Title 106 W. Va. C.S.R.

Banking Banking

Series 01 Regulations Pertaining To WV Consumer Credit And Protection Act.....

W. Va. Code R. § 106-1-1 General

1.1. Scope. -- This rule establishes general provisions implementing and supplementing the West Virginia Consumer Credit and Protection Act and the Money and Interest Article, W. Va. Code '' 46A-1-101 et seq. and 47-6-1 et seq.

1.2. Authority. -- W. Va. Code '31A-2-4(c)(12).

1.3. Filing Date. -- May 8, 1997.

1.4. Effective Date. -- June 2, 1997.

1.5. Repeal and Replace. -- This rule repeals and replaces West Virginia Division of Banking rule entitled, Regulations Pertaining to the West Virginia Consumer Credit and Protection Act, 106 CSR 8 effective April 23, 1982.

W. Va. Code R. § 106-1-2 Rules of General Application

2.1. Actuarial method.

"Actuarial method: means the method of allocating payments made on a debt between principal or amount financed and loan finance charge or sales finance charge pursuant to which a payment is applied first to the accumulated loan finance charge or sales finance charge and the balance is applied to the unpaid principal or unpaid amount financed.

The actuarial method under West Virginia law is a basic computation of principal multiplied by rate, multiplied by time (principal X rate X time). Because West Virginia law prohibits the capitalization of accrued and unpaid finance charges, the United States Rule method is incorporated in this rule. The United States Rule method means that at the end of each payment period the unpaid balance of the amount financed is increased by the finance charge earned during the payment period and is decreased by the payment made at the end of the payment period. If the payment is less than the finance charge earned, the adjustment of the unpaid balance of the amount financed is postponed until the end of the next payment period. Then if the sum of the two (2) payments is still less than the total earned finance charge for the two (2) payment periods, the adjustment of the unpaid balance of the amount financed is postponed still another payment period, and so forth.

2.2. Computation of time.

2.2.a. Actuarial method computation

2.2.a.1. Three hundred sixty five (365) day year, actual day basis; or

2.2.a.2. Three hundred sixty (360) day year, thirty (30) day month, so long as interest computations by this method do not result in the interest charge exceeding three hundred sixty five (365) days of interest in one (1) year. (A month is considered to be one twelfth (1/12) of a year and a day to be one three hundred and sixty fifth (1/365) of a year.

2.2.a.2.A. Prorate actual over thirty (30) day base

2.2.a.2.B. Payoffs on last day of month, whether the twenty eighth, twenty-ninth, or thirty-first are same as the thirtieth, if the installment due date is the last day of the month.

2.2.b. Rule of 78 computation Any generally accepted method for the allocation of charges consistent with the sum of the digits method.

2.3. Rebating in event of prepayment.

2.3.a. Rebating under Rule of 78.

2.3.a.1. Prepayments in full on or before the fifteen (15) days following an installment due date are considered to have been made as of the installment due date.

Prepayments in full on or after the sixteenth day following an installment due date are considered to have been made on the next succeeding installment due date. 2.3.a.2 The creditor is not required to make a rebate of less than one dollar ($1.00).

2.3.b. Rebating under actuarial method:

2.3.b.1. Daily "Payoff" which is determined by calculating the interest on a daily basis, or

2.3.b.2. The "Fifteen Day Rule" method as described in paragraph 2.3.a.1 of this rule, applies to precomputed credit transactions.

2.3.b.3. A creditor may compute a rebate on the assumption that all payments were made as scheduled, or as deferred, if deferred.

2.3.b.4. A creditor is not required to make a rebate of less than one dollar ($1.00) in a precomputed credit transaction.

2.3.c. Rebating on precomputed loans, credit sales, or credit transactions with an original term of thirty-six (36) months or less:

2.3.c.1. A creditor may use any generally accepted method for the allocation of charges and the calculation of rebates consistent with the sum of the digits method where the precomputed loan, credit sale or credit transaction is payable in equal, unequal or irregular payments and the original term of the transaction is thirty-six (36) months or less; or

2.3.c.2. A creditor may use the method of allocation of charges and the calculation of rebates described in subdivision 2.3.d of this rule.

2.3.d. Rebating on precomputed loans, credit sales or credit transactions with an original term, greater than thirty-six (36) months.

2.3.d.1. A creditor shall use the actuarial procedure or method for the allocation of charges and other calculation of rebates consistent with the actuarial method as defined in subsection 2.1 and subdivision 2.2.a of this rule where the precomputed loan, credit sale or credit transaction is payable in equal, unequal or irregular payments and the original term of the transaction is greater than thirty-six (36) months.

2.3.e. The terms "Finance Charge" as used in W. Va. Code '47-6-5d(a) and "finance charge which was required by applicable law to be disclosed" as used in W. Va. Code '47-6-5d(b) both mean "Loan Finance Charge" as defined in W. Va. Code '46A-1-102(26)(a) or "Sales Finance Charge" as defined in W. Va. Code '46A-1-102(44), whichever is applicable.

2.4. Balloon payments.

2.4.a. A creditor shall rebate any precomputed agreement, entered into in a consumer credit sale or consumer loan transaction, in which any scheduled payment is at least twice as large as the smallest of all earlier scheduled payments other than any down payment, if paid in full, according to W. Va. Code '47-6-5d(b) if the credit sale or loan by application of the smallest scheduled payment will not payout within thirty-six (36) months or less.

2.5. Calculation of deferral charges on precomputed transactions.

The creditor shall use the method of calculation of deferral charges consistent with the method of rebate which would be required or has been specified on that specific contract.

2.5.a. Calculation of deferral charges under the Rule of 78.

2.5.a.1. The word "Attributable" in the first sentence of W. Va. Code '46A-3-114(1) refers to charges earned on any installment on the basis of the Rule of 78, as provided in W. Va. Code '46A-3-111(1). For example, the deferral charge for deferring the fourth installment of a twelve (12) month contract and all remaining installments one (1) month would be nine seventy-eighths (9/78) of the original finance charge. If the same balances are deferred an additional two (2) months, the same nine seventy-eighths (9/78) charge may be made for each month. If the fourth through the seventh installments are subsequently paid and the eighth installment is deferred, the deferral charge would be the portion of the finance charge originally attributable to the eighth installment, i.e. 5/78.

2.5.a.2. Following a deferral, a creditor shall compute rebates for prepayment in full by multiplying the original finance charge by a fraction, having as a numerator the sum of all scheduled balances remaining unpaid to the deferred maturity date and as a denominator the sum of the originally scheduled balances. The creditor is not required to make a separate rebate of deferral charges: Provided, however, That if prepayment in full occurs during a deferral period (the period in which no payment is required or made by reason of a deferral), the creditor shall rebate the deferral charges for the unexpired full months in the deferral period and the deferrals will be considered not to have been made.

2.5.b. A deferral charge under the actuarial method is the finance charge due for that payment period to be deferred.

2.5.c. The creditor shall post deferral charges to the customer's account at the time the deferrals are made and in any event, not later than the next normal updating of the customer's account record. The creditor shall clearly identify the charges and indicate the installment upon which the charge is based. The customer=s account record shall show the final installment due date after each deferral.

2.5.d. If a deferral charge is made and the customer's account record does not indicate to the contrary, it will be assumed that the written authorization for such charge is a part of the contract evidencing the obligation. If a separate written agreement is used, the creditor shall provide a copy to the customer and the lender or seller shall retain the original for a period of at least two (2) years following final entry on the customer's account record.

2.6. Deficiency judgments.

The phrase "Balance Owed" in W. Va. code '46A-2-119(2), (3) and (4), with respect to restrictions on a deficiency judgment, means the gross unpaid balance of the account, excluding any unearned charges.

2.7. Delinquency charges on precomputed contracts.

2.7.a. A creditor may contract for and receive delinquency charges for consumer loans or consumer credit sales not exceeding the lesser of ten dollars ($10.00) or five percent (5%) of the amount of any installment unpaid, following the tenth day after the originally scheduled or deferred due date, but no less than one dollar ($1.00). Delinquency charges accrue on the eleventh day after the scheduled installment due date.

Example: If the installment due date is January 1, a delinquency charge accrues on January 12 if that installment is not previously paid in full. A creditor should post delinquency charges to the customer's account as they accrue and, in any event, no later than the next normal updating of the customer's account record. A creditor may collect delinquency charges at the time they accrue or any time thereafter.

2.7.b. Delinquency charges, except where otherwise provided by law, are earned as they accrue and do not become a part of the total finance charge for purposes of rebating unearned charges.

2.7.c. If the alternative method of computing delinquency charges as set forth in W. Va. Code '46A-3-112(1)(b) is used, the delinquency charge shall in no instance exceed the amount of a deferral charge for the same installment.

2.7.d. A creditor shall clearly identify delinquency charges upon the customer's account records. The installment upon which the charge is based shall also be indicated.

2.8. Electronic data processing.

A creditor may use electronic data processing methods to maintain records and accounting systems, in whole or in part, which provide information equivalent to that required by this rule. If requested by the Commissioner, a creditor shall provide a written description of the system utilized, including all features that do not meet the requirements of this rule and a full explanation of how the equivalent information may be obtained.

2.9. Minimum charge - revolving loan account.

2.9.a. With respect to a consumer credit sale made pursuant to a revolving charge account, other than sales of real estate pursuant to W. Va. Code '46A-3-102, sellers are authorized to contract for and receive, as a minimum charge, the charge provided for in W. Va. Code '46A-3-103(4).

2.9.b. With respect to a consumer loan made pursuant to a revolving loan account, lenders, other than regulated consumer lenders, are authorized to contract for and receive, as a minimum charge, the charge provided for in W. Va. Code '46A-3-106(4).

2.10. Limitation on garnishment.

2.10.a. W. Va. Code '46A-2-130 provides in part:

"The maximum part of the aggregate disposable earnings of an individual for any workweek which is subject to garnishment to enforce payment of a judgment arising from a consumer credit sale or consumer loan may not exceed the lesser of:

Twenty percent (20%) of his disposable earnings for that week, or The amount by which his disposable earnings for that week exceed thirty (30) times the federal minimum hourly wage prescribed by section 6(a)(1) of the 'Fair Labor Standards Act of 1938,' U.S.C. Title 19, '206(a)(1), in effect at the time the earnings are payable."

2.10.b. In the case of earnings for a pay period other than a week, the multiple of the federal minimum hourly wage shall be computed as follows:

2.10.b.1. The number of weeks (including fractions thereof) in the pay period are multiplied by thirty (30).

2.10.b.2. In determining the number of weeks in a pay period:

A year shall equal fifty-two (52) weeks, A month shall equal four and one third (4 1/3) weeks, and A half-month shall equal two and one sixth (2 1/6) weeks.

Examples: 4 1/3 X 30 = 130, is the multiple for a monthly pay period. 2 1/6 X 30 = 65, is the multiple for a semi-monthly pay period. 2 X 30 = 60, is the multiple for a biweekly pay period.

2.10.b.3. The multiple times the federal minimum hourly wage establishes the amount provided for in paragraph 2.10.a.2 of this rule.

W. Va. Code R. § 106-1-3 Loan Investigation Fee, Loan Origination Fee, Loan Assumption Fee

3.1. The terms "Loan Finance Charge," as defined in W. Va. Code ' 46A-1-102(26), and "Sales Finance Charge", as defined in W. Va. Code ' 46A-1-102(39), shall include a loan investigation fee, a loan origination fee, a loan assumption fee or any other similar fee for purposes of determining the allowable usury limits on all consumer loans as that term is defined in W. Va. Code ' 46A-1-102(15) and all consumer credit sales as that term is defined in W. Va. Code ' 46A-1-102(13), regardless of the rate alternative utilized in W. Va. Code ' 46A-3-104.

106CSR1

Series 02 The Sale Of Insurance Products By State-Chartered Banks

W. Va. Code R. § 106-2-1 General

1.1. Scope. -- This rule relates to notification, policies and procedures in connection with the sale of insurance products by state-chartered banks pursuant to W. Va. Code ''31A-4-13(f) and (g).

1.2. Authority. -- W. Va. Code ''31A-4-13(i) and 31A-2-4(c)(11).

1.3. Filing Date. -- April 15, 1999.

1.4. Effective Date. -- May 1, 1999.

W. Va. Code R. § 106-2-2 Notice and Conduct of Insurance Activities

2.1. Notice-- State-chartered banks shall first give the Commissioner of Banking thirty day written notice of their intent to engage in the sale of insurance products. Before the expiration of the thirty-day period, the Commissioner may object to the proposed sale of insurance products if he or she finds, based upon existing information known to the Commissioner or following an investigation conducted under subsection 3.1 of this rule, that the proposed activity would be contrary to the safety and soundness of the bank. If the Commissioner takes no action to prevent the bank from proceeding with the activity within the thirty-day period, the bank may sell the insurance products. The Commissioner, in his or her discretion, at any time prior to the end of the thirty-day period, may signify his or her non-objection to the sales, and the bank may proceed upon that assent. The notice and assent may apply to all products considered insurance under the laws of this state, unless otherwise limited by the Commissioner.

2.2. Federal Guidelines on Noninsured Products-- State-chartered banks shall adhere to all federal rules, regulations and general policies and guidelines regarding the sale of non-federally insured insurance products by or at their banks, including those relating to the clear disclosure that those insurance products are not insured by the Federal Deposit Insurance Corporation.

2.3. Insurance Commissioner Jurisdiction-- State- chartered banks shall adhere to any and all requirements imposed by the West Virginia Commissioner of Insurance as to the sale of insurance products, the distribution of fees associated with insurance and annuity sales, and as to the licensing of agents for insurance sales, to the same extent those requirements are applied to other corporations and national banks.

2.4. Sharing of Customer Information-- State- chartered banks shall establish and adhere to written policies governing the use and sharing of their bank customer information in conformity with applicable state law. Unless contrary to applicable state laws, these policies shall conform to federal rules and guidelines involving the sale of non-deposit investment or insurance products.

W. Va. Code R. § 106-2-3 Safety and Soundness

3.1. Investigation-- The Commissioner of Banking, in his or her discretion, may undertake an investigation if he or she believes that any sale or proposed sale of an insurance product might impair the safety and soundness of the bank. The Commissioner may deny, modify or prohibit the sale of an insurance product, if he or she finds the activity contrary to the safety and soundness of the bank.

W. Va. Code R. § 106-2-4 Enforcement and Penalties

4.1. Enforcement-- Nothing in this rule limits or prevents the Commissioner of Banking from exercising his or her lawful authority to regulate the conduct of banks and bank holding companies under the provisions of W. Va. Code '31A-1-1 et seq.

4.2. Penalties-- The Commissioner or the West Virginia Board of Banking and Financial Institutions may revoke or suspend a state-chartered banking institution=s authority to sell insurance products or a particular insurance product if it is found that a violation of this rule has occurred and that the nature of the violation warrants the revocation or suspension. Violation of this rule or any order to enforce this rule may also result in any other penalties provided by W. Va. Code '31A-1-1et seq.

106CSR2

Series 03 Regulations Governing The Operations Of State Chartered Financial Institutions Of WV

W. Va. Code R. § 106-3-1 General

1.1. Scope. -- This rule pertains to the operation of financial institutions under the primary jurisdiction of the Commissioner of Banking for the State of West Virginia.

1.2. Authority. -- W. Va. Code '31A-2-4(c)(11).

1.3. Filing Date. -- May 8, 1997.

1.4. Effective Date. -- June 2, 1997.

W. Va. Code R. § 106-3-2 Maintenance of Records and Accounts

2.1. Off-premise bookkeeping services.

Prior to contracting off-premise data processing bookkeeping services, a financial institution shall notify the Commissioner of Banking of the contracted services. Both the financial institution and the off-premise processing servicer shall in writing assure the Commissioner that the party performing those services shall be subject to regulation and examination by the commissioner and any appropriate federal supervisory agency to the same extent as if the services were being performed by the financial institution on its own premises. Submission of a copy of the written contract for off-premises data processing bookkeeping services between the state financial institution and the service provider, signed by both parties, which contains a contractual obligation for the service provider to be subject to regulation and examination by the Commissioner and any appropriate federal agency, shall satisfy the written assurance requirement.

106CSR3

Series 04 Rules Pertaining To The WV Regulated Consumer Lenders

W. Va. Code R. § 106-4-1 General

1.1. Scope. -- This rule establishes general provisions implementing and supplementing the West Virginia Consumer Credit and Protection Act as it relates to regulated consumer lenders.

1.2. Authority. -- W. Va. Code '31A-2-4(c)(12).

1.3. Filing Date. -- May 8, 1997.

1.4. Effective Date. -- June 2, 1997.

1.5. Repeal and Replace. B This rule repeals and replaces West Virginia Division of Banking rules entitled, Rules Pertaining to the West Virginia Consumer Credit and Protection Act and the Industrial Loan Company Act, 106 CSR 2 effective May 1, 1996, and Rules Pertaining to the West Virginia Industrial Loan Company Act, 106 CSR 5 effective May 1, 1996.

W. Va. Code R. § 106-4-2 Regulated Consumer Lender Restrictions

2.1. Balloon payments - Regulated consumer loans shall not contain balloon payments, except where provided by an applicable federal preemption of state law.

2.2. Financial statements.

The regulated consumer lender shall keep financial statements on file at its main office or the authorized place of examination for the last day of the month for the previous month's business.

2.3. Advertising.

2.3.a. A regulated consumer lender shall not advertise, in any manner, that a loan of a prospective borrower with another licensee will be paid or increased if the loan is transferred to the advertising regulated consumer lender.

2.3.b. A regulated consumer lender shall not refer to supervision or control by the state, the Attorney General, the Commissioner of Banking, the Division of Banking, or any other state agency, in any advertising. If desired, a regulated consumer lender may advertise that it is licensed under the provisions of W. Va. Code ' 46A-4-1 et seq.

2.3.c. A regulated consumer lender shall not advertise in any manner that may tend to confuse the identity of the regulated consumer lender with any other unrelated licensee or financial organization.

