The following definitions apply for purposes of sections
244.15 through 244.18:
Appraisal Standards Board means
the board of the Appraisal Foundation that develops, interprets, and
amends the Uniform Standards of Professional Appraisal Practice (USPAP),
establishing generally accepted standards for the appraisal profession.
Automobile loan:
(1) Means any loan to an individual to finance the purchase of, and
that is secured by a first lien on, a passenger car or other passenger
vehicle, such as a minivan, van, sport-utility vehicle, pickup truck,
or similar light truck for personal, family, or household use; and
(2) Does not include any:
(i) Loan to finance fleet sales;
(ii) Personal cash loan secured
by a previously purchased automobile;
(iii) Loan to finance the purchase of
a commercial vehicle or farm equipment that is not used for personal,
family, or household purposes;
(iv) Lease financing;
(v) Loan
to finance the purchase of a vehicle with a salvage title; or
(vi) Loan to finance the purchase of
a vehicle intended to be used for scrap or parts.
Combined loan-to-value (CLTV) ratio means, at
the time of origination, the sum of the principal balance of a first-lien
mortgage loan on the property, plus the principal balance of any junior-lien
mortgage loan that, to the creditor’s knowledge, would exist at the
closing of the transaction and that is secured by the same property,
divided by:
(1) For acquisition
funding, the lesser of the purchase price or the estimated market
value of the real property based on an appraisal that meets the requirements
set forth in section 244.17(a)(2)(ii); or
(2) For refinancing, the estimated market
value of the real property based on an appraisal that meets the requirements
set forth in section 244.17(a)(2)(ii).
Commercial
loan means a secured or unsecured loan to a company or an individual
for business purposes, other than any:
(1) Loan to purchase or refinance a one-to-four
family residential property;
(2)
Commercial real estate loan.
Commercial real estate
(CRE) loan means:
(1)
A loan secured by a property with five or more single family units,
or by nonfarm nonresidential real property, the primary source (50
percent or more) of repayment for which is expected to be:
(i) The proceeds of the sale, refinancing,
or permanent financing of the property; or
(ii) Rental income associated with the
property;
(2) Loans
secured by improved land if the obligor owns the fee interest in the
land and the land is leased to a third party who owns all improvements
on the land, and the improvements are nonresidential or residential
with five or more single family units; and
(3) Does not include:
(i) A land development and construction
loan (including 1- to 4-family residential or commercial construction
loans);
(ii) Any other land loan;
or
(iii) An unsecured loan to
a developer.
Debt service coverage (DSC)
ratio means:
(1) For
qualifying leased CRE loans, qualifying multi-family loans, and other
CRE loans:
(i) The
annual NOI less the annual replacement reserve of the CRE property
at the time of origination of the CRE loan(s) divided by
(ii) The sum of the borrower’s annual
payments for principal and interest (calculated at the fully-indexed
rate) on any debt obligation.
(2) For commercial loans:
(i) The borrower’s EBITDA as of
the most recently completed fiscal year divided by
(ii) The sum of the borrower’s annual
payments for principal and interest on all debt obligations.
Debt to income (DTI) ratio means the borrower’s
total debt, including the monthly amount due on the automobile loan,
divided by the borrower’s monthly income.
Earnings before
interest, taxes, depreciation, and amortization (EBITDA) means
the annual income of a business before expenses for interest, taxes,
depreciation and amortization are deducted, as determined in accordance
with GAAP.
Environmental risk assessment means a process
for determining whether a property is contaminated or exposed to any
condition or substance that could result in contamination that has
an adverse effect on the market value of the property or the realization
of the collateral value.
First lien means a lien or
encumbrance on property that has priority over all other liens or
encumbrances on the property.
Junior lien means a lien
or encumbrance on property that is lower in priority relative to other
liens or encumbrances on the property.
Leverage ratio means the borrower’s total debt divided by the borrower’s EBITDA.
Loan-to-value (LTV) ratio means, at the time of origination,
the principal balance of a first-lien mortgage loan on the property
divided by:
(1) For acquisition
funding, the lesser of the purchase price or the estimated market
value of the real property based on an appraisal that meets the requirements
set forth in section 244.17(a)(2)(ii); or
(2) For refinancing, the estimated market
value of the real property based on an appraisal that meets the requirements
set forth in section 244.17(a)(2)(ii).
Model year means the year determined by the manufacturer and reflected on the
vehicle’s Motor Vehicle Title as part of the vehicle description.
