Volume 43 - Issue 10 - October 3, 2024

State of Kansas

Office of the State Bank Commissioner

Permanent Administrative Regulations

Article 11.—DOCUMENTATION REQUIREMENTS

17-11-18. Loans; documentation requirements. (a) Except as specified in this subsection, each bank shall maintain complete and current credit information, not older than 15 months, for each borrower if the total amount of the following is greater than $250,000:

(1) All loans made to the borrower; and

(2) all loans attributable to the borrower pursuant to K.S.A. 9-1104, and amendments thereto.

This subsection shall not apply if all loans made or attributable to the borrower are adequately secured.

(b)(1) Unless loan repayment is guaranteed by a governmental program or private insurance company, the following requirements shall apply:

(A) For each purchase-money real estate mortgage loan not greater than $250,000, the bank shall maintain a written verification that a lien search of the records of the county register of deed’s office was conducted and the bank’s lien position was determined or any option listed under paragraph (b)(1)(B).

(B) For each purchase-money real estate mortgage loan greater than $250,000, the bank shall obtain and maintain on file either an attorney’s written title opinion or a title insurance policy.

(C) For each non-purchase-money real estate mortgage loan that is not greater than $250,000, the bank shall meet one of the following requirements:

(i) Maintain a written verification that a lien search of the records of the county register of deed’s office was conducted and the bank’s lien position was determined;

(ii) obtain and maintain on file an insurance policy fully insuring the bank against loss of the mortgage priority position;

(iii) obtain and maintain on file an attorney’s written title opinion; or

(iv) obtain and maintain on file a title insurance policy.

(D) For each non-purchase-money real estate mortgage loan greater than $250,000, the bank shall obtain and maintain on file an attorney’s written title opinion or a title insurance policy.

(2) For purposes of this subsection, “non-purchase-money real estate mortgage loan” shall mean a mortgage loan that does not finance or refinance the acquisition of real estate or the transfer of a deed.

(c) If the value of the improvements on any real estate is necessary for adequate protection of the loan, an insurance policy covering these improvements against fire and windstorm shall be on file with the bank for any loan greater than $25,000.

(d) A real estate mortgage or deed of trust, showing the filing information with the county register of deeds, shall be on file with the bank for each loan collateralized by real estate.

(e) For any loan collateralized by personal property, if the bank is required by law to file a financing statement to perfect a security interest, the bank shall maintain a copy of the filed financing statement. In other cases, the bank shall maintain all documents related to the loan. (Authorized by K.S.A. 9-1713; implementing K.S.A. 9-1101, K.S.A. 9-1130, and K.S.A. 9-1713; effective Jan. 1, 1966; amended May 1, 1983; amended Jan. 27, 1992; amended Aug. 9, 1996; amended Jan. 18, 2002; amended May 30, 2003; amended May 3, 2013; amended July 11, 2014; amended May 27, 2022; amended Oct. 18, 2024.)

17-11-21. Appraisals and evaluations. (a) Except for the transactions that meet the requirements of subsection (b) or (c), an accurate appraisal of all real estate mortgaged to secure principal debt of $25,000 or more to a bank shall be made by an appraiser who is licensed or certified by the state in which the property is located and who is independent of the transaction.

(b) Two officers or directors of the bank, or a qualified individual who is independent of the transaction, may complete an evaluation of real estate mortgaged in the following types of real estate-related transactions:

(1) Real estate mortgaged to secure either of the following:

(A) Principal debt of $400,000 or less, secured by a single one- to four-family residential property, including construction loans and business loans secured by a single one- to four-family residential property; or

(B) principal debt of $500,000 or less, not secured by a single one- to four-family residential property;

(2) business loans with a principal debt of $1 million or less secured by real estate if the primary source of repayment is not dependent upon the sale of, or rental income from, the real estate; or

(3) renewals or refinancing of loans secured by real estate, in any amount, if either of the following conditions is met:

(A) There is no advancement of new money other than funds necessary to cover reasonable closing costs; or

(B) there has been no obvious and material change in market conditions or physical aspects of the property that affects the adequacy of the real estate collateral or the validity of an existing appraisal, even with the advancement of new money.

(4) If a bank enters into a transaction that is secured by several individual properties, the estimate of value of each individual property shall determine whether an appraisal or evaluation would be required for that property under subsection (b).

(c) Neither an appraisal nor an evaluation shall be required for the following types of real estate-related transactions:

(1) Loans that are well supported by income or other collateral if real estate is taken as additional collateral solely in an abundance of caution;

(2) loans to acquire or invest in real estate if a security interest is not taken in real estate;

(3) liens taken on real estate to protect rights to, or control over, collateral other than real estate;

(4) real estate operating leases that are not the equivalent of a purchase or sale; or

(5) real estate-related loans that have met all appraisal requirements necessary to be sold to or insured by, any United States government agency or any United States government-sponsored agency.

(d) Each individual who conducts an appraisal or evaluation shall view the premises, make a written statement of value, and sign and file the statement with the bank. Each appraisal shall comply with applicable state standards. Each evaluation shall include the following:

(1) A legal description of the property, including street address if applicable;

(2) the owner(s) of the property;

(3) the type and general condition of improvements, including approximate age, size, and construction;

(4) the basis for determining the value of the property; and

(5) the date of the evaluation or appraisal and a signature of each evaluator or appraisers.

(e) Despite any other provisions of this regulation, an appraisal or evaluation may be required by the commissioner if it is deemed necessary to address safety and soundness concerns.

(f) As used in this regulation, a “business loan” means a loan or extension of credit to any corporation, general or limited partnership, business trust, joint venture, pool, syndicate, sole proprietorship, or other business entity. (Authorized by K.S.A. 9-1713; implementing K.S.A. 9-1101; effective Jan. 1, 1966; amended May 1, 1978; amended Jan. 27, 1992; amended Oct. 19, 1992; amended Jan. 25, 1993; amended Sept. 20, 1993; amended Sept. 19, 1994; amended Aug. 9, 1996; amended Jan. 18, 2002; amended July 11, 2014; amended Oct. 18, 2024.)

David L. Herndon
State Bank Commissioner

Doc. No. 052539