2.3.d. Each regulated consumer lender shall retain a copy of all advertising for a period of two (2) years from the date of its use. However, when two (2) or more offices are under the same ownership or control, the copy may be kept at one (1) central office within the State.

2.4. Refinancing and consolidation.

Regulated consumer lenders shall refrain from refinancing and consolidating loans and installment sales contracts where no reasonable benefit accrues to the consumer. Any refinancing or consolidation of a nonrevolving loan or credit sale which does not provide the consumer a substantial benefit and results in the consumer paying an increased finance charge rate which new and higher rate exceeds that permitted to merchants by W. Va. Code ' 46A-3-101, must contain the disclosures set forth or established under W. Va. Code ' 46A-4-111. Receipt of the disclosures must be acknowledged by the consumer=s signature or initials.

2.5. Revolving loan accounts.

With respect to a regulated consumer loan made pursuant to a revolving loan account, regulated consumer lenders may contract for and receive, as a minimum charge, the charge provided for in W. Va. Code '46A-4-107(6)(c).

2.6. Certain other charges prohibited.

2.6.a. A regulated consumer lender shall not contract for or make any charge not specifically provided for in chapter forty-six-a of the West Virginia Code, unless the charge results from a legal action awarded by a court.

2.6.b. Examples of additional charges prohibited in subdivision (a) of this subsection include, but are not limited to, collection charges and legal fees. Further, a regulated consumer lender may not make a separate charge for credit reports, loan investigation fees or appraisal fees except where those fees are part of prepaid loan finance charges or except where these credit report charges or appraisal fees are part of permitted reasonable closing costs in a loan secured by real property.

2.7. Records.

2.7.a. A regulated consumer lender shall maintain adequate records for each licensed office which will enable the Commissioner to reconcile outstanding balances to the corporation=s financial statement.

2.7.b. In the event that records for loan accounts and installments sales contracts purchased are commingled in a regulated consumer lender's files, the regulated consumer lender shall have a system by which those records may be readily identified, one from the other. The records shall bear the date of the contract and shall readily identify the type of transaction reflected thereon.

2.7.c. The records shall indicate when an account has been placed for collection or legal action taken. They shall also indicate whether judgment was obtained, together with the date and amount of judgment.

2.7.d. On accounts prepaid in full, the records shall clearly indicate the amount of unearned interest rebated and the amount of unearned insurance premium rebated, if any.

2.8. Reporting periods.

Effective December 31, 1997, all regulated consumer lenders shall submit semiannual reports as of June 30 and December 31 in the form and content prescribed by the Commissioner. The reports are due thirty (30) days after the close of the reporting period.

2.9. Regulated consumer loans not precomputed.

2.9.a. With respect to a regulated consumer loan, other than a revolving loan account, which is not precomputed, a regulated consumer lender shall compute finance charges on unpaid principal balances outstanding from time to time, for the actual time outstanding. Each payment shall be applied first to the accumulated finance charge and the remainder of the payment applied to the unpaid principal balance: Provided, That if the amount of the payment is insufficient to pay the accumulated finance charge, the unpaid accumulated charge shall continue to accumulate to be paid from the proceeds of subsequent payments and shall not be added to the principal balance.

2.9.b. Loan finance charges shall not be payable in advance or compounded. However, if part or all of the consideration for a new loan contract is the unpaid principal balance of a prior loan, then the principal amount payable under the new loan contract may include any unpaid loan finance charge which has accrued to the extent that the accrued charge does not exceed the unpaid principal balance of the prior loan. The resulting loan contract is considered a new and separate loan transaction for all purposes.

2.10. Out-of-state obligations.

With respect to consumer credit sales or consumer loans consummated in another state, a regulated consumer lender shall not collect or attempt to collect a sales finance charge or loan finance charge in excess of that permitted by the West Virginia Code. In certain situations where a consumer credit sale or non-revolving loan is made in another state W. Va. Code ''46A-3-104(6)and 46A-4-107(8) permit a resident lender as assignee to collect the finance charge provided in the agreement under the laws of the state where the agreement was executed.

2.11. Failure to do business.

Any regulated consumer lender who fails to have its office open for business at least three (3) hours per day, at least four (4) days per week for a consecutive period of four (4) weeks, is considered to have forfeited its license. For purposes of this subsection legal holidays may be counted as a business day. A regulated consumer lender may obtain written extensions from the Commissioner for periods not exceeding one (1) month upon presentation of evidence satisfactory to the Commissioner that the extensions are warranted.

2.12. Installment sales contracts.

2.12.a. A regulated consumer lender may purchase installment sales contracts without regard to the amount of the contracts and without regard to whether or not a buyer on a contract may also be obligated on a regulated consumer loan.

2.12.b. A regulated consumer lender may purchase installment sales contracts at any discount rate agreed upon with the seller.

2.12.c. A regulated consumer lender shall obtain from the seller a copy of the disclosure statement for each installment sales contract purchased and correct any bona fide errors in the computation of charges, so long as the corrections are not detrimental to the consumer.

2.13. Retention and financing of fees.

2.13.a. The non-refundable loan processing fee permitted by W. Va. Code ' 46A-4-107(7) shall be included in the calculation of the loan finance charge as a prepaid finance charge and may be paid separately or withheld from the proceeds of the loan and financed, and such financing shall not constitute interest on interest. Notwithstanding the withholding of the fee from the loan proceeds, the amount financed shall constitute the loan amount for purposes of this subsection of the code.

2.13.b. The total of any origination fees, points, or investigation fees assessed under subsection (4) of W. Va. Code ' 46A-4-107 which may be retained upon prepayment of a loan in a refinancing by the same lender within any twenty-four month period may not exceed five percent of the amount financed.

106CSR4

Series 06 Subsidiary Bank Holding The Stock Of Its Parent Holding Company as Collateral

W. Va. Code R. § 106-6-1 General

1.1. Scope. -- This rule permits a state chartered bank to hold the stock of its parent bank holding company, within certain limits, as collateral for an extension of credit.

1.2. Authority. -- W. Va. Code '31A-2-4(c)(11).

1.3. Filing date. -- May 2, 1989.

1.4. Effective date. -- May 2, 1989.

W. Va. Code R. § 106-6-2 Holding Company Stock As Collateral

2.1. In the case of a state-chartered bank, such bank may accept the stock of its parent bank holding company as collateral for loans or extensions of credit as long as the aggregate amount of the fair market value of all such parent bank holding company stock held as collateral will not exceed ten percent (10%) of the capital stock and surplus of the state-chartered bank.

106CSR6

Series 09 Rule Pertaining To The Legal Lending Limit

W. Va. Code R. § 106-9-1 General

1.1. Scope. -- This rule establishes the general method for implementing W. Va. Code '31A-4-26; it applies to all loans and extensions of credit made by state-chartered banking institutions and their domestic operating subsidiaries. This rule does not apply to loans made by state-chartered banking institutions to their affiliates (as that term is defined in subsection (b)(1) of Section 23A of the Federal Reserve Act (12 U.S.C. 371c(b)(1))) or operating subsidiaries. W. Va. Code '31A-4-26 and this rule are intended to prevent one (1) individual, or a relatively small group, from borrowing an unduly large amount of the state-chartered banking institution's funds. The statute and this rule are intended to safeguard the depositors of state-chartered banking institutions by spreading the loans and extensions of credit among a relatively large number of persons engaged in different lines of business.

1.2. Authority. -- W. Va. Code '31A-4-26(a)(5).

1.3. Filing Date. -- April 30, 2001.

1.4. Effective Date. -- June 1, 2001.

W. Va. Code R. § 106-9-2 Definitions

For purposes of this rule:

2.1. "Loans and Extensions of Credit" means any direct or indirect advance of funds to a person made on the basis of any obligation of that person to repay the funds or repayable from specific property pledged by or on behalf of a person. Such term shall also include any liability of a state-chartered banking institution to advance funds to or on behalf of a person pursuant to a contractual commitment;

2.2. "Contractual Commitment to Advance Funds" means (a) an obligation on the part of the bank to make payments (directly or indirectly) to a designated third party contingent upon a default by the bank's customer in the performance of an obligation under the terms of that customer's contract with the third party or (b) an obligation to guarantee or stand as surety for the benefit of a third party. The term includes, but is not limited to, AStandby Letters of Credit@, guarantees, puts and other similar arrangements. For purposes of this rule, undisbursed loan funds and loan commitments not yet drawn upon but which the bank has through written agreement obligated itself to disburse upon request are contractual commitments to advance funds as defined in this subsection. The definition does not include commercial letters of credit and similar instruments where the issuing bank expects the beneficiary to draw upon the issuer, which do not guarantee payment of a money obligation, and which do not provide for payment in the event of a default by the account party;

2.3. A "Standby Letter of Credit" means any letter of credit, or similar arrangement, however named or described, which represents an obligation to the beneficiary on the part of the issuer (a) to repay money borrowed by or advanced to or for the account of the account party, or (b) to make payment on account of any indebtedness undertaken by the account party, or (c) to make payment on account of any default by the account party in the performance of an obligation;

2.4. APerson@ means an individual, partnership, sole proprietorship, society, association, firm, institution, company, public or private corporation, not-for-profit corporation, state, governmental agency, bureau, department, division or instrumentality, political subdivision, county commission, municipality, trust, syndicate, estate or any other legal entity whatsoever, formed, created or existing under the laws of the state or any other jurisdiction;

2.5. "Unimpaired Capital and Unimpaired Surplus" means the amount of total equity capital outstanding as indicated in the bank's most recent quarterly report of condition and income as filed with the Commissioner of Banking pursuant to W. Va. Code '31A-4-19, plus the amount of the allowance for loan losses, minus the amount of goodwill or other nonmarketable intangible assets included in that quarterly report pursuant to generally accepted accounting principles. Unrealized gains and losses on the bank's securities and loan portfolios shall be included in the calculation of total equity capital to the extent required by generally accepted accounting principles and applicable federal or state law, rule or regulation;

2.6. "Readily Marketable Collateral" means AFinancial Instruments@ and bullion which are salable under ordinary circumstances with reasonable promptness at a fair market value determined by quotations based on actual transactions on an auction or a similarly available daily bid and ask price market;

2.7. "Financial Instruments" include stocks, notes, bonds, and debentures traded on a national securities exchange, "OTC Margin Stocks" (as defined in Regulation U of the Federal Reserve Board), commercial paper, negotiable certificates of deposit, bankers' acceptances and shares in money market and mutual funds of the type which issue shares in which banks may perfect a security interest. The term "Financial Instruments" does not include mortgages;

2.8. "Current Market Value" means the bid or closing price listed for an item in a regularly published listing or an electronic reporting service;

2.9. A "Readily Marketable Staple" means an article of commerce, agriculture or industry of such uses as to make it the subject of dealings in a ready market with sufficiently frequent price quotations as to make the price easily and definitely ascertainable, and the staple itself easy to sell at any time at a price determined in an organized market; and,

2.10. "Control" or ACommon Control@ as used throughout this rule shall be presumed to exist when:

(a) One or more persons acting in concert directly or indirectly own, control or have power to vote twenty-five percent (25%) or more of any class of voting securities or other ownership interests of another person;

(b) One or more persons, acting in concert, control, in any manner, the election of a majority of the directors, trustees or other persons exercising similar functions of another person; or, (c) Any other circumstances exist which indicate that one or more persons acting in concert directly or indirectly exercise a controlling influence over the management or policies of another person.

W. Va. Code R. § 106-9-3 Limitations and Compliance

3.1. General limitation.

The total loans and extensions of credit made by a state-chartered banking institution to any one person or common enterprise (as defined in subsection 4.2 of this rule) and not fully secured, as determined in a manner consistent with subsection 3.2 of this rule, shall not exceed fifteen percent (15%) of the unimpaired capital and unimpaired surplus of that state-chartered banking institution initially determined for the period that the loan or extension of credit is made.

3.2. Additional general limitation; loans fully secured by readily marketable collateral.

Where the total loans and extensions of credit by a state-chartered banking institution to any one person or common enterprise are fully secured by readily marketable collateral having a current market value, as determined by reliable and continuously available price quotations, at least equal to the outstanding amount of those loans and extensions, then the bank may provide these loans or extensions of up to ten percent (10%) of the unimpaired capital and unimpaired surplus of that state-chartered banking institution initially determined for the period that the loan or extension is made. This limitation is separate from and in addition to the limitation contained in subsection 3.l of this rule.

3.3. Compliance with W. Va. Code '31A-4-26(a)(2).

(a) Each loan or extension of credit based on the limitation contained in W. Va. Code '31A-4-26(a)(2) shall be secured by readily marketable collateral having a current market value of at least one hundred percent (100%) of the amount of the loan or extension of credit at all times.

(b) Each bank shall institute adequate procedures to ensure that the collateral value fully secures the outstanding loan at all times.

(c) Financial instruments may be denominated in foreign currencies which are freely convertible to United States dollars. If collateral is denominated and payable in a currency other than that of the loan or extension of credit which it secures, the bank's procedures shall require that the collateral be revalued at least monthly, using appropriate foreign exchange rates, in addition to being repriced at current market value.

(d) If collateral values fall below one hundred percent (100%) of the outstanding loan, to the extent that the loan is no longer in conformance with this section and exceeds the general fifteen percent (15%) limitation, the bank shall bring the loan into conformance within five (5) business days, except where judicial proceedings, regulatory actions or other extraordinary occurrences prevent the bank from taking action.

3.4. Material decline of unimpaired capital and unimpaired surplus.

(a) Where there is a material decline in a state-chartered bank's unimpaired capital and unimpaired surplus causing it to decrease during any quarterly reporting period more than twenty percent (20%) from that amount reported in the bank's most recent report of income and condition or causing it to decrease more than thirty percent (30%) in any twelve month period, the bank shall review its outstanding loans and extensions of credit and report to the commissioner of banking those loans and extensions of credit that exceed the limitations of this section using the bank's current re-evaluated unimpaired capital and unimpaired surplus. The report shall detail the bank's position in each loan and extension of credit. The commissioner may, within his or her discretion, require that these loans and extensions of credit be brought into conformity with the bank's current re-evaluated legal lending and investment limitation.

(b) The commissioner of banking may direct any state-chartered bank to recalculate its lending limits at more frequent intervals than provided in this section and require all outstanding loans and extensions of credit to be brought into conformance with the re-evaluated limitation in order to ensure a bank's safety and soundness. In these cases, the commissioner shall provide the bank a written notice explaining briefly the specific reasons why the determination was made to require the more frequent calculations.

W. Va. Code R. § 106-9-4 Combining Loans to Non-Affiliated Persons or Entities

4.1. General Rule. -- Loans or extensions of credit to one (1) person shall be attributed to other persons, for purposes of this rule, when:

(a) the proceeds of the loans or extensions of credit are to be used for the direct benefit of the other person or persons, or (b) a "Common Enterprise" is determined to exist between the persons.

4.2. Determination of a common enterprise.

(a) Whether two (2) or more persons are engaged in a common enterprise depends upon a realistic evaluation of the facts and circumstances of particular transactions.

(b) Where the expected source of repayment for each loan or extension of credit is the same for each person and neither person has another source of income from which the loan may be fully repaid, a common enterprise shall be determined to exist and the loans or extensions of credit shall be combined. An employer shall not be treated as a source of repayment because of wages and salaries paid to an employee, provided the employee does not exercise control over the employer.

(c) Where there is ASubstantial Financial Interdependence@ between the persons, a common enterprise shall be determined to exist and the loans or extensions of credit shall be combined. ASubstantial Financial Interdependence@ shall be determined to exist when fifty percent (50%) or more of one person's gross receipts or gross expenditures (on an annual basis) are derived from transactions with another person. Gross receipts and expenditures include gross revenues and expenses, intercompany loans, dividends, capital contributions, and similar receipts or payments.

(d) A common enterprise shall also be determined to exist when separate persons borrow from a bank for the purpose of acquiring a business enterprise of which those persons combined will own more than twenty-five percent (25%) of the voting securities or other voting ownership interests of the entity.

W. Va. Code R. § 106-9-5 Combining Loans to Affiliated Persons or Entities

5.1. General rules.

(a) The bank need not combine loans or extensions of credit to a person and its affiliates or to affiliates of one person unless either the direct benefit or the common enterprise test is met as set forth in section 4 of this rule.

(b) Loans or extensions of credit to a partnership, joint venture or association need not be combined with loans or extensions of credit to the members of the partnership, joint venture or association if the direct benefit or the common enterprise tests are not met. Similarly, loans or extensions of credit to members of a partnership, joint venture or association need not be combined with loans or extensions of credit to other members of the partnership, joint venture or association if the direct benefit or the common enterprise tests are not met with respect to the other members. The tests shall be considered to have been met when loans or extensions of credit are made to members of a partnership, joint venture or association for the purpose of purchasing an interest in the partnership, joint venture or association.

5.2. Definition of affiliated.

For purposes of this rule, an entity is AAffiliated@ with any person which owns or controls or beneficially owns or controls more than twenty-five percent (25%) of the voting stock or other voting ownership interest of the entity. The ownership or control need not be direct. For example, if A owns or controls more than twenty-five percent (25%) of the voting interest of Entity X which, in turn, owns more than twenty five percent (25%) of the voting interest of Entity Y, Entity Y would be considered an affiliate of both A and Entity X.

5.3. Exceptions.

(a) Notwithstanding subdivision 5.1 (a) of this rule, loans or extensions of credit by a state-chartered banking institution to an AAffiliated Group" may not exceed fifty percent (50%) of that state-chartered banking institution's unimpaired capital and unimpaired surplus. This aggregate limitation applies only to loans made pursuant to W. Va. Code ''31A-4-26(a)(1) and (2). An AAffiliated Group" includes a person and all of its affiliates.

(b) Loans or extensions of credit to a limited partnership, joint venture or association need not be combined with loans or extensions of credit to the limited partners in a limited partnership or to members of a joint venture or association if the partners or members, by the terms of the partnership or membership agreement, are not to be held liable for the debts or actions of the partnership, joint venture or association. However, the direct benefit and common enterprise rules are applicable to these partners or members.

