Banking Interpretations

June 29, 1999

Re: Loans made in New York State by a Massachusetts Saving Bank

Dear Ms. Gerrard:

Your May 3, 1999 letter on behalf of your client, [ ] ("Bank"), a savings bank located in Massachusetts, regarding the ability of the Bank to make loans in New York State has been referred to me for response.

According to your letter, the Bank does not plan to open an office in New York State as it intends for the loan application and underwriting process to take place in Massachusetts. The Bank will fund the loans in either Massachusetts or New York. Considering those facts, you request that the New York State Banking Department ("NYSBD") provide an opinion with respect to the following:

  1. Would the above described activities require the Bank to file an application with the NYSBD to establish a de novo branch in New York and if not, is any other approval required prior to engaging in such activities?
  2. If no branch approval is required in response to question 1, would branch approval be required if the loans were closed and funded at an attorney’s office in New York or at the Borrower’s place of business?
  3. If no branch approval is required in response to question 1, would branch approval be required if the loan required the Borrower to maintain a deposit account with the Bank?

Initially, please be advised that pursuant to Section 223 of the New York Banking Law, an out-of-state bank may not branch de novo into New York State. An out-of-state bank that does not operate a branch in New York State may only operate a branch in New York State if that branch is acquired pursuant to an acquisition transaction as defined in Banking Law §222(7).

However, it is not necessary that the Bank engage in an acquisition transaction in order to lend funds in New York State in the manner described above. If the application and underwriting processes are undertaken outside New York State, then the Bank may close the loans at an attorney’s office or at the borrower’s place of business. Further, any correspondent balance, assuming it was taken and maintained outside New York State, would have no effect on the Bank’s ability to lend in New York State.

You should be aware that although it is considered an organization exempt from the registration requirements of Article 12-D of the Banking Law, if the Bank solicits, negotiates, places, processes or makes mortgage loans secured by a first or junior lien in New York State, it must comply with the advertising, application and commitment procedures, and disclosure requirements set forth in Article 12-D of the Banking Law and Part 38 of the General Regulations of the Banking Board.

I trust this is responsive to your inquiry.

Very truly yours,
[  ]
Assistant Counsel