

(5) Each such loan is repayable in regular monthly installments within a period of 5 years:

And provided further, That any such loan for property alteration, repair, or improvement that is accepted for insurance under the provisions of the National Housing Act, as now or hereafter amended, or for insurance or guarantee under the provisions of the Servicemen's Readjustment Act of 1944, as now or hereafter amended, may be made for such amount and repayable upon such terms and within such periods as are acceptable to the insuring or guaranteeing agency: Provided, That no Federal association may make any unsecured loan to a director, officer, or employee of the association, or to any person or firm regularly serving the association in the capacity of attorney-at-law, except for the alteration, repair, or improvement of the home or combination of home and business property owned and occupied by such borrowing director, officer, employee, attorney, or firm.

§ 545.8-2 Cash and Government obligations. A Federal association shall not make or purchase any loan, cther than advances on the sole security of its savings accounts, at any time when its cash and obligations of the United States are not at least equal to 6 percent of the association's capital. For the purposes of this section:

(a) A loan shall be deemed to have been made as of the date of the note or bond evidencing the same, and a loan shall be deemed to have been purchased as of the date of payment therefor;

(b) The term "cash" means cash on hand, and cash on deposit in banks, including Federal Home Loan Banks, which is not pledged as security for indebtedness; and

(c) The term "obligations of the United States" means all unpledged evidences of indebtedness issued by the United States and all unpledged evidences of indebtedness issued by any agency or instrumentality of the United States which are by statute fully guaranteed as to principal and interest by the United States.

OTHER INVESTMENTS

$545.9 Stocks and securities. A Federal association may invest in the obligations of, or obligations guaranteed as to principal and interest by, the United States: in obligations of Federal home

loan banks; in obligations of the Federal National Mortgage Association; in stock of a Federal home loan bank; and in stock of the Federal National Mortgage Association through making nonrefundable capital contributions as provided in section 303 (b) of the National Housing Act, as amended.

§ 545.10 Office building. A Federal association may invest in an office building or buildings, and appurtenances, for the transaction of such association's business, or for the transaction of such business and for rental: Provided, That no such investment may be made without the prior approval of the Board if the total amount of the investment exceeds the aggregate amount of the association's general reserves and surplus. A Federal association may not purchase an office building, or any part thereof, or land upon which to erect an office building, from an affiliated institution, from an officer, director or employee of such association, or from a corporation or association in which any officer, director or employee is a stockholder or is an officer, director or employee, or from a partnership in which any officer, director or employee is a partner, without the prior approval of the Board.

BROKERAGE BUSINESS AND SALE OF LOANS

§ 545.11 Restrictions. A Federal association may not engage in the mortgage brokerage business. A Federal association may sell any loan at any time if the total dollar amount of loans sold, including such sale, within the calendar year beginning January 1 immediately preceding the date of such sale, does not exceed a sum equivalent to 20 percent of the dollar amount of all loans held by such Federal association at the beginning of such calendar year. The limitation upon the sale of loans may be adjusted in the case of any Federal association upon application to and approval by the Board. All loans sold shall be sold without recourse, and if under a contract to service the same, then on a basis to provide sufficient compensation to the Federal association to reimburse it for expenses incurred under its service contract.

FIDELITY BONDS

§ 545.12 Bonds for directors, officers, employees, and agents. Each Federal association shall provide and maintain a fidelity bond covering its directors, of

ficers, employees, and agents in the form and amount required by the Federal Savings and Loan Insurance Corporation.

OFFICES

§ 545.13 Home office. The home office of a Federal association is the office established by such association's charter; such association shall be operated from its home office and all branch offices and agencies thereof shall be subject to direction therefrom. A Federal association shall maintain at its home office a complete record of all business transacted at such office and control records of all business transacted at each of its branch offices and agencies.

§ 545.14 Branch office. No Federal association may establish or maintain a branch office without the prior written approval of the Board. Each application by a Federal association for permission to establish or maintain a branch office shall state the need for such branch office; the functions to be performed; the personnel and office facilities to be provided; the estimated annual volume of business, income, and expenses of such branch office; and shall be accompanied by a proposed annual budget of such association. Any business of a Federal association, except the approval of loans, may be transacted at a branch office, as authorized by its board of directors. A detailed record of all transactions of any branch office of a Federal association shall be maintained at such office and such control records as may be necessary for the proper conduct of such association's business shall be furnished by such branch office to its home office.

§ 545.15 Agency. Subject to prior approval by the Board as hereinafter provided, a Federal association may establish and maintain one or more agencies at which any agent of such association may transact its business to the extent authorized by its board of directors: Provided, That no loans may be approved and no savings accounts may be opened at any agency of a Federal association. Each application for approval by the Board of the establishment or maintenance of a place of business as an agency of a Federal association shall state the need for such agency; the functions to be performed; the personnel and office facilities to be provided; and the estimated annual volume of business and expenses of such agency. A Federal association may, without ap

proval by the Board, establish or maintain any agency the functions of which are limited to the servicing of loans and contracts, or to the management or sale of real estate owned, or to any combination of such functions; temporary or incidental agencies may likewise be established for individual transactions or for special, temporary purposes. An original record of all business of a Federal association transacted at any agency thereof shall be kept by such agency and such reports of business so transacted shall be made to a branch office or to the home office of such association as are required for the proper conduct and control of the association's affairs.

§ 545.16 Change of office location. A Federal association may not move any office from its immediate vicinity without prior approval by the Board. A move of more than one mile or move outside of the municipality in which the office is located will constitute a move of an office from its immediate vicinity. If a Federal association changes the location of its home office, as fixed in such association's charter, such charter shall be appropriately amended in accordance with the provisions thereof. Each application to the Board by a Federal association for permission to move any office of such association from its immediate vicinity shall be supported with a statement showing the need for such change of location, and the estimated expense of removal to and of maintenance at the new location. The provisions of the second sentence of this section shall not be applicable with respect to any Federal association which prior to April 19, 1951, in connection with a change of the location of any office not involving a move from the immediate vicinity of such office within the meaning of these rules and regulations and charter provisions in force and effect on such date, had purchased or leased or had legally bound itself to purchase or lease, the office quarters at the proposed new location of such office.