W. Va. Code R. § 106-9-6 Exceptions to the Lending Limits

6.1. Discount of commercial or business paper. -- W. Va. Code '31-4-26(a)(4)(A) provides that loans or extensions of credit arising from the discount of commercial or business paper evidencing an obligation to the person negotiating it with recourse are not subject to any limitation based on capital and surplus.

(a) This exception applies to negotiable paper given in payment of the purchase price of commodities in domestic or export transactions purchased for resale or to be used in connection with the fabrication of a product or to be used for any other business purpose which may reasonably be expected to provide funds for payment of the paper. Loans or extensions of credit arising from the discount of paper of the kind described in this subsection shall bear the full recourse endorsement of the owner. However, loans or extensions of credit arising from the discount of the paper in export transactions may be endorsed by the owner without recourse or with limited recourse, or may be accompanied by a separate agreement for limited recourse: Provided, that if transferred without full recourse, the paper shall be supported by an assignment of appropriate insurance covering the political, credit and transfer risks applicable to the paper. Insurance provided by the Export-Import Bank or the Foreign Credit Insurance Association is considered appropriate for this purpose. Loans or extensions of credit based on this exception are not subject to any limitation.

(b) Since the reason for the unlimited credit under this exception is that the paper arises from the sale of a commodity which may reasonably be expected to provide funds for payment of the paper, a borrower=s failure to pay either principal or interest when due removes the reason for unlimited credit. Therefore, although the line of credit to the maker or endorser should not be classified as excessive by reasons of the default, the paper on which the default has occurred shall thereafter be taken into consideration in determining whether additional loans or extensions of credit may be made within the limits of W. Va. Code '31A-4-26(a). The same principles of disqualification from the exception apply to any renewal or extension of either the entire loan or an installment of the loan.

6.2. Bankers' acceptances. -- W. Va. Code '31A-4-26(a)(4)(B) provides that the purchase of bankers' acceptances of the kind described in section thirteen of the Federal Reserve Act and issued by other banks are not subject to any limitation based on capital and surplus.

(a) This exception permits the purchase by a state-chartered banking institution without limitation of bankers' acceptances created by other banks: Provided, that the acceptances are of the kind described in 12 U.S.C. '372 (eligible acceptances). Acceptances other than those described in 12 U.S.C. '372 shall be included within the purchasing state-chartered banking institution's lending limit to each acceptor bank.

(b) The limits under which a state-chartered banking institution may itself accept drafts eligible for rediscount are contained in 12 U.S.C. '372. These limits are distinct from the limits under W. Va. Code '31A-4-26(a). Acceptances by a bank of "Ineligible" drafts, i.e., time drafts which do not meet the requirements for discount with a Federal Reserve Bank, are subject to the limitations of W. Va. Code '31A-4-26(a).

(c) A state-chartered banking institution may hold its own acceptance, which for purposes of this rule, is to be considered a loan or extension of credit to the customer for whom the acceptance was made and is subject to the lending limits. To the extent that a loan or extension of credit created by discounting the acceptance is covered by a bona fide participation agreement, the discounting bank need only consider that portion of the discounted acceptance which it retains as being subject to the limitations of W. Va. Code '31A-4-26(a).

6.3. Loans secured by bills of lading or warehouse receipts covering readily marketable staples.

(a) The total loans and extensions of credit made by a state chartered banking institution to any one person or common enterprise may exceed fifteen percent (15%) of the unimpaired capital and unimpaired surplus of that state chartered banking institution at the time the loans or extensions of credit are made if they are fully secured by bills of lading or other documents giving a lien on readily marketable staples, as determined in a manner consistent with subdivision 6.3(b) of this rule, notwithstanding the collateral requirements in subsection 3.2 of this rule.

(b) Where the total loans and extensions of credit by a state chartered banking institution to any one person or common enterprise are fully secured by bills of lading or other documents giving a lien on readily marketable staples, the market value of which at all times equals or exceeds one hundred fifteen percent (115%) of the outstanding amount of the loans or extensions of credit, the bank may provide the loans or extensions of up to twenty percent (20%) of the unimpaired capital and unimpaired surplus of that state chartered banking institution. This limitation is in addition to the limitation contained in subsection 3.1 of this rule. Thus, the total amount allowed under this provision may not exceed thirty-five percent (35%) of a bank's unimpaired capital and unimpaired surplus.

(c) The maximum term of a loan or extension of credit extended under subdivision 6.3(b) of this rule shall be ten (10) months.

(d) Staples eligible for this exception shall be nonperishable and shall be fully covered by insurance when insurance is customary. This exception is intended to apply primarily to basic commodities, such as wheat and other grains, cotton, wool, and basic metals such as tin, copper, lead and the like. Whether a commodity is readily marketable depends upon existing conditions and it is possible that a commodity that qualifies at one time may cease to qualify at a later date. Fabricated commodities, which do not constitute standardized interchangeable units and do not possess uniformly broad marketability, do not qualify as readily marketable staples.

(e) Commodities sometimes fail to qualify as nonperishable because of the manner in which they are handled or stored during the life of the loan or extension of credit. Accordingly, the lending bank shall determine the question as to whether a staple is nonperishable on a case-by-case basis.

(f) The important characteristic of warehouse receipts, order bills of lading or other similar documents is that the holder of the documents has control of the commodity and can obtain immediate possession. However, the existence of brief notice periods or similar procedural requirements under state law, for the disposal of the collateral shall not affect the eligibility of instruments for this exception. Only documents with these characteristics are eligible security for loans under this exception. In the event of default on a loan secured by these documents, the bank must be in a position to sell the underlying commodity and promptly transfer title and possession to the purchaser, thus being able to protect itself without extended litigation. Generally, documents of title qualifying under the Uniform Commercial Code [W. Va. Code '46-1-201] are similar documents qualifying for this exception.

(g) Field warehouse receipts are an acceptable form of collateral when they are issued by a duly bonded and licensed grain elevator or warehouse having exclusive possession and control of the commodities even though the grain elevator or warehouse is maintained on the commodity owner's premises.

(h) Warehouse receipts issued by the borrower-owner which is a grain elevator or warehouse company, duly bonded and licensed and regularly inspected by state and federal authorities, may be considered eligible collateral under this exception only when the receipts are registered with an independent registrar whose consent is required before the commodities can be withdrawn from the warehouse.

(i) If collateral values fall below the levels required by subdivision 6.3(b) of this rule, to the extent that a loan is no longer in conformance with the collateral requirements and exceeds the general fifteen percent (15%) limitation, the bank shall bring the loan into conformance within five (5) business days, except where judicial proceedings, regulatory actions or other extraordinary occurrences prevent the bank from taking action.

6.4. Loans secured by obligations of the United States and West Virginia. W. Va. Code '31A-4-26(a)(4)(D) provides that loans or extensions of credit secured by bonds, notes, certificates of indebtedness or treasury bills of the United States or by other obligations fully guaranteed as to principal and interest by the United States or by bonds, notes, certificates of indebtedness which are general obligations of the state of West Virginia or by other obligations fully guaranteed as to principal and interest by the state of West Virginia are not subject to any limitation based on capital and surplus.

(a) This exception applies only to the extent that loans or extensions of credit are fully secured by the current market value of obligations of the United States or the state of West Virginia or guaranteed by the United States or the state of West Virginia.

(b) If the market value of the collateral declines to the extent that the loan is no longer in conformance with this exception and exceeds the general fifteen percent (15%) limitation, the bank shall bring the loan into conformance within five (5) business days.

6.5. Loans to or guaranteed by a federal agency or the state of West Virginia. W. Va. Code '31A-4-26(a)(4)(E) provides that loans or extensions of credit to or secured by unconditional takeout commitments or guarantees of any department, agency, bureau, board, commission or establishment of the United States or of the State of West Virginia or any corporation wholly owned directly or indirectly by the United States are not subject to any limitation based on capital and surplus.

(a) This exception may apply to only that portion of a loan or extension of credit that is covered by a federal government or state of West Virginia guarantee or commitment.

(b) For purposes of this exception, the commitment or guarantee shall be payable to cash or its equivalent within sixty (60) days after demand for payment is made.

(c) A guarantee or commitment is unconditional if the protection afforded the bank is not substantially diminished or impaired in the case of loss resulting from factors beyond the bank's control. Protection against loss is not materially diminished or impaired by procedural requirements, such as an agreement to take over only in the event of default, including default over a specific period of time, a requirement that notification of default be given within a specific period after its occurrence, or a requirement of good faith on the part of the bank.

6.6. Loans secured by segregated deposit accounts W. Va. Code '31A-4-26(a)(4)(F) provides that loans or extensions of credit secured by a segregated deposit account in the lending bank are not subject to any limitation based on capital and surplus.

(a) The lending bank shall ensure that a security interest has been perfected in the deposit, including the assignment of a specifically identified deposit and any other actions required by state law.

(b) Deposit accounts that qualify for this exception include deposits in any form generally recognized as deposits. In the case of a deposit eligible for withdrawal prior to the maturity of the secured loan, the bank shall establish internal procedures that prevent the release of the security.

(c) A deposit which is denominated and payable in a currency other than that of a loan or extension of credit which it secures may be eligible for this exception if it is freely convertible to United States dollars. The bank shall revalue the deposit at least monthly, using appropriate foreign exchange rates to ensure that the loan or extension of credit remains fully secured. This exception applies to only that portion of the loan or extension of credit that is covered by the United States dollar value of the deposit. If the United States dollar value of the deposit falls to the extent that the loan is in nonconformance with this exception and exceeds the general fifteen percent (15%) limitation, the bank shall bring the loan into conformance within five (5) business days, except where judicial proceedings, regulatory actions or other extraordinary occurrences prevent the bank from taking such action. This exception is not authority for state-chartered banking institutions to take deposits denominated in foreign currencies.

6.7. Loans to depository institutions with the approval of the Commissioner. W. Va. Code '31A-4-26(a)(4)(G) provides that loans or extensions of credit to any banking institution or to any receiver, conservator or other agent in charge of the business and property of such banking institution or other federally insured depository institution, when such loans or extensions of credit are approved by the commissioner of banking, are not subject to any limitation based on capital and surplus.

(a) This exception is intended to apply only in emergency situations where a state-chartered banking institution is called upon to provide assistance to another depository institution.

(b) For purposes of this subsection, a depository institutions means a commercial bank, savings bank, trust company, savings association or credit union.

6.8. Discount of installment consumer paper.

(a) Loans and extensions of credit arising from the discount of negotiable or nonnegotiable installment consumer paper that carries a full recourse endorsement or unconditional guarantee of any one person or common enterprise transferring the paper are subject to a maximum limitation equal to twenty-five percent (25%) of the bank's unimpaired capital and unimpaired surplus, provided the state-chartered banking institution has assessed the financial capacity of the endorser or guarantor upon which it is relying.

(b) The unconditional guarantee may be in the form of a repurchase agreement or a separate guarantee agreement. A condition reasonably within the power of the bank to perform, such as the repossession of collateral, shall not be considered to make conditional an otherwise unconditional agreement.

(i) For purposes of this section of the rule only, "Consumer" means the user of any products, commodities, goods, or services, whether leased or purchased, and does not include any person who purchases products or commodities for the purpose of resale or for fabrication into goods for sale.

(ii) For purposes of this section of the rule only, "Consumer Paper" includes paper relating to automobiles, mobile homes, residences, office equipment, household items, tuition fees, insurance premium fees and similar consumer items. Also included is paper covering the lease (where the bank is not the owner or lessor) or purchase of equipment for use in manufacturing, farming, construction or excavation.

(c) Under certain circumstances, installment consumer paper which otherwise meets the requirements of this section shall be considered a loan or extension of credit to the maker of the paper rather than the seller of the paper even though it carries a full recourse endorsement or unconditional guarantee. Specifically, where (A) through a review of the bank's files it has been determined that the financial condition of each maker is reasonably adequate to repay the loan or extension of credit and (B) an officer designated by the bank's Chairman or Chief Executive Officer pursuant to authorization by the board of directors certifies in writing that the bank is relying primarily upon the maker to repay the loan or extension of credit, the loan or extension of credit is subject only to the lending limits of the maker of the paper. Where paper is purchased in substantial quantities, the records, evaluation and certification may be in such form as is appropriate for the class and quantity of paper involved. The bank may use sampling techniques, or other appropriate methods, to independently verify the reliability of the credit information supplied by the seller.

6.9. Loans and extensions of credit secured by livestock.

(a) The total loans and extensions of credit made by a state-chartered banking institution to any one person or common enterprise may exceed fifteen percent (15%) of the unimpaired capital and unimpaired surplus of that state-chartered banking institution at the time the loans or extensions of credit are made if they are fully secured by documents or instruments securing title or giving a lien on livestock, as determined in a manner consistent with subdivision 6.9(b) of this rule.

(b) Where the total loans and extensions of credit by a state-chartered banking institution to any one person or common enterprise are fully secured by: (i) shipping documents or instruments transferring or securing title covering livestock or giving a first lien on livestock when the market value of the livestock securing the obligation is not at any time less than one hundred fifteen percent (115%) of the face amount of the obligation; or, (ii) discounted paper given in payment for livestock by dealers, which carries a full recourse endorsement or unconditional guarantee of the seller, and which is secured by a first lien on the livestock being sold when the market value of the livestock securing the obligation is not at any time less than one hundred percent (100%) of the face amount of the obligation; then the bank may provide those loans or extensions of credit of up to an additional ten percent (10%) of the unimpaired capital and unimpaired surplus of that state-chartered banking institution calculated at the time that loan or extension is made. This limitation is separate from and in addition to the limitation contained in subsection 3.1 of this rule.

(c) "Livestock" as the term is used in this subsection, includes dairy and beef cattle, hogs, sheep, goats, horses, mules, poultry and fish, whether or not they are held for resale.

(d) Banks shall maintain in their files an inspection and valuation report on the livestock pledged, in order to demonstrate compliance with this section. The inspection and valuation report should be performed at least every twelve (12) months or more frequently as considered prudent.

(e) Liens on the livestock shall be in a form that allows the bank to maintain a perfected security interest in the livestock under applicable state law.

(f) If collateral values fall below the levels required by subdivision 6.9(b) of this rule, to the extent that the loan is no longer in conformance with the collateral requirements and exceeds the general fifteen percent (15%) limitation, the bank shall bring the loan into conformance within thirty (30) business days, except where judicial proceedings, regulatory actions or other extraordinary occurrences prevent the bank from taking action.

6.10. Loans to Student Loan Marketing Association. W. Va. Code '31A-4-26(a)(4)(J) provides that loans or extensions of credit to the Student Loan Marketing Association are not subject to any limitation based on capital and surplus.

6.11. Loans to a person owning the property in which that state-chartered banking institution is located. W. Va. Code '31A-4-26(a)(4)(K) provides that loans or extensions of credit to a person owning the property in which that state-chartered banking institution is located, when that state-chartered banking institution has an unimpaired capital and surplus of not less than one million dollars ($1,000,000) or when approved in writing by the commissioner of banking, are not subject to any limitation based on capital and surplus. This exception is intended for APersons@ (as defined in subsection 2.4 of this rule) who own real property and lease fifty-one percent (51%) or more of the useable space to a state-chartered banking institution for use as either a main office or branch office, or other operations of a bank, and through its lease payments, the state-chartered banking institution provides, or is capable of providing, one hundred percent (100%) of the debt service on the loan or extension of credit.

W. Va. Code R. § 106-9-7 Miscellaneous

7.1. Obligations of accommodation parties. -- The liability of a drawer, endorser or guarantor who does not receive any of the proceeds, or the benefit of the proceeds, of the loan or extension of credit is not a loan or extension of credit to that person for purposes of this rule unless either the direct benefit or the common enterprise test is met. However, no person shall serve as an accommodation party on loans exceeding fifty percent (50%) of a state-chartered banking institution's unimpaired capital and unimpaired surplus.

7.2. Sale of federal funds and limitations on interbank liabilities.

(a) For purposes of this section of the rule, "Sale of Federal Funds" means any transaction among depository institutions involving the transfer of immediately available funds resulting from credits to deposit balances at federal reserve banks or from credits to deposit balances due from a correspondent depository institution.

(b) Immediately available balances may be sold for one business day, under a continuing contract, or for more than one business day.

(c) For purposes of this section of the rule, a "Continuing Contract" means an agreement that remains in effect for more than one business day but has no specified maturity and requires no advance notice for termination.

(d) Sales of federal funds to other banking or depository institutions, regardless of maturity, are subject to a maximum limitation equal to twenty-five percent (25%) of the bank=s unimpaired capital and unimpaired surplus.

7.3. Purchase of third-party paper. -- Where a state-chartered banking institution purchases third-party paper subject to an agreement that the seller will repurchase the paper upon default or at the end of a stated period after default, the seller's obligation to repurchase is subject to W. Va. Code '31A-4-26(a)(1) and is measured by the total unpaid balance of the paper owned by the bank less any applicable dealer reserves. Where the seller's obligation to repurchase is limited, the seller's total loans or extensions of credit, for the purpose of W. Va. Code '31A-4-26(a)(1) are measured by the total amount of paper the seller may ultimately be obligated to repurchase. Where no more than an agreed percentage of the purchase price is retained by the bank and credited to a reserve to be held as a form of collateral security, but the bank has no direct or indirect recourse to the seller, the loans or extensions of credit do not constitute loans or extensions of credit to the seller subject to the expanded limitations of subdivision 6.8(a) of this rule.

7.4. Overdrafts. -- Overdrafts, whether or not prearranged, are loans and extensions of credit for purposes of this rule. This rule does not apply to intra-day or daylight overdrafts.

7.5. Loans charged off, in whole or in part.-- The legal lending limits apply to all existing loans or extensions of credit to a person by the bank, including loans or extensions of credit that have been charged off the books of the bank in whole or in part. Loans or extensions of credit that have become unenforceable by reason of discharge in bankruptcy or are no longer legally enforceable for other reasons are not loans and extensions of credit for purposes of this rule.

