2010 California Code
Financial Code
Article 5. Limitations And Regulations Of Loans And Purchased Obligations

FINANCIAL CODE
SECTION 18265-18274



18265.  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.



18266.  (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.




18266.1.  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.



18266.2.  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.



18266.3.  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.


18268.  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.



18269.  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.



18270.  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.



18271.  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.


18272.  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.



18274.  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.


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