 Sam
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Joined: 21 May 2005
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Location: CALIFORNIA
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 Posted: Mon Jan 16, 2006 5:24 am Post subject: Thrift Lender: An alternative for banks and brokers |
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Thrift lenders include savings, loan associations and savings banks that specialize in mortgage lending under the rules and regulations of the Financial Reform, Recovery and Enforcement Act (FIRREA). They are either owned by shareholders ("stock" ownership), or by their depositors and borrowers ("mutual" ownership). Apart from providing mortgages, they also offer savings accounts, time deposits and checking accounts. Thrift lenders can offer all kinds of mortgages including purchase and refinance loans, construction loans, home improvement loans as well as home equity loans.
Savings and loan associations as well as savings banks may be chartered either by the Federal Office of Thrift Supervision (OTS) or by a state government regulator. Usually the Savings Association Insurance Fund (SAIF) insures thrift lenders like savings and loan associations, and the Bank Insurance Fund (BIF) insures the savings banks.
Qualified Thrift Lender Test: In order to retain their charter, as well as their membership in the Federal Home Loan Bank System, the savings institutions acting as thrifts must hold a certain percentage of their loan portfolio in housing related assets. This is known as the “Qualified thrift lender” (QTL) test.
All savings institutions must have 65% of their portfolio in housing-related or other qualified assets to offer their services as a thrift lender. Financial institutions must also abide by the Home Owners’ Loan Act (HOLA) QTL test or the Internal Revenue Service (IRS) tax code Domestic Building and Loan association (DBLA) test in order to qualify as a thrift lender.
Under the QTL test, a thrift lender must hold qualified thrift investments that include one of the following categories.
- Assets that make up the QTI without limit: These include mortgage loans for the purchase of property, refinancing or home improvement loans, and home equity loans, loans made through credit cards and others.
- Assets limited to 20% of portfolio assets: These assets cover up 50% of the amount of residential mortgage loans that are originated and sold within 90 days. Loans intended for the purchase, construction or development of community service facilities not in credit-needy areas also come under this category. The assets even include 200% of the amount of loans and investments in "starter homes".
However, an institution will cease to operate as a qualified thrift lender when its ratio of QTL divided by the portfolio assets falls below 65% at the end of a month, for four months within a year. |
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