7.6. Sale of loan participation.

(a) When a state-chartered banking institution sells a participation in a loan or extension of credit, including the discount of the bank's own applicable acceptance, that portion of the loan that is sold on a nonrecourse basis shall not be applied to the bank's lending limits. In order to remove the sold, nonrecourse portion of a loan or extension of credit from a bank's lending limit, that state-chartered banking institution shall have a written commitment to purchase from the participating bank prior to loan closing and shall remove the disallowed portion of the loan from the books within ten (10) business days of closing. In addition, the a participation must result in a pro rata sharing of credit risk proportionate to the respective interests of the originating and participating lenders. A pro rata sharing of credit risk is required even if the participation agreement provides that repayment shall be applied first to the shares sold. In that case, the pro rata sharing may only be accomplished if the agreement also provides that, in case of a default or comparable event defined in the agreement, participants shall share in all subsequent repayments and collections in proportion to the percentage of participation at the time of the occurrence of the event.

(b) The provisions of subdivision 7.6(a) of this rule apply to all loans and extensions of credit including contractual commitments to advance funds.

7.7. Interest or discount on loans. -- The legal lending limits do not apply to the portion of a loan or extension of credit that represents accrued or discount interest.

7.8. Loans to industrial development authorities. -- A loan or extension of credit to an industrial development authority or similar public entity created for the purpose of constructing and leasing a plant facility, including a health care facility, to an industrial occupant is not a loan or extension of credit to the authority for the purposes of W. Va. Code '31A-4-26(a) if the following criteria is met. However, if a loan or extension of credit meets all of the following criteria, it shall be considered a loan or extension of credit to the lessee and shall be combined with other obligations of the lessee for the purposes of W. Va. Code '31A-4-26(a).

(a) The bank relies on the credit of the industrial occupant in making the loan;

(b) The authority's liability with respect to the loan is limited solely to whatever interest it has in the particular facility;

(c) The authority's interest is assigned to the bank as security for the loan or a promissory note from the lessee to the bank provides a higher order of security than the assignment of a lease; and (d) The industrial occupant's lease rentals are assigned and paid directly to the bank. A loan or extension of credit meeting the above criteria shall be considered a loan or extension of credit to the lessee and shall be combined with other obligations of the lessee for the purposes of W. Va. Code '31A-4-26(a).

7.9. Loans to leasing companies. -- A loan or extension of credit to a leasing company for the purpose of purchasing personal property for lease shall be considered a loan to the lessee, provided that the following criteria are met:

(a) The bank evaluates the creditworthiness of the lessee before the loan is extended to the leasing corporation;

(b) The loan is without recourse to the leasing corporation;

(c) The bank is given a security interest in the personal property and in the event of default, may proceed directly against the property and the lessee for any deficiency resulting from the sale of the property;

(d) The leasing corporation assigns all of its rights under the lease to the bank;

(e) The lessee's lease payments are assigned and paid to the bank; and (f) The lease terms are subject to the same limitations that would apply to a state bank acting as the originating lessor.

7.10. Separate limitations for W. Va. Code '31A-4-26(a). -- The legal lending limits prescribed by W. Va. Code '31A-4-26(a) are separate and distinct from the investment limits prescribed by W. Va. Code '31A-4-26(b). Accordingly, a state-chartered banking institution may make loans or extensions of credit to one borrower up to the full amount permitted by W. Va. Code '31A-4-26(a) and also hold eligible investment securities of the same obligor up to the full amount permitted by W. Va. Code '31A-4-26(b). In order for a security to be an investment security, it must be eligible for investment by a state-chartered banking institution in accordance with the standards set forth in W. Va. Code '31A-4-26(b).

106CSR9

Series 10 Procedural Rules Of The Commissioner Of Banking

W. Va. Code R. § 106-10-1 General

1.1. Scope. -- These regulations shall govern the procedure and practice before the Commissioner of Banking (or any hearing examiner appointed pursuant to W. Va. Code '31A-8-1) with regard to declaratory rulings and contested case hearings.

1.2. Authority. -- W. Va. Code ''29A-4-1 and 29A-5-1(a).

1.3. Filing Date. -- January 11, 1985.

1.4. Effective Date. -- February 11, 1985.

W. Va. Code R. § 106-10-2 Declaratory Rulings

2.1. The permissive parties. -- Pursuant to W. Va. Code '29A-4-1, any person with a bona fide interest in any state of facts or any rule or statute enforceable by the Commissioner of Banking may, by proper petition, request a declaratory ruling from the Commissioner of Banking upon such matter.

2.2. Form of petition. -- The petition shall be typewritten, shall concisely state the matters upon which a declaratory ruling is sought, shall state why petitioner seeks such ruling and shall be verified by petitioner's authorized agent or petitioner's attorney. Three (3) copies of such petition shall be filed with the Commissioner of Banking.

2.3. Briefs. -- Petitioner shall prepare a brief or memorandum of law and three (3) copies of such shall be filed with the Commissioner of Banking simultaneously with the filing of the petition.

2.4. Hearings. -- If petitioner seeks a hearing before the Commissioner of Banking, he shall so state in his petition, in which event the Commissioner of Banking shall hear petitioner at a time and place to be determined by the Commissioner of Banking within sixty (60) days from the date of request, giving petitioner at least ten (10) days written notice of the date, time and place of the hearing.

2.5. Decision. -- The Commissioner of Banking shall render a written ruling upon the matter requested by petitioner within thirty (30) days after a hearing, if such is held, or within sixty (60) days after the filing of a petition, if no hearing is requested.

2.6. Applicability of decision. -- Any ruling by the Commissioner of Banking shall be binding upon the Commissioner of Banking and upon the party requesting the ruling upon the state of facts set forth in the petition, but shall not be binding upon any other person.

2.7. Appeal. -- A declaratory ruling of the Commissioner of Banking shall be subject to review as provided for in W. Va. Code '29A-4-2.

W. Va. Code R. § 106-10-3 Contested Case Hearings

3.1. Conduct of hearing. -- Any contested case hearing before the Commissioner of Banking shall be conducted pursuant to W. Va. Code '29A-5-1 et seq. and W. Va. Code '31A-8-1.

3.2. Notice of hearing. -- Notice of the time and place of any hearing shall be given to all parties who may be interested in any hearing as provided for in W. Va Code '31A-8-1; 29A-5-1; and 29A-7-2. All notices required by statute or these rules to be served on parties to a contested case hearing shall be sufficient if served upon that party or his attorney of record, in person or by registered or certified mail. Hearings may be continued by the Commissioner of Banking on his own motion or for good cause shown without further notice.

3.3. Place of hearing. -- The Commissioner of Banking shall determine the site of any hearing.

3.4. Hearing tribunal. -- Pursuant to W .Va. Code '31A-8-1, any matter requiring a hearing may be heard by the Commissioner of Banking or by a hearing examiner appointed by him.

3.5. Presentation of evidence. -- Seven (7) days prior to the hearing date, each party to the hearing shall file with the Commissioner of Banking three (3) copies of the following items and shall simultaneously supply opposing parties with one (1) copy:

(a) The basic petition document or answer to that petition and supporting exhibits which the party may wish to file in support or furtherance of that petition or answer to that petition.

(b) A list of all witnesses proposed to be called with the identity of each witness and a concise summary statement of each witness' testimony. At any hearing, all items previously filed as hereinabove required shall become a part of the record and shall not require further authentication, but may be traversed by an opposing party. No witness not previously listed shall be heard except for good cause shown. The provisions of W. Va. Code '29A-5-2 shall govern the presentation of all evidence at a contested case hearing.

3.6. Stipulations. -- Seven (7) days prior to the hearing date, parties to the hearing shall file with the Commissioner of Banking three (3) copies of a signed joint stipulation setting forth the following:

(a) Issues to be decided;

(b) Statement of undisputed facts, including facts to which each witness will testify;

(c) Statement of disputed facts, including facts to which each witness will testify; and (d) Exhibits to be introduced, with or without objection.

It shall be within the Commissioner of Banking's discretion to waive this signed joint stipulation requirement.

3.7. Record. -- A record shall be made of all reported testimony and evidence in a contested case hearing but need not be transcribed unless requested by a party, in which case the cost of the transcription shall be borne by such party.

3.8. Decision. -- The Commissioner of Banking shall render his decision within thirty (30) days after a contested case is heard or within thirty (30) days after proposed findings of fact and conclusions of law and exceptions to those proposed findings of fact and conclusions of law are filed. An order accompanied by findings of fact and conclusions of law (in conformity with that decision of the Commissioner of Banking) shall be entered in accordance with the provisions of W. Va. Code '29A-5-3.

3.9. Finality of decision. -- After a final decision is rendered pursuant to Section 3.8 of these regulations, the Commissioner of Banking shall not grant a rehearing upon the same matter, but an aggrieved party shall have recourse to an appeal pursuant to W. Va. Code '29A-5-4.

106CSR10

Series 11 Permissible Additional Charges In Connection with A Consumer Credit Sale

W. Va. Code R. § 106-11-1 General

1.1. Scope. -- This rule establishes certain other "Permissible Additional Charges", for benefits conferred on the consumer in a consumer credit sale or loan, pursuant to W. Va. Code '46A-3-109(a)(4).

1.2. Authority. -- W. Va. Code ''46A-3-109(a)(4) and 31A-2-4(c)(12).

1.3. Filing Date. -- April 19, 1999.

1.4. Effective Date. -- May 1, 1999.

W. Va. Code R. § 106-11-2 Documentary Fee or Documentary Charge

2.1. Benefit to Consumer. -- The "Documentary Fee" or "Documentary Charge" provided for in W. Va. Code '46A-3-109(a)(6) applies to a documentary service. The documentary service is limited to securing a title and services related to securing a title actually provided to the consumer in a consumer credit sale. Except as authorized under W. Va. Code ' 17A-4A-4, documentary services do not include services that the seller is required by law to perform. It is not mandatory under this rule for the seller to provide documentary services for which a "Documentary Fee" or "Documentary Charge" apply, and the consumer, unless otherwise precluded by law, has the option to accept the documentary service for which the "Documentary Fee" or "Documentary Charges" apply. The "Documentary Fee" or "Documentary Charge" must represent a benefit of value to the consumer and there must be a reasonable relationship between the fee or charge and the benefit conferred on the consumer. The seller in a consumer credit sale must demonstrate that there was a documentary service actually performed, that the documentary service was of value to the consumer, and that there was a reasonable relationship between the fee or charge and the benefit conferred upon the consumer.

W. Va. Code R. § 106-11-3 Flood Mapping Service Fee for Residential Property

3.1. Third Party Providers. -- A lender in making a consumer loan secured by a first or subsequent lien on residential property, including a loan for a mobile home purchase or refinancing where the home is to be placed on a certain parcel of real estate known to the lender, may charge the consumer and recover the reasonable fee incurred by the lender in obtaining information from a non-affiliated third party on the flood map location of the property: Provided, That this flood map location information is required by federal law or regulation to be ascertained by the lender. The flood mapping service fee must be reasonable in relation to the actual service provided.

W. Va. Code R. § 106-11-4 Over-the-Limit Fees

4.1. Revolving Credit. -- A lender may assess, as a permissible additional charge in connection with a revolving line of credit, a charge to the consumer for exceeding his or her credit limit. The charge may not, in any billing period, exceed two percent (2%) of the consumer's established credit limit or ten dollars ($10), whichever is less. This charge is also subject to the monthly periodic finance charge if not paid upon initial billing.

W. Va. Code R. § 106-11-5 Cash Advance Charges

5.1. Lender Credit Cards. -- A lender may impose charges for a cash advance obtained by a consumer in connection with use of a lender credit card as a permissible additional charge. The charge may not, per occurrence, exceed one and one-half percent (1.5%) of the amount of the cash advance, or five dollars ($5), whichever is less. These charges are also subject to the monthly periodic finance charge if not paid upon initial billing.

W. Va. Code R. § 106-11-6 Debt Cancellation Contracts and Insurance

6.1. Fee for Cancellation of Debt. -- A lender or creditor may charge and collect a fee in connection with a contract to cancel (i) all of the debtor=s liability for non-delinquent amounts which exceed the value received by the creditor or its assignee for the collateral securing the obligation, or (ii) the remaining liability in the event of the loss of life, health, or income of the debtor, or in case of an accident. The fee is a permissible additional charge: Provided, That,

6.1.a. The debt cancellation agreement is not required by the lender or the creditor, and this fact is disclosed in writing;

6.1.b. The fee is disclosed in writing and the term of the agreement is equal to the term of the loan or credit transaction;

6.1.c. The borrower signs or initials an affirmative written request for the plan after receiving the disclosures required by subdivisions a and b of this subsection;

6.1.d. In the case of a debt cancellation plan for collateral, the amount of the debt at the time of the contract, excluding any insurance or additional charges, exceeds $2,000;

6.1.e. In the case of a debt cancellation plan for loss of life, health, or income or in case of an accident, the contract is sold in lieu of corresponding credit life, health, loss of income or accident insurance; and

6.1.f. The debt cancellation fee is one which is not treated as a finance charge for purposes of the federal Truth-in-Lending Act.

6.2. Fee for GAP Insurance for Cancellation of Debt-- A lender or creditor may impose and collect a fee in connection with an insurance contract for Guaranteed Automobile Protection ("GAP")to cancel all of the debtor=s liability for non-delinquent amounts which exceed the value received by the creditor or its assignee for the collateral securing the obligation: Provided, That,

6.2.a. The loan or credit sale is secured by a motor vehicle and the amount of the debt at the time of the contract, excluding any insurance or additional charges, exceeds $2,000;

6.2.b. The GAP insurance agreement canceling the debt is not required by the lender or the creditor, and this fact is disclosed in writing;

6.2.c. The premium fee is disclosed in writing and the term of the policy coverage is equal to the term of the loan or credit transaction;

6.2.d. The borrower signs or initials an affirmative written request for coverage after receiving the disclosures required by subdivisions b and c of this subsection; and

6.2.e. The GAP insurance policy fee is one which is not treated as a finance charge for purposes of the federal Truth-in-Lending Act.

6.3. Determination of Insurance-- The Commissioner of Insurance retains the authority to determine whether any debt cancellation agreement constitutes an insurance product.

6.4. overage Limitations-- Debt cancellation contracts and GAP insurance permitted by this section need not cancel or cover any other insurance deductible, amount owed by failure to maintain any required insurance, or any late fees or accrued and unpaid charges, or any refunds for other goods or services rendered. Nor, where such contracts or insurance are used to protect against excess collateral liability, are they required to provide any cancellation or coverage if the debtor=s property insurance on the collateral fails to pay the lender or creditor, or the debtor=s insurance company determines that the collateral is not a total loss resulting from theft or physical damage.

W. Va. Code R. § 106-11-7 Optional End Term Debt Cancellation Fee

7.1. Balloon Note Secured by Motor Vehicle-- A lender or creditor may, at the end of the term of a balloon loan or note secured by a motor vehicle, offer, as an option, to accept return of the motor vehicle and charge and collect a fee to cancel all of the debtor=s liability for amounts exceeding the value of the collateral securing the obligation. The fee may include or be in addition to excess mileage fees and payments for damages to the vehicle. The fee is a permissible additional charge: Provided, That,

7.1.a. The borrower is provided the option to pay off the loan or debt, or to refinance the loan or debt without penalty; and

7.1.b. The amount of the initial balloon loan or note exceeded $2,000 and the amount actually owing at the end of that balloon loan or note and at the time the fee is imposed exceeds $1,000.

106CSR11

Series 12 General Rules Implementing The WV Community Reinvestment Act

W. Va. Code R. § 106-12-1 General

1.1. Scope. -- This rule establishes general guidelines implementing W. Va. Code '31A-8B-1 et seq., the West Virginia Community Reinvestment Act; it applies to all bank holding companies, all state-chartered banking institutions, all domestic subsidiaries of bank holding companies and all domestic subsidiaries of state-chartered banks operating or with application to operate in West Virginia. W. Va. Code '31A-8B-1 et seq. and this rule are intended to encourage banks and bank holding companies to help meet the credit needs of their local community or communities and to provide guidance to banks and bank holding companies as to how the Commissioner of Banking ("Commissioner") and the West Virginia Board of Banking and Financial Institutions ("Board") will assess the records of these institutions in satisfying their continuing and affirmative obligations to help meet the credit needs of the local communities, including low and moderate-income neighborhoods, consistent with the safe and sound operation of those institutions. The Commissioner and the Board will take the records of applicant banks and bank holding companies in complying with the provisions of both the Federal and West Virginia Community Reinvestment Acts into account when evaluating applications for deposit facilities and applications for permission to engage in financially-related services.

1.2. Authority. -- W. Va. Code '31A-8B-5.

1.3. Filing Date. -- June 9, 1993.

1.4. Effective Date. -- July 1, 1993.

W. Va. Code R. § 106-12-2 Applicability of Federal Community Reinvestment Act of 1977

2.1. All state-chartered banks shall comply with the Federal Community Reinvestment Act of 1977 and related regulations heretofore promulgated thereunder. In connection with the examination of a bank, the Commissioner shall assess the record of performance of the bank in helping to meet the credit needs of its entire community, including low - and moderate-income neighborhoods, consistent with the safe and sound operation of the bank. The Commissioner shall consider the factors established in the Federal Community Reinvestment Act of 1977 and related regulations in making this assessment.

W. Va. Code R. § 106-12-3 Filing Requirements

3.1. All bank or bank holding company applications requiring Board or Commissioner approval shall include the current Community Reinvestment Act statement required pursuant to the Federal Community Reinvestment Act of 1977 and related regulations issued thereunder. For purposes of a bank holding company application, the applicant bank holding company shall submit the information requested pursuant to these regulations for each of its subsidiary banks located in West Virginia and each bank located in West Virginia, which it is to acquire. For purposes of a bank merger application, the acquiring bank or bank holding company shall submit all information requested pursuant to these regulations for each bank or bank holding company involved in the merger.

