R331-26-2. Definitions

For the purposes of this rule:

(1) A "covered transaction" is a sale of a parcel of other real estate held by a depository institution where less than 10% of the total sales price is in cash; where the depository institution finances all or a portion of the sales price on terms more favorable than those customarily offered by the depository institution at that point in time when acting solely as lender; or where the transaction does not transfer from the depository institution to the buyer substantially all of the usual risks and benefits of ownership. A transaction ceases to be covered when all of the aforementioned conditions no longer apply. It will be deemed that 10% of the sales price has been paid in cash when the cash received by the depository institution as a down payment together with that portion of the sales price guaranteed to the depository institution by private mortgage insurance or an equivalent guarantee equals or exceeds 10% of the total sales price, or when the unpaid principal balance of any debt to the depository institution resulting from a covered transaction, less the amount of any private mortgage insurance or equivalent guarantee, falls below 90% of the total sales price.

(2) "Depository institution" means depository institution as defined in Section 7-1-103.

(3) "Fair value" is the cash price that might reasonably be anticipated in a current sale under all conditions requisite to a fair sale. A fair sale means that buyer and seller are each acting prudently, knowledgeably and under no necessity to buy or sell. Any related appraisal should estimate the cash price that might be received upon exposure to the open market for a reasonable time, considering the property type and local market conditions. When it is unlikely that the sale can be completed within 12 months, the appraisal must discount all cash flows generated by the property to obtain the estimate of fair values. These cash flows include those arising from ownership, development, operation, and sale of the property. The discount applied shall reflect the appraiser's judgment of what a prudent, knowledgeable purchaser under no necessity to buy would be willing to pay to purchase the property in a current sale.

(4) "Other real estate" means all real property held by a depository institution except premises and real property acquired and held as a permitted investment.

(5) "Premises" means real property recorded as an asset on a depository institution's books or otherwise held by a depository institution which is used in the conduct of the depository institution's business, including leasehold improvements and capital leases of real property. It also includes real property acquired and held for future use where the minutes of the board of directors show the depository institution in good faith intends to utilize such property in the conduct of the depository institution's business within three years.

(6) The "recorded investment in the debt satisfied" is the unpaid balance of the debt, accrued and uncollected interest, any legal fees or direct costs of acquiring title to the property, unamortized premium and loan acquisition costs, if any, less any prior direct writedowns, unamortized discount, and finance charges.

(7) "Supervisor" means the appropriate supervisor within the Department of Financial Institutions.