Memo RM1996-12
To: All State Chartered Banks
From: W. Newton Male, Bank Commissioner
Date : October 31, 1996
RE: K.A.R. 17-11-18
Subsection (b) of K.A.R. 17-11-18 provides an exception to the requirement of obtaining an attorney's opinion or title insurance on a loan secured by real estate:
"(b) Unless loan repayment is guaranteed by a governmental program or private insurance company, an attorney's opinion or title insurance shall be on file with the bank or trust company for each real estate loan in excess of $25,000."
It is recognized that many government programs do not guarantee 100% of the loan balance. So long as the portion of the loan amount that is not guaranteed does not exceed $25,000, this regulation does not require an attorney's opinion or title insurance on the loan.
For example, assume the loan amount is $100,000. The government guarantee or private insurance is for 80% of the loan. The portion that is not guaranteed is $20,000. The bank would not be required to obtain an attorney's opinion or title insurance for this loan, because the unguaranteed portion does not exceed $25,000.
Note: This is only an interpretation of the requirements in K.A.R. 17-11-18, and not an analysis of what is required to qualify for any government guarantee or private insurance. It is often the case that the bank is required to obtain an attorney's opinion or title insurance in order to qualify for the guarantee.