3.2. In addition to the Community Reinvestment Act (CRA) statement required under subsection 3.1 of this rule, the applicant may include supplemental information supporting the applicant's record of performance in meeting the credit needs of the community or communities it is attempting to serve. Credit activities in the following loan categories are considered important and favorable:

3.2.1. Housing-related Loans

3.2.1.a. Federal Housing Authority/Veterans Administration/Farmers Home Administration mortgage loans.

3.2.1.b. Federal Housing Authority Title I home improvement loans.

3.2.1.c. Mobile home loans.

3.2.1.d. Loans extended via participation in city, county and/or state housing development agencies.

3.2.1.e. Housing loans extended in low - and moderate-income neighborhoods.

3.2.1.f. Use of various secondary market programs and participation in such programs.

3.2.1.g. In-house housing related loan programs.

3.2.2. Commercial and Industrial Loans.

3.2.2.a. Small Business Loans.

3.2.2.a.A. Small Business Administration guaranteed loans.

3.2.2.a.B. Farmers Home Administration guaranteed Business and Industrial Loans.

3.2.2.a.C. In-house small business loan programs.

3.2.2.b. General Commercial Loans.

3.2.2.c. Participation in industrial and economic development programs.

3.2.2.c.A. Extension of industrial development loans.

3.2.2.c.B. Purchase of industrial revenue bonds.

3.2.2.c.C. Investment in local municipal and school bonds (for purpose of this category, local means home county and contiguous counties).

3.2.2.c.D. Community purpose loans.

3.2.3. Agricultural loans.

3.2.4. Consumer loans.

3.2.4.a. Student loans.

3.2.4.b. Consumer counseling.

3.2.4.c. Loans to low - and moderate-income consumers.

3.2.4.d. All other.

3.3. Out-of-state bank holding companies seeking to acquire a West Virginia bank or West Virginia bank holding company pursuant to W. Va. Code '31A-8A-7 (c) shall, in addition to the filing of the required CRA statements, include a record of any formal protest and hearing held over the last five years regarding the CRA performance of the Applicant and all of their currently owned affiliate banks.

3.4. The applicant shall furnish any additional information that the Board or the Commissioner may require.

W. Va. Code R. § 106-12-4 Assessing The Record Of Performance

4.1. Whenever the Board or Commissioner receives an application, requiring Board or Commissioner approval, from a banking institution, whose most recent CRA performance rating is "Needs to improve record of meeting community credit needs", the Board or Commissioner shall require the applicant banking institution to provide additional, detailed information, setting forth the measures undertaken by the applicant banking institution to improve its performance under the CRA. The Board or Commissioner shall not accept an application requiring Board or Commissioner approval from banking institutions whose most recent CRA performance rating is "Substantial noncompliance in meeting community credit needs."

4.2. Whenever a bank holding company files an application requiring the approval of the Board or Commissioner, the Board or Commissioner shall assess the record of compliance with the CRA of each of the holding company's subsidiary banks. If, in the opinion of the Board or Commissioner, the overall record of compliance with CRA by the holding company's subsidiary banks is determined to be unsatisfactory, the Board or Commissioner will not accept the application.

W. Va. Code R. § 106-12-5 Public Participation

5.1. For all bank or bank holding company applications requiring Board or Commissioner approval the applicants shall, in conjunction with public notice and publication requirements of the Federal Reserve Board or Federal Deposit Insurance Corporation, include in the notice the following statement:

"The public is also invited to submit written comments regarding this application to the West Virginia Board of Banking and Financial Institutions. Write Commissioner of Banking, Capitol Complex, Charleston, West Virginia 25305."

5.2. In conjunction with an application, the Commissioner shall make available for public inspection the applicant's CRA statements, the applicant's record of previously filed CRA protests, historical information concerning loan and deposit trends, and any supplemental information filed with the Commissioner.

5.3. A banking institution's record of compliance with the Community Reinvestment Act and this rule is a subject for consideration in conjunction with the notice and hearings required by W. Va. Code '31A-3-3.

W. Va. Code R. § 106-12-6 Effects On Applications

6.1. The assessment of an applicant's record of performance in helping to meet the credit needs of its community or communities, may be the basis for denial of an application.

6.2. Notwithstanding any section of this rule to the contrary, the Board or the commissioner may approve applications subject to terms and conditions, which, in the discretion of the Board or the Commissioner, are considered necessary to improve the applicant's record of community reinvestment.

106CSR12

Series 16 Lease Financing Transactions

W. Va. Code R. § 106-16-1 General

1.1. Scope. -- The purpose of this regulation is to set forth the manner in which state chartered banking institutions may engage in lease financing transactions.

1.2. Authority. -- W. Va. Code '31A-4-38.

1.3. Filing Date. -- April 22, 1992.

1.4. Effective Date. -- April 24, 1992.

W. Va. Code R. § 106-16-2 Definitions

2.1. "Bank", as used in this regulation, means a corporation heretofore or hereafter chartered to conduct a banking business under the laws of West Virginia and embraces and includes a trust company or an institution combining banking and trust company facilities, functions and services chartered or authorized to conduct such business in this state and includes industrial banks as authorized by W. Va. Code '31-7-1 et seq. 2.2.

(a) "Net Lease", as used in this regulation, means a lease which is the functional equivalent to a loan of money secured by the leased properties and under which a bank will not directly or indirectly, provide or be obligated to provide for:

(1) The servicing, maintenance or repair of the lease property during the lease term.

(2) The purchasing of parts and accessories for the leased property; however, the bank may lease improvements and additions to the leased property to the lessee upon its request in accordance with any applicable requirements for maximum estimated rental value.

(3) The loan of replacement or substitute property while the leased property is being serviced.

(4) The purchasing of insurance for the lessee, except where the lessee has failed in its contractual obligation to purchase or maintain the required insurance.

(5) The renewal of any license or registration for the leased property unless such action by the bank is necessary to protect its interest as owner or financier of the leased property.

(b) The limitations contained in subsection 2.2.(a) of this section do not prohibit a bank from arranging for any of the services enumerated in that subsection to be provided to the lessee by a third party (at the expense of the lessee) with respect to property leased by the lessee.

(c) If, in good faith, a bank believes that there has been an unexpected change in conditions which threatens its financial position by significantly increasing it's exposure to loss, the limitations contained in subsection 2.2.(a) of this section shall not prevent the bank as owner and lessor under a net lease, from taking reasonable and appropriate action to salvage or protect the value of the leased property or its interests arising under the lease.

2.3. "Personal property", as used in the regulation, means tangible, personal property including, vehicles, machinery, equipment, furniture and fixtures.

W. Va. Code R. § 106-16-3 Authority to Engage in Leasing Transactions

3.1. Investment in Personal Property (a) A bank may (1) become the legal or beneficial owner and lessor of specific, personal property or otherwise acquire property only after the bank has entered into a legally binding written commitment to lease the personal property on terms which comply with the provisions of this regulation; (2) become the owner and lessor of personal property by purchasing the property from another lessor in connection with the purchase of the related lease; and (3) incur obligations incidental to its position as the legal or beneficial owner and lessor of the leased property; provided the lease is a net basis lease representing a noncancelable obligation of the lessee, notwithstanding the possible early termination of the lease.

(b) Prior to entering into a lease financing transaction, a bank must reasonably expect to realize a return of its full investment in the leased property, plus the estimated cost of financing the property over the term of the lease from:

(1) Rentals;

(2) Estimated tax benefits; and (3) The estimated residual value of the leased property at the expiration of the initial term of the lease.

(c) The aggregate book value of all tangible personal property held for lease by a bank pursuant to the provisions of this regulation shall not exceed ten percent (10%) of the consolidated assets of the bank.

(d) At the expiration of the lease (including any renewals or extensions with the same lessee), or in the event of a default on a lease agreement prior to the expiration of the lease term, all of the bank's interest in the property shall either be liquidated or re-leased in conformance with this regulation as soon as practicable, but in any event no later than one (1) year from the expiration of the lease. Provided, that under exceptional circumstances and in response to a written request by the bank, the Commissioner of Banking may extend the time for the liquidating or re-leasing the leased property. Property which the bank retains in anticipation of re-leasing the leased property. Property which the bank retains in anticipation of re-leasing must be re-valued at the lower of current fair market value or book value prior to any subsequent lease, for the purpose of determining the applicable maximum estimated residual value.

(e) Notwithstanding the provisions of paragraph (d) of this section, on the return of leased property, at the expiration of a conforming lease term, or on the default of a lessee, a short term bridge or interim lease is permissible if it otherwise conforms with the requirements of this section. Banks may only use short term bridge or interim leases to facilitate conforming long term lease financing transactions.

W. Va. Code R. § 106-16-4 Lease Term, Legal Lending Limits

4.1. Term of Initial Lease Transaction.

Lease financing transactions entered into pursuant to this regulation must have an initial term of not less than ninety (90) days and not more than ten (10) years.

4.2. Application of Legal Lending Limits.

Lease financing transactions entered into pursuant to this regulation are subject to the limitations on loans and extensions of credit under W. Va. Code '31A-4-26 and regulations promulgated thereunder. The Commissioner of Banking reserves the right to determine that such leases are also subject to the limitations of any other law, regulation or ruling.

W. Va. Code R. § 106-16-5 Residual Value

5.1. Maximum Estimated Residual Value.

(a) Any unguaranteed portion of the estimated residual value relied upon by the bank to yield a return of its full investment shall not exceed twenty-five percent (25%) of the original cost of the property to the lessor. The amount of the estimated residual value guaranteed by the manufacturer, the lessee or a third party may exceed twenty-five percent (25%) of the original cost of the property, where the bank has determined, and can provide full, supporting documentation, that the guarantor, which is not an affiliate, as that term is defined by 12 USC 371C, has the resources to meet the guarantee.

(b) A bank may base calculations of estimated residual value on leases of personal property to federal, state or local governments entities may be based on reasonably anticipated future transactions or renewals.

(c) In all cases, the estimated residual value of the property and that portion of the estimated residual value relied upon by the lessor to satisfy the requirements of subsection 3.1.(b) of this rule must be reasonable in light of the nature of the leased property and all relevant circumstances so that realization of the bank's full investment plus the cost of financing the property depends on the creditworthiness of the lessee and any guarantor of the residual value, and not on the residual market value of the leased property.

W. Va. Code R. § 106-16-6 Maintenance and Retention of Records

Whenever a bank enters into a lease financing transaction, the bank must identify any and all records associated with the lease financing transaction to distinguish them from those records maintained by the bank on its loans. A bank shall maintain all records associated with a bank's lease financing transactions separately from those records associated with a bank's loan transactions.

W. Va. Code R. § 106-16-7 Conflicts

Nothing in this regulation shall be construed to be in conflict with the duties, liabilities and standards imposed by the Consumer Leasing Act of 1976, 15 USC 1667 et seq.

106CSR16

Series 18 Legislative Rule Pertaining To Acquisition Of Property By Financial Institutions And Valuation Of Real Estate Owned By State-Chartered Banks

W. Va. Code R. § 106-18-1 General

1.1. Scope. -- This rule regulates certain conduct in the acquisition of property by financial institutions through foreclosure or surrender of deed or otherwise in satisfaction of debt previously contracted and establishes standards for the proper valuation by state-chartered banks of real estate obtained for sale or use.

1.2. Authority. -- W. Va. Code ''31A-4-13 and 31A-2-4(c)(11).

1.3. Filing Date. -- April 18, 1994.

1.4. Effective Date. -- May 19, 1994.

W. Va. Code R. § 106-18-2 Definitions

2.1. "Fair Value" means the amount, minus estimated expenses to sell, that the bank could reasonably expect to receive for the property in a current sale between a willing buyer and a willing seller, other than in a forced or liquidation sale.

2.2. "Cost" means the amount paid by the bank to purchase the property minus depreciation if the property is held for use by the bank and is not an asset held for sale; and means the amount actually paid by the bank to obtain the property at foreclosure plus the bank's unpaid loan balance, or in the event the property is surrendered by deed or otherwise obtained by the bank in satisfaction of debt previously contracted, the amount of the unpaid loan balance when the property is held for sale.

2.3. "Other Real Estate Owned" or "OREO" means real estate obtained by a financial institution as a result of a loan default or repayment of debt or otherwise and which is held for sale; and includes all such property so designated in accordance with Generally Accepted Accounting Principals (GAAP).

2.4. "Financial Institution" means those institutions defined as such in W. Va. Code '31A-1-2(1).

2.5. "Affiliate" means those persons or entities defined as such in W. Va. Code '31A-8-3(b).

W. Va. Code R. § 106-18-3 Valuation of Real Estate Held by State-Chartered Banks

3.1. Real Estate Held For Use -- In determining the value that a state-chartered bank places on its books for a real estate asset which it holds for use to conduct its banking business, the bank shall calculate the amount as the lesser of fair value or cost, the cost being the price paid by the bank to purchase the property minus depreciation.

3.2. Real Estate Held For Sale -- In determining the value that a state-chartered bank places on its books for a real estate asset which it obtained by foreclosure or otherwise obtained and holds for sale, the bank shall calculate the amount as the lesser of fair value or cost, the cost being the price actually paid to obtain the property at foreclosure plus the bank's unpaid loan balance, or in the event the property is surrendered by deed or otherwise obtained by the bank in satisfaction of debt previously contracted, the amount of the unpaid loan balance.

3.3. Use of GAAP Principals -- In determining the value of other real estate owned by the bank and held for sale, as well as the value of real estate held by the bank for its own use, and in determining the proper accounting for the disposal of the real estate, state-chartered banks shall use "Generally Accepted Accounting Principals" (GAAP) as set forth by the American Institute of Certified Public Accountants (AICPA).

3.4. Conformity With Federal Law -- Notwithstanding any contrary provision of this rule, state-chartered banks shall follow federal banking law and regulations in determining their real estate's fair value and cost.

W. Va. Code R. § 106-18-4 Holding Period

4.1. Pursuant to W. Va. Code '31A-4-13(e) a state-chartered bank may hold other real estate owned for a period not to exceed ten years, except that the Commissioner may approve a written request by the bank to extend the holding period for up to an additional two years, if:

4.1.1. The bank has made a good faith attempt to dispose of the other real estate owned within the ten year period; or

4.1.2. Disposal of the other real estate owned within the ten year period would be detrimental to the bank.

4.2. The holding period begins on the date that ownership of the property is originally transferred to the state-chartered bank except that: The holding period for former banking premises begins on the date of relocation to new banking quarters. If there is no relocation or if the property was originally acquired for future expansion and will not be used as such, then the holding period begins on the date on which the bank decides that banking use is no longer contemplated.

4.3. Real estate acquired by a state-chartered bank for future bank expansion should normally be used within three (3) years. Prior to acquisition of such real estate, the bank shall state, by board of directors resolution or other official action, definite plans for its use. The resolution or other official action shall be available to inspection by state and federal bank examiners.

4.4. A state-chartered bank may comply with its obligation to dispose of other real estate obtained through foreclosure or surrender of deed or otherwise in satisfaction of debt previously contracted by retaining the property for its own use as bank premises or by transferring it to a subsidiary for use in the business of the subsidiary upon the approval of the institution's board of directors.

W. Va. Code R. § 106-18-5 Appraisal Requirements

5.1. Upon transfer to other real estate owned, a state chartered bank shall substantiate fair value by obtaining an appraisal for the property or by obtaining an appropriate evaluation if an appraisal is not otherwise required by federal or state laws or regulations.

5.2. The state-chartered bank shall develop a prudent collateral evaluation policy that allows the bank to monitor the fair value of each parcel of other real estate owned in a manner consistent with prudent banking practice.

5.3. Provided however, that if a state-chartered bank already has a recent valid appraisal or an appropriate evaluation on a troubled real estate loan or on a loan secured by property designated as in-substance foreclosure under GAAP, then the bank is not required to obtain another appraisal or evaluation upon acquiring ownership. The bank shall, though, continue to follow its prudent collateral evaluation policy.

W. Va. Code R. § 106-18-6 Additional Expenditures and Notification

6.1. Additional expenditures on OREO -- Banks shall expense normal repairs and maintenance costs when incurred as per Generally Accepted Accounting Principals (GAAP). For other real estate owned that is a development or improvement project, a state-chartered bank may only make further prudent advances to complete the project if they:

6.1.1. Are reasonably calculated to reduce any shortfall between the parcel's market value and the bank's recorded investment amount; and

6.1.2. Are not made for the purpose of speculation in real estate.

6.2. Notification procedures -- The bank shall notify the Commissioner in writing at least 30 days before implementing a development or improvement plan for other real estate owned that would cause the sum of the bank's recorded investment amount, and any unpaid prior liens on the property to exceed 10% of the bank's capital and surplus. The required notification must include any documentation necessary to demonstrate that the additional expenditure is consistent with the conditions and limitations in this section. If the Commissioner imposes no additional conditions or limitations on the bank's plan within 30 days following receipt of the bank's notification, then on the thirty-first day (or sooner if notified by the Commissioner) the bank may implement the plan to develop or improve the other real estate owned.

W. Va. Code R. § 106-18-7 Prohibited Conduct at Foreclosure and OREO Sales by Directors, Officers, Employees and Affiliates of a Financial Institution

7.1. Participation As Purchaser -- No director, officer, employee or affiliate of a financial institution shall, either directly or indirectly, purchase property for sale as the result of the financial institution's foreclosure upon that property without the prior approval of the disinterested members of the board of directors of the institution. Provided, however, that such purchase may be made by the institution's directors, officers, employees or affiliates if it is made in the name of, and on behalf of, the institution foreclosing on the property.

7.2. Inside Information -- No director, officer, employee or affiliate of a financial institution shall, in connection with a public foreclosure sale to be conducted by their institution, provide any person with non-public inside information held by the institution for the purpose of assisting that person against others in making a foreclosure sale bid.

