CHAPTER 622

An Act to amend and reenact § 6-78, as amended, of the Code of Virginia,
relating to limitation on amount of loans made by banks upon real
estate security.

(H 520]

Approved March 31, 1956

Be it enacted by the General Assembly of Virginia:

1. That § 6-78, as amended, of the Code of Virginia be amended and
reenacted as follows:

§ 6-78. No bank shall make any loan secured by real estate when
such loan together with all prior liens and encumbrances on such real
estate exceeds fifty per centum of the appraised value of the real estate
offered as security, unless such loan be for a term not longer than *
twenty years and be secured by an amortized mortgage, deed of trust or
other instrument under the terms of which the annual installment pay-
ments are not less than four per centum per annum of the principal of
the loan when such loan is for a period of not more than ten years, and
not less than five per centum per annum of the principal of the loan when
such loan is for a period in excess of ten years but not more than * twenty
years, in neither of which events shall the amount of the loan, together
with all prior liens and encumbrances on such real estate exceed * sixty-
siz and two-thirds per centum of the appraised value of the real estate
offered as security.

No bank shall make such loans in an aggregate sum in excess of the
amount of its capital stock actually paid in and unimpaired plus the
amount of its unimpaired surplus fund, or in excess of * seventy per
centum of the amount of its time and savings deposits at the election of
the bank *.

A loan secured by real estate within the meaning of this section shall
be in the form of an obligation or obligations executed or assumed by the
borrower and secured by mortgage, trust deed, or other such instrument
upon real estate owned by the borrower. Loans made to finance the con-
struction of business, residential or farm buildings and having maturities
of not to exceed nine months, if accompanied by a valid and binding
agreement to advance the full amount of the loan wpon the completion of
the building entered into by an individual, partnership, association, or
corporation acceptable to the discounting bank, whether or not secured
by a mortgage or similar lien on the real estate upon which the business,
residential or farm building is being constructed, shall not be considered
as loans secured by real estate within the meaning of this section but
Shall be classed as ordinary commercial loans, provided that no bank shall
invest in, or be liable on, any such loans in an aggregate amount in excess
of fifty per centum of its capital and permanent surplus. .

_ Loans made to finance existing construction, if accompanied by a
valid and binding agreement by an insurance company, authorized to do
business in this State, to advance the full amount of the loan, within a
period of 60 days, whether or not secured by a mortgage or similar lien
on real estate, shall not be considered as loans secured by real estate
within the meaning of this or the preceding section but shall be classed
as ordinary commercial loans and shall not be subject to the limitations
and restrictions of this section.

The appraisals herein required, if and when the loan shall exceed one
thousand dollars, shall be made by appraisers appointed by or by the
authority of the board of directors, shall be in writing, signed by the
appraisers, and shall be retained in the files of the bank, subject to
examination of bank examiners. The appraisers so appointed shall be
experienced persons competent to appraise real estate in the locality in
which the real estate is, and each appraisal, if and when the loan shall
exceed five thousand dollars, shall be made by at least two appraisers.

The provisions of this section shall not be construed to prohibit any
bank from accepting as security for a loan made in good faith without
security or upon security since found to be inadequate an obligation or
obligations secured by mortgage, trust deed, or other such instrument
upon real estate.