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4000 - Advisory Opinions

Application of Real Estate Lending Standards to Interim Construction Loan for Low-Income and Elderly Apartment Housing


August 2, 1993

Valerie J. Best, Counsel

This letter confirms our telephone conversation of July 28, 1993 concerning the "Real Estate Lending Standards" (copy enclosed) adopted by the FDIC on November 5, 1992.

You advise that, over the past several years, First State Bank has provided interim construction financing for construction of low income and elderly apartment-type housing based on takeout commitment from the Farmers Home Administration. You advise that these projects are residential, but not 1-4 family. You asked us to provide you with a written opinion as to whether such interim construction would be defined as residential or non-residential, for the purpose of establishing borrower equity.

Based on the information available to us, it appears that this type of loan would be considered non-residential and fall within the following loan category for purposes of the Real Estate Lending Standards:

Construction: Commercial, multifamily, and other nonresidential.

Consequently, under the Real Estate Lending Standards, the loan-to-value limit would be 80 percent.

If you have additional questions concerning the Real Estate Lending Standards, you may wish to contact Martha Coulter at (202) 898-6913 or Robert Walsh at (202) 898-6911. I may be reached at (202) 898-3812. I hope this information is helpful to you.

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