7.3. Beneficiary of Foreclosure Sale -- No director, officer, employee or affiliate of a financial institution shall conspire with another person to become the beneficial owner of property purchased by that other person at a foreclosure sale held by the institution. No prior agreement or arrangement shall be made whereby the director, officer, employee or affiliate of a financial institution pledges to purchase the foreclosed property from the buyer at a later date with the purpose of avoiding obtaining prior approval of the institution's board of directors as required in subsection 7.1 of this rule.

7.4. Prohibited Use of Property -- No director, officer, employee or affiliate of a financial institution shall use for any personal purpose other real estate owned by that institution. Nor shall they use the other real estate owned for any business purpose, except as permitted by the procedure in section 4.4 of this rule, or for incidental and temporary use related to the institution's business pending final disposition of the property, where the institution is endeavoring to make bona fide efforts to sell such property. Provided, however, that nothing in this rule prohibits a financial institution from collecting rent or lease payments from any third-party originally owed to the debtor for use of the property pending final disposition of the property, where the institution is endeavoring to make bona fide efforts to sell the property.

7.5. Participation as a Broker -- No director, officer, employee or affiliate of a financial institution shall accept or agree to accept, directly or indirectly, any brokerage fee in connection with the sale by that institution of other real estate owned.

7.6. Violation and Penalty -- Any person violating this section of the rule will be considered in violation of W. Va. Code '31A-8-3 and will be subject to all the penalties provided therefore.

W. Va. Code R. § 106-18-8 Severability

If any word, phrase, or provision of this rule is held to be invalid, the remainder of the rule shall, to the fullest extent possible, not be affected by that holding.

106CSR18

Series 19 Rules For Reverse Mortgage Loans

W. Va. Code R. § 106-19-1 General

1.1. Scope. -- This rule establishes general provisions implementing and supplementing the AReverse Mortgage Enabling Act,@ W. Va. Code '47-24-1, et seq.

1.2. Authority. -- W. Va. Code ' 47-24-8(b).

1.3. Filing Date. -- May 8, 1997.

1.4. Effective Date. -- June 2, 1997.

W. Va. Code R. § 106-19-2 Authorization to Make Reverse Mortgage Loans

2.1. Coverage. -- This rule govern the ability of banks, savings institutions, credit unions and their eligible licensed financial affiliates to make or participate in reverse mortgages pursuant to W. Va. Code '47-24-1 et seq., and in connection therewith, to compound interest.

2.2. Exclusions. This rule shall not apply to persons making reverse mortgage loans under a program authorized by and under the supervision of a federal governmental agency or federally sponsored mortgage enterprise (e.g., HUD or Fannie Mae) which has been certified by the Commissioner of Banking and otherwise meets the criteria set forth in W. Va. Code '47-24-8(c).

W. Va. Code R. § 106-19-3 Definitions

3.1. AAffiliated.@ - When used in connection with a financial institution, means any company which controls, is controlled by, or is under common control with that financial institution or is the ultimate parent holding company of that financial institution.

3.2. AAuthorized Lender@ or ALender@ B Means any bank, savings institution, or credit union in West Virginia or any eligible licensed financial affiliate thereof which is approved by the Commissioner of Banking to make reverse mortgages.

3.3. AMortgagor.@ B Refers to a tenant who is sixty-two (62) years of age or older, or if the real property is held by tenants by the entirety or by joint tenancy, the youngest of whom is at least sixty-two (62) years of age, who own their own home free and clear or with insubstantial outstanding debt encumbering their real estate.

3.4. ANonrecourse Loan.@ - When used in connection with a reverse mortgage loan, means that the only asset of the estate which may be used by the lender to satisfy the loan is the real property securing the loan and any limitation thereon as may be provided for through equity participation. Since by statutory definition in W. Va. Code ' 47-24-3, a reverse mortgage is a nonrecourse loan, no deficiency judgment may be sought or granted in any civil action involving a reverse mortgage.

3.5. ATenure Loan.@ - Means a loan which has no set term for maturity, but rather is scheduled to become due upon the death of all mortgagor(s) so long as they maintain the secured property as their principal residence.

W. Va. Code R. § 106-19-4 Approval for Mortgage Bankers and Other Entities to Make Reverse. Mortgage Loans

4.1. Approval Requirements. -- In addition to any other requirements of West Virginia law, authorized lenders must comply with the following requirements before offering reverse mortgage loans.

4.1.a. Every reverse mortgage lender authorized under this rule shall maintain a bond in favor of the Commissioner of Banking in an amount necessary to fund all reverse mortgage loan requirements anticipated over the next twelve months for loans then on the lender=s books and those expected to be made over the next twelve months or three million dollars ($3,000,000), whichever is greater. The terms of the bond shall be stated in a manner acceptable to the Commissioner of Banking. The initial term of the bond shall be at least two years; and

4.1.b. The company that provides the bond as required in subdivision 4.1.a of this section may not be affiliated with the lender and shall be authorized to make surety bonds in the state of West Virginia.

4.2. Minimum Capital Requirement. -- The lender shall maintain a minimum capital of five million dollars ($5,000,000).

4.3. Parent Lender Capital Alternative Requirement. -- A lender may rely on the capital of its parent company or institution to satisfy the requirements of subsection 4.2 of this rule. Provided That for any year in which a lender seeks to rely on the capital of its parent company or institution, it shall provide to the Division of Banking a certified financial statement of the parent company or institution showing a net worth of at least fifty million dollars ($50,000,000) as of the close of its most recent fiscal year and a binding written commitment from the parent company or institution to the lender to make a minimum of five million dollars ($5,000,000) available to the lender as a capital contribution in connection with its reverse mortgage lending program.

4.4. Exceptions. B The bonding and minimum capital requirements set forth in subsections 4.1 and 4.2 of this section shall not apply to a lender that:

4.4.a. only originates reverse mortgage loans the proceeds of which are fully disbursed at the loan closing; or

4.4.b. only originates reverse mortgage loans which are structured to provide for the purchase of an annuity with payments made to the mortgagor(s) where:

4.4.b.1. the payments are funded solely by the annuity;

4.4.b.2. the payments commence no more than thirty days after the loan closing; and

4.4.b.3. the reverse mortgage loan principal is comprised only of the cost of the annuity or the payments made to the mortgagor(s) that are funded by the annuity and any financed fees, costs and payments permitted pursuant to section 10 of this rule.

4.5. Application for Authorization-- In addition to the financial requirements set forth in this section, lenders that seek to originate reverse mortgage loans shall apply by letter with return receipt requested together with all required documents to the Commissioner of Banking for authorization to make these loans. In the absence of an adverse notice or a request for supplementary information to the lender by the Division of Banking within sixty days of receipt by the Division of Banking of its letter application and accompanying documents, the lender may commence originating reverse mortgage loans.

This letter application in order to confer valid authorization shall contain the following information and documents as applicable:

4.5.a. the name, address, telephone number, and principal place of business of the lender;

4.5.b. the name of an executive officer responsible for the lender=s reverse mortgage loan program;

4.5.c. the basis for any exemptions from the financial requirements set forth in subsections 4.1 and 4.2 of this rule and documentation to support these exemptions;

4.5.d. if no exemption is claimed from subsection 4.1 of this rule, a copy of the bond agreement together with the actual bond;

4.5.e. if no exemption is claimed from subsection 4.2 of this rule, an audited financial statement for the fiscal year most recently ended;

4.5.f. a copy of the report issued by A. M. Best Company for the underwriter of any bond or anticipated annuity;

4.5.g. the designation of the Secretary of State, or where the institution is chartered under federal law, the designation of its primary federal regulatory agency as agent for service of process for any communication concerning a reverse mortgage loan made to a West Virginia resident;

4.5.h. a copy of any trust agreement entered into between the lender and a trustee pursuant to subsection 6.17 of this rule, prior to the trustee holding an annuity which funds any reverse mortgage loan;

4.5.i. the name, address, telephone number, and principal place of business of any trustee and a designation by any trustee of the Secretary of State, or where the trustee institution is chartered under federal law, the designation of its primary federal regulatory agency as agent for service of process for any communication concerning a reverse mortgage loan made to a West Virginia resident; and

4.5.j. any other information and documents as may be requested by the Commissioner of Banking.

W. Va. Code R. § 106-19-5 Lending Procedures and Records Retention

5.1. Toll-Free Telephone Number. B All lenders must provide a toll-free telephone number and the name of a person to whom applicants and mortgagors may address questions, comments or complaints.

5.2. Books and Records Retention. B All lenders shall maintain their books and records relating to the making of reverse mortgage loans for a six-year period as set forth in W. Va. Code '31A-4-35 in a manner permitting inspection by the Commissioner of Banking. The Commissioner is authorized to inspect the books and records upon reasonable notice. Lenders shall bear all costs and expenses relating to these inspections.

5.3. Notice of Agent for Service of Process. B The lender shall disclose within the deed of trust its designated agent for service of process in connection with any reverse mortgage loan transaction, together with the agent=s address.

5.4. Mortgage Loan Forms. B All lenders shall, upon request, furnish copies of its mortgage loan forms and other documents to the West Virginia division of banking for review.

5.5. Telephone Applications Not Permissible. B No lender shall accept telephone applications. However a lender may solicit and accept inquiries about its products from potential borrowers by telephone.

W. Va. Code R. § 106-19-6 Requirements for Reverse Mortgage Loans

6.1. Security Instrument. -- The security instrument shall expressly and conspicuously bear a legend identifying the security as a reverse mortgage.

6.2. Single Family Dwelling. -- The reverse mortgage loan shall be secured by a first lien on real property improved by a one-unit single family dwelling that is the residence of the mortgagor(s). The proceeds of a reverse mortgage loan are to be advanced to the mortgagor(s) during the life of the loan in equal installments, in advances through a line of credit or otherwise, in lump sums, or through a combination thereof.

6.3. Comply with Federal Laws. -- All lenders shall comply with all applicable federal laws and regulations, including but not limited to the applicable sections of the Truth in Lending Act (15 USC ' 1601 et seq.), the Equal Credit Opportunity Act (15 USC ' 1691 et seq.) and the Real Estate Settlement Procedures Act (12 USC ' 2601 et seq.).

6.4. Comply with State Laws. B All lenders must comply with all applicable state laws and regulations, including but not limited to the applicable sections of the West Virginia Consumer Credit and Protection Act, W. Va. Code '46A-1-101 et seq.

6.5. Application Fee. -- Prior to the closing of a reverse mortgage loan, the only charge a lender may collect from an applicant is an application fee which must be designated as such and which may not be a percentage of the principal amount of the loan or amount financed. The fee shall be reasonably related to the services to be performed.

6.6. Loan to Value Ratio. -- The maximum loan to value ratio for any loan projected at the time of loan closing shall not exceed eighty percent (80%) of the anticipated value of the property at anticipated loan maturity or at any time prior to the anticipated loan maturity date. The loan to value ratio shall be calculated by dividing the numerator, as defined in subdivision (a) of this subsection, by the denominator, as defined in subdivision (b) of this subsection.

6.6.a. Numerator of the Ratio. -- The numerator of the loan to value ratio shall include: all principal, all accrued loan interest, all fees, costs and payments incurred in connection with the origination of the loan, including but not limited to charges for the purchase of annuities, the payment of real estate taxes and insurance to the extent that an escrow account is established to fund real estate tax and insurance obligations or the lender has committed to advance funds to pay for such taxes and insurance on the property securing the reverse mortgage and any shared appreciation assuming (i) no early prepayment of the reverse mortgage loan, (ii) any loan amounts, such as credit lines and reserve accounts, which may be drawn at the discretion of the mortgagor(s) or by the lender are drawn fully at the earliest opportunity, (iii) the current interest rate if fixed or, if variable, the yearly average of the base index and margin chosen by the lender for the eight year period preceding the loan closing, and (iv) if applicable, a projected appreciation or depreciation rate for home prices which is determined by the same factor as is used in the denominator set forth in subdivision (b) of this subsection.

6.6.b. Denominator of the Ratio. -- The denominator of the loan to value ratio shall be determined by increasing or decreasing the appraised value of the real property, as determined at loan closing by an independent certified or licensed appraiser, by a factor that the creditor reasonably believes will be the average annual increase or decrease in the value of the real property securing the reverse mortgage loan from the loan closing until the anticipated loan maturity; Provided, however, that this factor shall in no event exceed the average of the yearly changes in the Consumer Price Index for Shelter, as determined by the United States Department of Labor, for the eight years preceding the year in which the loan is made.

6.6.c. Term Loan. -- For a term loan, the anticipated loan maturity shall be the date of maturity of the loan. No term loan may have a maturity date of less than ten years.

6.6.d. Tenure Loan. -- For a tenure loan, the Commissioner of Banking may, in his or her discretion, review and approve the data and assumptions used to establish the anticipated loan maturity for each reverse mortgage loan.

6.7. Alternative to Loan to Value Ratio. -- As an alternative to subsection 6.6 of this rule, the parties may agree that the total obligation of the mortgagor(s) to the lender arising from the reverse mortgage loan shall be no greater than eighty percent (80%) of the actual value of the property at maturity or the amount of the original loan principal at loan closing whichever is greater. The eighty percent (80%) cap is exclusive of any actual losses incurred by the lender as a direct result of a breach of a loan covenant by the mortgagor(s). The difference between the principal and accrued interest and eighty percent (80%) of the actual value of the property at maturity shall be known as Aequity participation@.

6.8. Right to Prepay. -- The mortgagor(s) may prepay any loan without penalty at any time. The payment of any fees or charges, such as a termination fee, that otherwise would be due at maturity without prepayment shall not be considered a penalty.

6.9. Attachment Prohibition. -- A lender shall not use or attach any property or asset of the mortgagor except the real property securing the reverse mortgage loan in satisfaction of a reverse mortgage obligation.

6.10. Late Payment. -- In the event that a lender fails to make or remit to the mortgagor(s) any payment required under any loan within fifteen (15) days of its due date, the lender shall forfeit the interest that would have been earned on the outstanding loan principal for the entire period during which payments were suspended, ceased or made late, and may be subject to other penalties as provided for in chapter 31A of the West Virginia Code.

6.11. Counseling and Information Services. -- All lenders shall deliver to all applicants a statement prepared by the West Virginia division of banking on the advisability and availability of independent counseling and information services. In addition, no reverse mortgage loan commitment or approval shall be issued by a lender until the applicant presents a written statement that the terms of the reverse mortgage loan have been explained by an attorney, a housing and urban development certified counselor or any other counseling service as indicated on the statement supplied by the West Virginia division of banking.

6.12. Reappraisal Requests. -- At the end of the term of a reverse mortgage loan, the mortgagor(s) may request that the real property securing the loan be reappraised to increase the payments made to the mortgagor(s) or to extend the loan term. The reappraisal may be performed at the lender=s sole discretion. In all cases, the lender may require the mortgagor(s) to pay the cost of the reappraisal in advance. In the event the value of the property has increased, the lender may chose to increase the loan payments or extend the loan term where agreed to by the mortgagor(s) subject to the following:

6.12.a. The loan-to-value ratio limitations, as determined pursuant to this rule as of the date on which the increase or extension would begin, shall not be exceeded; and

6.12.b. Any existing insurance coverage shall be increased to insure the additional amounts to be due.

The mortgagor(s) shall execute all documents reasonably requested by the lender and pay all reasonable closing costs associated with the increase in payments or the extension of the loan term provided that the costs have been previously disclosed in writing to the mortgagor(s).

6.13. Reserve Account. -- The lender and the mortgagor(s) may agree in writing to establish a reserve account which may be drawn upon by the mortgagor(s) or the mortgagee to maintain the structural integrity of the real property, to pay real estate taxes or the premium on any required insurance or for any personal expenses of the mortgagor(s). The reserve account may bear interest at a rate that is different from the interest rate on other advances made pursuant to the terms of the reverse mortgage. A lender may only charge interest on advances actually made from the reserve account and not on the entire balance in the reserve account.

6.14. Security Agreement Requirements. -- The security agreement shall include the following:

6.14.a. a list of events which could result in termination of the reverse mortgage loan;

6.14.b. the lender=s obligation to notify the mortgagor(s) in writing of any event that could lead to termination of the reverse mortgage loan pursuant to subsection 9.1 and subdivision 9.2.b of this rule; and

6.14.c. the name of a third-party, if any, designated by the mortgagor(s) to whom the lender is obligated to send written notice of any event that could lead to termination of the reverse mortgage loan pursuant to subsection 9.1 and subdivision 9.2.b of this rule.

6.15. Service of Foreclosure Documents. -- The lender shall also provide a copy of all foreclosure documents served on the mortgagor(s) to the third party designated in the security agreement simultaneously with service on the mortgagor(s); or if the mortgagor has not named a third party or if the third party can not be contacted, the lender shall notify in writing the County Clerk of the county where the property is located of its intent to commence foreclosure proceedings.

6.15.a. If a third party has been named but can not be contacted, then the lender shall cause a notice of the foreclosure to be published as a Class II legal advertisement in the county where the property is located, and shall retain in its records an affidavit of posting and proof of publication of the notice.

6.15.b. If repayment is due as a result of the death of the mortgagor(s), then the lender shall provide notice in writing to the heirs, administrator, or executor responsible for the property prior to any foreclosure action. This notice shall state:

6.15.b.1. the amount of the outstanding balance;

6.15.b.2. that the debt must be paid in full within thirty days of the repayment notice to prevent foreclosure proceedings;

6.15.b.3. that the estate may elect to pay the debt in full prior to foreclosure and thereby satisfy the reverse mortgage obligation;

6.15.b.4. that it is the responsibility of the estate, if it so desires, to arrange and pay for an appraisal of the property prior to sale or foreclosure, and that the only asset of the estate which may be used by the lender to satisfy the loan is the real property securing the loan and any limitation thereon as may be provided for in subsection 6.7 of this rule. The notice shall also state that no deficiency judgment may be sought or granted in any civil action involving a reverse mortgage.

6.16. Interest Accrual. -- Interest shall only accrue from the time monies are advanced to or on behalf of the mortgagor(s). Accrued interest may be added to the loan principal.

