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4000 - Advisory Opinions

"Other Purpose" Loan Explained for Purposes of New Limits on Extensions of Credit to Executive Officers Imposed by Section 306 of FDICIA


June 2, 1992

Pamela E.F. LeCren, Counsel

In response to your request for clarification as to what constitutes an "other purpose" loan for purposes of the recent amendments to FDIC's regulations discussed in FIL 32--92 (May 5, 1992), please be advised that if the proceeds of an extension of credit are used for something other than the financing, purchase, construction, maintenance or improvement of a residence, the extension of credit is not considered to be a home loan even if the extension of credit is secured by a residence. If the proceeds of such a loan are used for the education of an executive officer's children, the loan is not subject to the new loan limit, i.e., the higher of 2.5% of capital and unimpaired surplus or $25,000 but in no event higher than $100,000. An "education loan" of that type will of course be subject, however, to the limit on loans to executive officers to which nonmember banks have been subject for many years.

If you have any further questions, please do not hesitate to call me at (202) 898-3730.

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