Net operating income (NOI) refers to the income a CRE
property generates for the owner after all expenses have been deducted
for federal income tax purposes, except for depreciation, debt service
expenses, and federal and state income taxes, and excluding any unusual
and nonrecurring items of income.
Operating affiliate means an affiliate of a borrower that is a lessor or similar party
with respect to the commercial real estate securing the loan.
Payments-in-kind means payments of accrued interest that are
not paid in cash when due, and instead are paid by increasing the
principal balance of the loan or by providing equity in the borrowing
company.
Purchase money security interest means a security
interest in property that secures the obligation of the obligor incurred
as all or part of the price of the property.
Purchase price means the amount paid by the borrower for the vehicle net of any
incentive payments or manufacturer cash rebates.
Qualified
tenant means:
(1) A
tenant with a lease who has satisfied all obligations with respect
to the property in a timely manner; or
(2) A tenant who originally had a lease that subsequently expired
and currently is leasing the property on a month-to-month basis, has
occupied the property for at least three years prior to the date of
origination, and has satisfied all obligations with respect to the
property in a timely manner.
Qualifying leased CRE loan means a CRE loan secured by commercial nonfarm real property, other
than a multi-family property or a hotel, inn, or similar property:
(1) That is occupied by one
or more qualified tenants pursuant to a lease agreement with a term
of no less than one (1) month; and
(2) Where no more than 20 percent of the aggregate gross revenue
of the property is payable from one or more tenants who:
(i) Are subject to a lease that
will terminate within six months following the date of origination;
or
(ii) Are not qualified tenants.
Qualifying multi-family loan means
a CRE loan secured by any residential property (excluding a hotel,
motel, inn, hospital, nursing home, or other similar facility where
dwellings are not leased to residents):
(1) That consists of five or more dwelling
units (including apartment buildings, condominiums, cooperatives and
other similar structures) primarily for residential use; and
(2) Where at least 75 percent of the NOI
is derived from residential rents and tenant amenities (including
income from parking garages, health or swim clubs, and dry cleaning),
and not from other commercial uses.
Rental income means:
(1) Income derived
from a lease or other occupancy agreement between the borrower or
an operating affiliate of the borrower and a party which is not an
affiliate of the borrower for the use of real property or improvements
serving as collateral for the applicable loan; and
(2) Other income derived from hotel, motel,
dormitory, nursing home, assisted living, mini-storage warehouse or
similar properties that are used primarily by parties that are not
affiliates or employees of the borrower or its affiliates.
Replacement reserve means the monthly capital replacement
or maintenance amount based on the property type, age, construction
and condition of the property that is adequate to maintain the physical
condition and NOI of the property.
Salvage title means
a form of vehicle title branding, which notes that the vehicle has
been severely damaged and/or deemed a total loss and uneconomical
to repair by an insurance company that paid a claim on the vehicle.
Total debt, with respect to a borrower, means:
(1) In the case of an automobile loan,
the sum of:
(i) All
monthly housing payments (rent- or mortgage-related, including property
taxes, insurance and home owners association fees); and
(ii) Any of the following that is dependent
upon the borrower’s income for payment:
(A) Monthly payments on other debt and lease
obligations, such as credit card loans or installment loans, including
the monthly amount due on the automobile loan;
(B) Estimated monthly amortizing payments
for any term debt, debts with other than monthly payments and debts
not in repayment (such as deferred student loans, interest-only loans);
and
(C) Any required monthly alimony,
child support or court-ordered payments; and
(2) In the case of a commercial loan,
the outstanding balance of all long-term debt (obligations that have
a remaining maturity of more than one year) and the current portion
of all debt that matures in one year or less.
Total liabilities ratio means the borrower’s total liabilities
divided by the sum of the borrower’s total liabilities and equity,
less the borrower’s intangible assets, with each component determined
in accordance with GAAP.
Trade-in allowance means the
amount a vehicle purchaser is given as a credit at the purchase of
a vehicle for the fair exchange of the borrower’s existing vehicle
to compensate the dealer for some portion of the vehicle purchase
price, not to exceed the highest trade-in value of the existing vehicle,
as determined by a nationally recognized automobile pricing agency
and based on the manufacturer, year, model, features, mileage, and condition
of the vehicle, less the payoff balance of any outstanding debt collateralized
by the existing vehicle.
Uniform Standards of Professional
Appraisal Practice (USPAP) means generally accepted standards
for professional appraisal practice issued by the Appraisal Standards
Board of the Appraisal Foundation.