6.17. Conditions for Reverse Mortgage Loans that Require Annuity Purchase. -- A reverse mortgage loan which provides for the purchase of an annuity shall comply with the following conditions as applicable:

6.17.a. The company that issues the annuity shall have a rating of excellent or superior from the A. M. Best Company and shall be licensed by the State of West Virginia; and

6.17.b. If a trustee holds the annuity in trust during the life of the mortgagor(s), then

6.17.b.1. the trustee shall be a banking organization or an insurance company which is incorporated, chartered, organized or licensed under the laws of this state or any other state or the United States;

6.17.b.2. the trustee shall either appoint the Secretary of State, or where the trustee institution is chartered under federal law shall appoint its primary federal regulatory agency, as agent for service of process for any communication concerning a reverse mortgage loan made to a West Virginia resident;

6.17.b.3. the trust agreement shall provide that it is governed by West Virginia law;

6.17.b.4. payments derived from the annuity shall be paid by the trustee or the insurance company directly to the mortgagor(s) irrespective of whether the payment is made on behalf of the lender or investor; and

6.17.b.5. the mortgagor(s) shall have a beneficial interest in the trust irrespective of whether the lender or investor also has a beneficial interest in the trust.

W. Va. Code R. § 106-19-7 Additional Features of Reverse Mortgage Loans

7.1. Escrow Account for Taxes and Insurance. -- The lender may maintain an escrow account for purposes of paying real estate taxes and insurance on the real property securing the loan. The lender shall calculate these escrowed amounts in conformity with the method provided by federal laws, regulations, or guidelines for other residential mortgage lenders.

7.2. Shared Appreciation. -- The security agreement may provide that the lender receive a percentage of the future appreciation of the real property securing the loan, i.e., Ashared appreciation@, in addition to or in lieu of fixed or variable rate interest . This appreciation shall not be considered interest for purposes of any law regulating the maximum rate of interest which may be charged, taken or received. Loans which contain Aequity participation@ as provided for in subsection 6.7 of this rule may not provide for any other forms of equity sharing or shared appreciation.

7.3. Mortgagor=s Right to Lifetime Possession. B Except where the reverse mortgage has a set fixed term and maturity date, all mortgagor(s) shall retain the right to lifetime possession of the real property which serves as security for the loan, as long as the real property remains the mortgagor(s)= principal residence and subject to the conditions set forth in section 9 of this rule and W. Va. Code '47-24-4(g).

7.4. Mortgage Insurance. -- The mortgagor(s) may elect to maintain mortgage insurance for the principal and any accrued but unpaid interest. The insurance shall name the mortgagee as beneficiary. This insurance may not be required by the lender as a condition for granting a reverse mortgage loan. This insurance shall not be offered by the lender where the loan is to be sold into the secondary market and the lender has obtained a written commitment from the investor prior to the loan closing to purchase the loan, and has arranged for the delivery of the loan to the investor within forty-five days of the loan closing.

7.5. Lender=s Limited Waiver of the Right of Foreclosure. -- Prior to offering reverse mortgage loans, all lenders shall prepare a form entitled ALender=s Limited Waiver of the Right of Foreclosure@ for review and approval by the Commissioner of Banking to ensure that this document sets forth the termination events, as applicable, pursuant to section 9 of this rule and W. Va. Code '47-24-4(g). This document shall be executed by the lender in connection with the closing of every reverse mortgage loan. The lender shall furnish a copy of the executed form to every mortgagor(s) at closing and shall keep the original form on file for the life of the loan.

W. Va. Code R. § 106-19-8 Maintenance of Real Property Securing the Reverse Mortgage Loan

8.1. Structural Integrity. -- Mortgagor(s) shall be required to maintain the structural integrity of the real property securing the reverse mortgage loan in the same condition as the property is in at the time of closing or after repairs have been made for which funds have been disbursed or set aside at closing for later disbursement. For purposes of this section, repairs necessary to maintain the structural integrity shall be limited to repairing structural problems threatening the continued viability of the structure as a residential unit and those matters which, without repair, will threaten to materially damage the property or its market value.

8.2. Lender Arrangement of Repair to Maintain Structural Integrity. -- If the mortgagor(s) fails to make a repair required to maintain the structural integrity of the real property in a timely manner, the lender may arrange for the repair and pay for it in the following ways:

8.2.a. by deducting necessary amounts from a reserve fund;

8.2.b. by withholding from one or more monthly payments otherwise due to the mortgagor(s) no more than 25% of each of the monthly payments; or

8.2.c. by adding the amount to the loan principal.

If a reserve fund has been established for repairs, then the lender must first deduct the repair costs from that fund before choosing whether to proceed according to the provisions of subdivision 8.2.b or 8.2.c of this rule. If a reserve fund has not been established, then the lender may choose whether to proceed according to the provisions of subdivision 8.2.b or 8.2.c of this rule, or a combination thereof.

8.3. Lender Must Notify Mortgagor of Repair. -- Prior to making or charging the mortgagor(s) for a repair necessary to maintain the structural integrity of the real property, the lender shall notify the mortgagor(s) of the problem and, unless a threat of imminent danger to life or property exists, provide the mortgagor(s) ninety days in which to make the repairs. If the repairs are not completed by the mortgagor(s) in a satisfactory manner prior to the end of the appropriate period, the lender may take those steps as it views reasonably necessary to maintain the structural integrity of the real property and charge the mortgagor(s) for all reasonable expenses. If an imminent danger to life or property exists, the lender may proceed to preserve the structural integrity of the real property on as little as forty-eight hours notice to the mortgagor(s).

8.4. Lender Right to Inspect on Notice. -- The lender shall have the right to inspect the real property securing the loan on seventy-two (72) hours notice to the mortgagor but not more often than is reasonably necessary to ensure the continued structural integrity of the real property.

W. Va. Code R. § 106-19-9 Termination of Reverse Mortgage Loans

9.1. Termination Due to Non-temporary Absences. -- A reverse mortgage loan may be terminated by a lender pursuant to W. Va. Code '47-24-4(g)(2)(B) where the mortgagor(s) ceases to use the real property as his or her principal place of residence for more than 60 consecutive days in any 365 day period without notifying the lender and making arrangements satisfactory to the lender for the maintenance of the real property and the anticipated return of the mortgagor(s). For purposes of this section the term Aprincipal place or residence@ means the living and sleeping quarters of the mortgagor. The lender shall not unreasonably withhold consent to the arrangements made by the mortgagor(s) pursuant to this section.

9.2. Termination Due to Events Jeopardizing Lender=s Security. -- A reverse mortgage loan may only be terminated by the lender pursuant to W. Va. Code '47-24-4(g)(1)(D) for the following events as specified in the loan documents:

9.2.a. the mortgagor(s) fails to pay real estate taxes or maintain all insurance required pursuant to the security agreement;

9.2.a.1. If the mortgagor(s) fails to pay taxes or maintain all required insurance, then the lender shall within ten business days of learning of such event, give written notice of the failure to the mortgagor(s) and the third-party, if any, designated by the mortgagor(s) to receive notice of any event that could lead to termination. If the mortgagor(s) has not named a third-party or if the third-party can not be contacted, then the lender shall give written notice of the failure to the County Clerk of the county where the property is located. The lender must give the mortgagor(s) thirty (30) calendar days to cure such failure. In addition, the notice to the mortgagor(s) and the third party shall advise the mortgagor(s) of his or her right to cure the problem.

9.2.a.2. The failure to pay taxes or maintain all required insurance shall not be construed to be a termination event unless the lender has complied with the provisions set forth in paragraph (1) of this subdivision.

9.2.b. the mortgagor(s)= (i) filing a voluntary petition in bankruptcy or effecting a plan or other arrangement with creditors under court supervision, (ii) having an involuntary petition in bankruptcy filed against the mortgagor that is not discharged within 90 days after it is filed, or (iii) applying for or permitting the appointment of a receiver, trustee or custodian for the real property securing the loan which is not discharged within 90 days after the date of appointment. Provided, That the appointment of a conservator, guardian, committee or other fiduciary of the person to act on the mortgagor(s)= behalf in connection with a determination by a court that the mortgagor(s) is incompetent will not terminate the loan; or

9.2.c. the mortgagor(s) fails to maintain the structural integrity of the real property, as that term is defined in section 8 of this rule. The lender is required to make reasonable efforts to remedy any breach of structural integrity prior to a termination of a reverse mortgage loan under this subdivision.

9.3. Notification in Writing to Mortgagor. -- The mortgagor(s) or his or her estate shall notify the lender, in writing, promptly upon (i) the sale or other transfer of title to the home securing the loan; (ii) upon the mortgagor=s death, or if there is more than one mortgagor, then upon the death of the last living mortgagor; or (iii) the occurrence of any event listed in subsections 9.1 or 9.2 of this section which would also cause the loan to terminate.

W. Va. Code R. § 106-19-10 Permitted Fees, Costs and Payments

10.1. Permitted Initial Fees and Charges. -- Other than principal, interest, shared appreciation and equity participation, lenders may only charge, in connection with the origination of reverse mortgage loans, the following fees, costs and payments, as applicable, at closing. The lender before assessing the charge shall disclose the charges to the mortgagor(s) pursuant to section 11 of this rule:

10.1.a. an application fee, which may be collected prior to closing, as limited by the provisions of subsection 6.5 of this rule;

10.1.b. a loan origination fee not to exceed two points based on the value of the real property securing the reverse mortgage loan at the time of loan closing;

10.1.c. the cost of document preparation which is reasonably related to the services provided as incurred and paid to a third-party provider;

10.1.d. the cost of appraising or surveying the property as incurred and paid to a third-party provider;

10.1.e. the cost of a title examination, an abstract of title or title insurance as incurred and paid to a third-party provider;

10.1.f. the cost of a tax search for tax liens existing at the time of closing if the search is not included in the title examination as the cost is incurred and paid to a third-party provider;

10.1.g. the payment to discharge any existing liens on the real property securing the loan as incurred and paid to a third-party;

10.1.h. the cost of recording the reverse mortgage loan as incurred and paid to a third-party;

10.1.i. the cost of actual attorney=s fees charged to the lender in connection with the closing of the loan as incurred and paid to a third-party provider;

10.1.j. the cost of a credit report as incurred and paid to a third-party provider;

10.1.k. the cost of a flood zone search as incurred and paid to a third-party provider;

10.1.l. the cost of an inspection to be paid in connection with the origination of the loan but not subsequent to the loan closing as incurred and paid to a third-party provider;

10.1.m. the payment to purchase an annuity as incurred and paid to a third-party;

10.1.n. the payment for any repairs contracted for at or before the loan closing, irrespective of whether the repairs are completed at time of closing or whether the funds are held in escrow as the payments are incurred and paid to a third-party;

10.1.o. a one-time payment for a tax reporting service as incurred and paid to a third-party;

10.1.p. the cost of purchasing mortgage insurance as incurred and paid to a third-party provider;

10.1.q. the payment of real estate taxes and property insurance as incurred and paid to a third-party; and

10.1.r. the cost of mortgage brokerage services, not to exceed three points based on the value of the real property securing the reverse mortgage loan at the time of loan closing as incurred and paid to a third-party provider.

10.2. Subsequent Permitted Fees and Charges. -- During the life of the loan, lenders may charge the following fees or require the mortgagor(s) to incur the following costs or payments:

10.2.a. the cost of purchasing any additional mortgage insurance as agreed to by the parties;

10.2.b. the costs to maintain the structural integrity of the real property securing the loan in accordance with section 8 of this rule;

10.2.c. the costs of any appraisal for the refinancing or extension of the loan in accordance with subsection 6.12 of this rule;

10.2.d. the payment of real estate taxes and property insurance;

10.2.e. a monthly servicing and administrative fee of not more than $30 as agreed to by the parties.

10.3. Termination Fee. -- At termination of the loan, lenders may charge a termination or maturity fee which shall be the actual cost of arranging for the sale or foreclosure of the real property securing the loan. The fee may include actual broker=s fees, advertising costs, moving and storage costs, and legal and other fees representing actual fees or costs charged to the lender.

10.4. Fees for Escrow Account Impermissible. -- Lenders may not charge any fees for the establishment, maintenance or termination of an escrow account with respect to any reverse mortgage loan.

W. Va. Code R. § 106-19-11 Required Disclosures For Reverse Mortgage Loans

11.1. Disclosure Requirements. -- Prior to accepting an application for any loan, but in any event prior to a lender accepting an application fee, a lender must disclose to each loan applicant the following information, as is relevant to the type of loan being offered:

11.1.a. The following notice, or a similar notice to like effect:

YOU SHOULD CONSULT YOUR TAX, LEGAL OR FINANCIAL ADVISERS OR CONSULT WITH APPROPRIATE AUTHORITIES REGARDING ENTITLEMENTS AND TAX AND ESTATE PLANNING CONSEQUENCES OF A REVERSE MORTGAGE LOAN.

In addition, the lender shall furnish the applicant with a statement prepared by the West Virginia Division of Banking concerning the availability of independent counseling and information services;

11.1.b. The lender=s toll free telephone number and the name of a person to whom applicants and mortgagors may address questions, comments or complaints;

11.1.c. A notice that the mortgagor(s) or applicant can submit written complaints to the West Virginia Division of Banking, State Capitol Complex, 1900 Kanawha Boulevard East, Building 3, Room 311, Charleston, West Virginia, 25305-0240;

11.1.d. The events which would terminate or accelerate the loan and an explicit warning, if applicable, that the mortgagor(s) may be compelled to move out of his or her home at the expiration of the loan term or upon acceleration of the loan;

11.1.e. That the loan, if applicable, provides for the lender to receive a percentage of the future appreciated value of the property, i.e., Ashared appreciation@, what that percentage is, and the lender=s method of calculating that amount. In addition, the lender shall provide both a narrative explanation and an example of the application of its methodology in determining the amount. This example must use as its projected real estate appreciation or depreciation rate for home prices the average of the yearly changes in the Consumer Price Index for Shelter for the South Region of the United States for the eight years preceding the year in which the loan is made;

11.1.f. That interest accrues from the time monies are advanced to or on behalf of the mortgagor(s) and whether accrued interest is added to the loan principal;

11.1.g. That the only asset of the mortgagor(s) which may be used by the lender to satisfy the loan is the real property securing the loan and any limitation thereon as may be provided for in subsection 6.7 of this rule. No deficiency judgment may be sought or granted in any civil action involving a reverse mortgage;

11.1.h. That the loan may be prepaid at any time without penalty. The lender shall specify how the value of the home at the time of prepayment will be determined and the method by which the then outstanding loan balance will be prepaid;

11.1.i. All fees, costs and payments to be paid by the mortgagor(s) and whether the application fee, loan origination fee, and/or broker fees are non-refundable;

11.1.j. The mortgagor(s)= right to designate a third party whom the lender would notify in writing of any event that could lead to termination of the loan and to whom the lender must furnish a copy of any foreclosure documents;

11.1.k. A description of any conditions or limitations in connection with the refinancing or extension of any loan, and if applicable, the mortgagor(s)= right to refinance or extend the loan;

11.1.l. The interest rate(s) to be charged on the outstanding principal under any loan and whether the rate(s) are fixed, variable or both. In addition, in a term loan with a fixed rate of interest, the lender shall disclose the total interest payable on the loan principal, assuming maturity of the loan at expiration of the term. In a term loan with a variable rate of interest, the lender shall disclose the estimated total interest payable on the loan principal using the yearly average of the base index and margin chosen by the lender for the eight year period preceding the loan closing and assuming the maturity of the loan at expiration of the term. For tenure reverse mortgage loans, the same disclosures shall be made, except that maturity shall be assumed to occur at the actuarial life expectancy of the mortgagor, or, if there is more than one mortgagor, the younger of the mortgagors;

11.1.m. The following notice, or a similar notice to like effect:

THE LENDER MAKING THIS REVERSE MORTGAGE LOANS IS IN COMPLIANCE WITH THE CRITERIA ESTABLISHED BY THE COMMISSIONER OF THE WEST VIRGINIA DIVISION OF BANKING FOR THE MAKING OF SUCH LOANS.;

11.1.n. If applicable, the availability of an annuity, whether an annuity will be required, and if there is an annuity, when the annuity payments will commence, who will own the annuity and the affiliation, if any, between the lender and the company from which the annuity is purchased;

11.1.o. Whether an escrow account will be established, for what purposes and when the escrow account will be terminated;

11.1.p. Whether a reserve fund will be established and for what purposes;

11.1.q. Whether and what type(s) of insurance will be required and the cost of any premiums;

11.1.r. Whether the mortgage broker or any entity acting in a mortgage brokerage capacity, as a general business practice, utilizes the services of two or fewer lenders, and if so, the name(s) of the lender(s);

11.1.s. If applicable, that the loan provides for the lender to receive Aequity participation@, the maximum total percentage obligation of the mortgagor(s) to the lender arising from the reverse mortgage loan, the minimum amount due at closing, if any, and what is included and what is excluded from these amounts. In addition, the lender shall provide both a narrative explanation and an example demonstrating equity participation; and shall, if applicable, provide an explanation and demonstration of anticipated shared appreciation; and

11.1.t. Any additional information as the lender believes appropriate, as long as the information is complete, accurate and not misleading.

11.2. Disclosure Requirement Procedures. B The lender shall furnish the information required by subdivisions 11.1.a through 11.1.c of this subsection to the mortgagor(s) on a separate sheet. The information set forth in subdivisions 11.1.d through 11.1.f must be furnished by the lender to the mortgagor(s) on a separate sheet and in bold type.

11.3. Counseling Information. -- Prior to an applicant=s receiving counseling pursuant to subsection 6.11 of this rule, the lender shall furnish for term loans, a schedule of estimated payments to the mortgagor(s) and the total payment in dollars over the term of the loan. For tenure loans, a schedule of estimated payments to the mortgagor(s) shall be furnished. The lender shall label the schedules as Aestimates@. The lender shall make the foregoing disclosure prior to or simultaneously with the approval of the application.

