2020 Georgia Code
Title 7 - Banking and Finance
Chapter 1 - Financial Institutions
Article 2 - Banks and Trust Companies
Part 3 - Powers of Banks
§ 7-1-286. Real Estate Loans; Acquisition by Bank or Trust Company of Ownership Interest

1. A bank shall make loans secured by improved or unimproved real estate (including a leasehold) subject to the provisions of Part 365 of the Federal Deposit Insurance Corporation's rules and regulations, including 12 C.F.R. 365.1 and 365.2 and the Interagency Guidelines for Real Estate Lending Policies in Appendix A and 12 C.F.R. 208.51 and the guidelines contained in 12 C.F.R. Part 208 in the case of Federal Reserve member banks. Such loans shall also be subject to the additional provisions and exceptions as set forth in the rules of the department.
2. The limitations of subsection (a) of this Code section shall not apply to:
   1. An investment security acquired pursuant to Code Section 7-1-287;
   2. A loan in connection with which the bank takes a real estate lien as security in the exercise of banking prudence but as to which it is relying for repayment on:
      1. The general credit of the obligor or of an installment buyer or of a lessee of the real estate;
      2. Collateral other than the real estate lien;
      3. A guaranty or an agreement to take over or purchase the loan, in the event of default, by a financially responsible person other than a person engaged in the business of guaranteeing real estate loans; or
      4. An agreement by a financially responsible person to take over or purchase the loan, or to provide funds for payment thereof, within a period of two years from the date of the loan;

         and there is documentation in the file setting forth the applicable facts to support reliance on this paragraph.

3. For the purpose of this Code section, a "leasehold" shall mean the interest, which is security for a loan, of a lessee of real estate under a lease which on the date of the loan has an unexpired term extending at least ten years beyond the maturity of the loan or contains a right of renewal, which may be exercised by the bank, extending at least ten years beyond the maturity of the loan.
4. Notwithstanding any other provisions of this chapter and otherwise subject to regulations of the department, a bank or trust company may acquire, directly or indirectly, an ownership interest in real estate incidental to the financing of the purchase, development, or improvement of such real estate, provided that:
   1. The amount of such ownership interest shall not exceed 25 percent of the appraised value of the real estate;
   2. The amount of such ownership interest when aggregated with the amount financed shall not exceed the limitations prescribed by this Code section and Code Section 7-1-285;
   3. The ownership interest shall be terminated upon substantial repayment of the financing in the manner prescribed in Code Section 7-1-263, relating to the divestiture of real estate interest; and
   4. Any time real estate owned by a bank or trust company pursuant to this subsection is held or disposed of pursuant to the provisions of Code Section 7-1-263, said action to hold or dispose shall be reported in writing annually to the stockholders. Said report shall include disclosure of any real estate acquired by foreclosure or the taking by a deed in lieu of foreclosure and the name or names of the corporation or individuals from whom title was taken.

(Ga. L. 1919, p. 135, art. 19, § 15; Code 1933, § 13-2015; Ga. L. 1937, p. 423, § 1; Ga. L. 1945, p. 208, § 1; Ga. L. 1959, p. 250, § 1; Ga. L. 1965, p. 281, § 1; Ga. L. 1972, p. 556, § 1; Code 1933, § 41A-1307, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 18; Ga. L. 1989, p. 1249, § 4; Ga. L. 1992, p. 6, § 7; Ga. L. 1998, p. 795, § 14; Ga. L. 2000, p. 174, § 7; Ga. L. 2001, p. 970, § 2; Ga. L. 2007, p. 502, § 2/SB 70; Ga. L. 2020, p. 493, § 7/SB 429.)

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted "provided that:" for "provided:" at the end of the introductory language of subsection (d).

- Pursuant to Code Section 28-9-5, in 1989, "Any time" was substituted for "Anytime" at the beginning of paragraph (e)(4) (now (d)(4)).

- Rules governing real estate loans, Official Compilation of the Rules and Regulations of the State of Georgia, Rules of Department of Banking and Finance, Rule 80-1-5.02.

- For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001). For note, "Opportunity Costs: Nonjudicial Foreclosure and the Subprime Mortgage Crisis in Georgia," see 25 Ga. St. U.L. Rev. 1205 (2009).

When bank letter confirming loan did not specify the financing terms the seller could not be sure that the buyer had obtained a commitment in accordance with the contract by terms which the buyer would be bound. Brown v. Morris Real Estate Consultants, Inc., 256 Ga. 269, 347 S.E.2d 563 (1986).

RESEARCH REFERENCES

Am. Jur. 2d.

- 10 Am. Jur. 2d, Banks and Financial Institutions, § 602.

- 9 C.J.S., Banks and Banking, § 477.

- Bank's liability to real property purchaser for misrepresentation respecting purchaser's obtaining government guaranteed or subsidized loan, 37 A.L.R.4th 773.

Financing agency's liability to purchaser of new home or structure for consequences of construction defects, 20 A.L.R.5th 499.