4000 - Advisory Opinions
Loans to Partnership Personally Guaranteed by General Partner Are Subject to Executive Officer Loan Limits Under 12 C.F.R. Part 337
July 8, 1992
Pamela E.F. LeCren, Counsel
Please be advised that the revolving credit loan agreement dated May 14, 1990 described in your July 8, 1992 letter faxed to me this morning does not qualify as a "home loan" for the purposes of the FDIC's recent amendment to Part 337 concerning loans to executive officers as the loan is not secured by a first lien and the loan would not appear to have been extended for the purpose of acquiring, constructing, maintaining etc. a residence. The loan therefore falls into the "other purpose loan" category. Although the loan is grandfathered inasmuch as it was extended prior to May 18, 1992, it should be taken into account by the bank whenever you seek additional loans.
According to your letter, you are the sole general partner and one of nine limited partners of [limited partnership]. You hold a 32.45% interest in the partnership. I will presume that none of the other eight limited partners are executive officers of the bank or that should any such partners be executive officers of the bank that their combined interest in the partnership added to yours does not exceed 50%. The partnership has two outstanding loans both of which were extended on April 12, 1991 and both of which are personally guaranteed by you.
Although a loan to a partnership will not normally be subject to the new executive officer loan limits unless one or more of the bank's executive officers individually or together own a majority interest in the partnership, the above described two loans are considered made to you because you have personally guaranteed the loans. The loans are not affected by the change in FDIC's regulations, however, because both loans were made prior to May 18, 1992. They may therefore, be paid down in accordance with their terms. The loans should be taken into account by the bank whenever you seek any additional loans. As the loans in question mature after May 18, 1993, the loans cannot be extended or refinanced other than in compliance with the new regulations which, among other things, limit "other purpose loans" to executive officers to a maximum of $100,000. In short, the compliance phase-in provided for by FDIC's regulations is inapplicable to the loans in question.
If you have any further questions, please feel free to contact me at (202) 898-3730.