11.4. Notice in Writing Regarding Move-out. -- Six months prior to the end of a term loan, the lender shall disclose, in writing, if applicable:

11.4.a. that the mortgagor(s) is responsible for making real estate tax and insurance payments; and

11.4.b. that the mortgagor(s) will have to vacate his or her home upon the expiration of the term and the exact date that the move-out is required.

W. Va. Code R. § 106-19-12 Availability of Reverse Mortgage Loans

12.1. Advertising and Promotional Materials. -- Lenders shall maintain copies of all advertising and promotional materials for all reverse mortgage loans for a period of two years commencing from the first date that the material was used to solicit reverse mortgage loans.

12.2. Retention of Applications.-- Lenders shall maintain an application log for all applications. In addition, the lender shall maintain rejected mortgage applications files for a minimum of twenty-five months from the date of notice of the rejection.

W. Va. Code R. § 106-19-13 Administrative Penalties and Hearings

13.1. Disciplinary Action. -- Any person may be subject to disciplinary action as may be determined to be appropriate by the Commissioner of Banking or the West Virginia Board of Banking and Financial Institutions for violations of this rule or the reverse mortgage laws as provided in W. Va. Code '47-24-8(a). The penalties may include civil money penalties where imposed by a court or otherwise agreed to by the parties. It shall be a violation of this rule to engage in a pattern of conduct that demonstrates the lender=s gross incompetence or dishonesty. Such conduct includes, but is not limited to, a pattern of unjustified late payments, the failure to provide proper disclosures, the receipt of unauthorized fees, the failure to maintain the required line of credit, any violation of the procedures set forth in this rule, and the failure to perform all required duties in an honest, fair and reasonable manner.

13.2. Administrative Hearing. B Prior to the Commissioner of Banking revoking a lender=s license, charter or approval to make reverse mortgage loans pursuant to section 4 of this rule, he or she shall hold an administrative hearing. Revocation may also be ordered after an administrative hearing by the West Virginia Board of Banking and Financial Institutions.

W. Va. Code R. § 106-19-14 Special Provisions Regarding Payment of Real Estate Taxes and Insurance

14.1. Insurance Selection. -- Mortgagor(s) shall have the right to choose a property insurer(s) subject to the lender=s consent which shall not be unreasonably withheld. If the mortgagor(s) fails to choose a property insurer(s) in a timely manner or if the insurer(s) is not acceptable to the lender, then the lender may insure the property with a carrier of its choice.

14.2. Advance Funds for Taxes and Insurance. -- If there is no escrow account, then the lender may advance the funds necessary to pay for insurance coverage or to pay real estate taxes and to reimburse itself in the following ways:

14.2.a. by deducting necessary amounts from a reserve fund;

14.2.b. by withholding from one or more monthly payments otherwise due to the mortgagor(s) no more than 25% of each monthly payment; or

14.2.c. by adding the amount to the loan principal.

If a reserve fund has been established, then, to the extent possible, the lender must reimburse itself from such fund before choosing subdivision 14.2.b or 14.2.c above. If a reserve fund has not been established, then the lender may choose whether to proceed according to subdivision 14.2.b or 14.2.c or a combination of these subdivisions.

W. Va. Code R. § 106-19-15 Aggregate Loan Limits For Certain Lenders

15.1. Aggregate loan limits. -- No West Virginia state-chartered bank or credit union shall retain as an asset reverse mortgage loans in an aggregate amount exceeding ten percent of the institution=s capital, undivided profits and surplus.

15.2. Amount Explanation. -- For purposes of complying with this section, the amount of each reverse mortgage loan shall be considered to be the loan balance at anticipated loan maturity which is not guaranteed or insured as to loss of principal by the United States government or an agency the federal government.

106CSR19

Financial Institutions, Division of Financial Institutions, Division of

Series 05 Rule Pertaining to Residential Mortgage Lenders, Brokers, and Loan Originators

W. Va. Code R. § 106-5-1 General

1.1. Scope. -- This rule establishes the general method for implementing W. Va. Code §31-17-1, et seq. and W. Va. Code §31-17A-1, et seq.; it applies to all licensees under those statutes.

1.2. Authority. -- W. Va. Code §31A-2-4(c)(11).

1.3. Filing Date. -- April 7, 2026.

1.4. Effective Date. -- May 1, 2026.

1.5. Sunset Provision. – This rule will terminate and have no further force or effect on August 1, 2031.

W. Va. Code R. § 106-5-2 Time Frames for Record Keeping by Licensees

2.1. A residential mortgage lender who acts as the original lender providing the initial funding for a mortgage loan to a borrower must maintain records related to that loan for a period of 36 months from the date the loan closes. In cases where the loan does not close, for any reason, that residential mortgage lender must maintain records related to the proposed loan for a period of 36 months from the date of the borrower’s loan application.

2.2. A residential mortgage lender that does not provide the initial funds for a loan but only purchases, takes assignment of, or services the loan, must maintain records related to that loan for a period of 36 months from the date of last entry on the books of that lender.

2.3. A residential mortgage broker must retain records related to mortgage loans for a period of 36 months from the date the loan closes. In cases where the loan does not close, for any reason, the residential mortgage broker must maintain records related to the loan proposed for a period of 36 months from the date of the latest application, credit document, required disclosure or request by consumer to terminate the transaction.

W. Va. Code R. § 106-5-3 Records That Must Be Maintained by Licensed Residential Mortgage Lenders Who Provide the Initial Funding for a Loan

3.1. The lender that provides the initial funding for a loan must maintain the following records:

3.1.1. Loan application;

3.1.2. Initial Loan Estimate provided, whether by broker or lender;

3.1.3. Subsequent Loan Estimates provided, whether by broker or lender;

3.1.4. Required Provider List;

3.1.5. Verification of borrower income and employment as required by the lender;

3.1.6. Credit report(s), if obtained;

3.1.7. All written and electronic correspondence, including, but not limited to, e-mails and fax transmissions, between the lender and broker and between the lender and borrower;

3.1.8. Closing Disclosure(s), including initial, final, and post-closing, if applicable;

3.1.9. Any other disclosure(s) required by applicable Federal regulations;

3.1.10. Affiliated Business Arrangement Disclosure Statement, if applicable;

3.1.11. Servicing Transfer Disclosure Statement;

3.1.12. Notice of Servicing Transfer provided by transferee, if applicable;

3.1.13. Right to Receive Appraisal Disclosure, if applicable;

3.1.14. Right of Rescission Notice, if applicable;

3.1.15. Tangible Net Benefit Worksheet, if applicable;

3.1.16. Deed of Trust;

3.1.17. Note or other instrument of indebtedness;

3.1.18. Any appraisal of the property, if applicable;

3.1.19. Home Ownership Equity Protection Act disclosure required by 12 C.F.R. §226.32, if applicable;

3.1.20. Adjustable Rate Mortgage Disclosure, if applicable;

3.1.21. A written justification for using a non-local appraiser, if applicable;

3.1.22. Any commitment or rate lock-in agreements, if applicable;

3.1.23. Copies of all rate sheets used on specific dates and times for the prior three-year period;

3.1.24. A record of all cash, checks, or other monetary instruments received in connection with each residential mortgage loan showing the identity of the payor, the date received, the amount, and purpose;

3.1.25. A record of all monies disbursed relating to the licensee’s business as a mortgage lender including, but not limited to, refunds to borrowers and all disbursements of funds on behalf of borrowers, showing at least the payee, amount, date, and purpose of payment, including identification of the loan to which the payment relates, if any;

3.1.26. Copies of all written complaints received from customers and written records of the disposition of those complaints;

3.1.27. A general ledger and subsidiary records sufficient to produce an accurate statement of assets and liabilities and profit and loss statement on a monthly basis;

3.1.28. A record of all charges or fees assessed to the borrower’s account reflecting the amount of the charge or fee, the purpose, and the date imposed;

3.1.29. A copy of the escrow account detail provided to the borrower annually, if applicable;

3.1.30. Copies of any written assessment of a borrower's ability to repay the loan according to its terms, if applicable; and

3.1.31. Itemization of all fees and charges imposed on each loan and received by the lender and by any third-parties. The itemization must include the nature and amount of each fee or charge and the identity of the recipient.

3.2. All records required to be maintained by section 3.1 shall be kept in the specific loan file relating to the individual borrower or loan applicant except for those records listed in subsections 3.1.24, 3.1.25, 3.1.26 and 3.1.27.

W. Va. Code R. § 106-5-4 Records That Must be Maintained by Licensed Residential Mortgage Lenders That Purchase or Take Assignment of a Residential Mortgage Loan

4.1. A lender that, after closing, subsequently purchases or takes assignment of a loan subject to the provisions of W. Va. Code §31-17-1, et seq. must maintain the following records:

4.1.1. All written correspondence, including, but not limited to, e-mails and fax transmissions, between that lender and the previous lender that held or serviced the loan;

4.1.2. Closing Disclosures, including initial, final, and post-closing, if applicable;

4.1.3. Notice of Servicing Transfer provided by transferee, if applicable;

4.1.4. The Note or other instrument of indebtedness;

4.1.5. All written and electronic correspondence between that purchaser or assignee and the borrower including, but not limited to, e-mails and facsimile transmissions;

4.1.6. A contact log reflecting the date and substance of all conversations with borrowers;

4.1.7. A record of all cash, checks, or other monetary instruments received in connection with a residential mortgage loan showing the identity of the payor, the date received, the amount, and purpose and a description of how funds were applied;

4.1.8. A record of all monies disbursed relating to the licensee’s business as a mortgage lender including, but not limited to, refunds to borrowers and all disbursements of funds on behalf of borrowers, showing at least the payee, amount, date, and purpose of payment, including identification of the loan to which the payment relates, if any;

4.1.9. Copies of all written complaints received from customers and written records of the disposition of those complaints;

4.1.10. A general ledger and subsidiary records sufficient to produce an accurate statement of assets and liabilities and profit and loss statement on a monthly basis; and

4.1.11. A record of all charges or fees assessed to the borrower’s account reflecting the amount of the charge or fee, the purpose, and the date imposed.

4.2. All records required to be maintained by section 4.1 shall be kept in the specific loan file relating to the individual borrower or loan applicant except for those records listed in subsections 4.1.6, 4.1.7, 4.1.8, 4.1.9 and 4.1.10.

W. Va. Code R. § 106-5-5 Records That Must be Maintained by Licensed Residential Mortgage Servicers

5.1. A lender that, after closing, subsequently services a loan subject to the provisions of W. Va. Code §31-17-1, et seq. must maintain the following records:

5.1.1. Force-placed insurance documents and letters;

5.1.2. All written correspondence, including fax transmissions and e-mails, between that lender and the previous lender that held or serviced the loan;

5.1.3. Closing Disclosure(s), including initial, final, and post-closing, if applicable;

5.1.4. A signed Servicing Transfer Disclosure statement;

5.1.5. The Deed of Trust;

5.1.6. Note or other instrument of indebtedness;

5.1.7. Legal instrument(s) assigning the note and deed of trust to purchaser or assignee;

5.1.8. Any appraisals of the property, if applicable;

5.1.9. All written and electronic correspondence between the servicer and the borrower including e-mails and facsimile transmissions;

5.1.10. A contact log reflecting the date and substance of all conversations with borrowers;

5.1.11. A record of all cash, checks, or other monetary instruments received in connection with a residential mortgage loan showing the identity of the payor, the date received, the amount, and purpose and description of how funds were applied;

5.1.12. A record of all monies disbursed relating to the licensee’s business as a mortgage lender or servicer including, but not limited to, refunds to borrowers and all disbursements of funds on behalf of borrowers or others, showing at least the payee, amount, date, and purpose of payment, including identification of the loan to which the payment relates, if any;

5.1.13. Copies of all written complaints received from customers and written records of the disposition of those complaints;

5.1.14. A general ledger and subsidiary records sufficient to produce an accurate statement of assets and liabilities and profit and loss statement on a monthly basis; and

5.1.15. A record of all charges or fees assessed to the borrower’s account reflecting the amount of the charge or fee, the purpose, and the date imposed.

5.1.16. Any other disclosure(s) required by applicable Federal regulations.

5.1.17. All documentation of collection or legal action taken, by the lender or a third party contracted by the lender, including but not limited to right to cure default notices, loss mitigation packages, and foreclosure documents and letters (including trustee’s report of sale), etc.

5.2. All records required to be maintained by section 5.1 shall be kept in the specific loan file relating to the individual borrower or loan applicant except for those records listed in subsections 5.1.10, 5.1.11, 5.1.12, 5.1.13 and 5.1.14.

W. Va. Code R. § 106-5-6 Records That Must be Maintained by Licensed Residential Mortgage Brokers

6.1. A licensed residential mortgage broker must maintain the following records:

6.1.1. Initial loan application;

6.1.2. Contract or agreement between the broker and the borrower, specifically the credit service organization disclosure statement and contract;

6.1.3. Loan Estimate(s) provided by the broker or lender;

6.1.4. Required Provider List;

6.1.5. Credit report(s), if obtained;

6.1.6. Verification of borrower income and employment as required by the initial lender;

6.1.7. All written and electronic correspondence, including, but not limited to, e-mails and fax transmissions, between the broker and the lender;

6.1.8. Closing Disclosure(s) including initial, final, and post-closing, if applicable;

6.1.9. Affiliated Business Arrangement Disclosure Statements provided to the borrower;

6.1.10. Servicing Transfer Disclosure statement;

6.1.11. Right to Receive Appraisal Disclosure, if applicable;

6.1.12. Right of Rescission Notice, if applicable;

6.1.13. Tangible Net Benefit Worksheet, if applicable;

6.1.14. Appraisal(s) of the property;

6.1.15. A written justification for using a non-local appraiser, if applicable;

6.1.16. Any commitment or rate lock-in agreements, if applicable;

6.1.17. Copies of all notes or electronic correspondence and communications, including, but not limited to, e-mails and fax transmissions with borrowers, third party settlement service providers including appraisers, title agents and credit reporting agencies;

6.1.18. A record of all cash, checks, or other monetary instruments received in connection with a loan application showing the identity of the payor, the date received, the amount, and purpose;

6.1.19. A record of all monies disbursed relating to the licensee’s business as a mortgage broker including, but not limited to, refunds to borrowers and all disbursements of funds on behalf of borrowers, showing at least the payee, amount, date, and purpose of payment, including identification of the loan to which the payment relates, if any;

6.1.20. Copies of all written complaints received from customers and written records of the disposition of those complaints;

6.1.21. A general ledger and subsidiary records sufficient to produce an accurate statement of assets and liabilities and profit and loss statement on a monthly basis;

6.1.22. A record of all charges or fees assessed to the borrower’s account reflecting the amount of the charge or fee, the purpose, and the date imposed;

6.1.23. Copies of all rate sheets used on specific dates and times for the prior three-year period;

6.1.24. Copies of any written assessments of the borrower's ability to repay the loan according to its terms, if applicable;

6.1.25. Any other disclosure(s) required by applicable Federal regulations;

6.1.26. Note or other instrument of indebtedness; and

6.1.27. Itemization of all fees and charges imposed on each loan and received by the broker and by any third-parties. The itemization must include the nature and amount of each fee or charge and the identity of the recipient.

6.2. All records required to be maintained by section 6.1 shall be kept in the specific loan file relating to the individual borrower or loan applicant except for those records listed in subsections 6.1.18, 6.1.19, 6.1.20, 6.1.21 and 6.1.23.

W. Va. Code R. § 106-5-7 Form and Location of Records

7.1. All records that licensees must maintain under this rule or W. Va. Code §31-17-1, et seq. may be maintained in electronic format but must be readily available for review as required by the Commissioner of Financial Institutions. All records maintained under this subsection must be available to the Commissioner of Financial Institutions, or his or her delegates, in a manner that is organized by entire individual loan files. The files must be organized by a stacking order, properly labeled, and legible.

7.2. All records that licensees must maintain under this rule or W. Va. Code §31-17-1, et seq. shall be secured against unauthorized access or damage in a licensed location. However, if a licensee maintains a centralized out-of-state storage facility for such records, it shall notify the Commissioner by designating the books and records location in the Nationwide Multistate Licensing System and Registry (NMLS).

7.2.1. The licensee must ensure that the proposed storage will ensure that the records are secured against unauthorized access or damage; and

7.2.2. The licensee must make available at its expense for inspection and copying upon request of the Commissioner or his or her designees copies of all requested records in a form which satisfies the requirements of subsection 7.1 of this rule.

7.3. A licensee shall notify the Commissioner promptly of any proposed change in the location of its books and records by updating the licensee’s NMLS record.

W. Va. Code R. § 106-5-8 Advertising

8.1. Every licensed lender and broker shall maintain and keep available for inspection by representatives of the West Virginia Division of Financial Institutions one copy of all advertising material used during the prior three years.

8.2. If the advertising media is a radio or television broadcast, then a licensee may comply with this requirement by maintaining a copy of the transcript of the advertising.

8.3. If the advertising includes sponsorship of schools or athletic teams, then a licensee may comply with this requirement by maintaining a copy of the print design or a sample of each item.

8.4. Advertising includes the use of social media and websites to promote the company or its products.

8.5. Team names are names other than the mortgage company’s legal name that typically represent a distinct group of employees working for the mortgage company as a division or team within the larger organization. Use of team names must meet the following:

8.5.1. The team name must be properly registered as “doing business as” with the West Virginia Secretary of State’s Office and in NMLS for use in West Virginia.

8.5.2. Team names are permitted for advertising purposes only and may not be used to conduct residential mortgage loan origination business.

8.5.3. The mortgage company’s legal name and NMLS identification number must be used with the team name or logo, in substantially equivalent prominence. It must be apparent to the viewer what mortgage company is making the advertisement.

W. Va. Code R. § 106-5-9 Use of Non-local Appraisers

9.1. If a licensed broker or lender employs an appraiser whose main office is more than 75 miles from the property to be appraised, that lender or broker must document, in writing and maintain in accordance with the provisions of subsections 3.1.21. or 6.1.15. of this rule, the reason(s) why such an appraiser was used instead of an appraiser with a main office closer to the property being appraised.

9.2. The 75 mile distance used in subsection 9.1 of this rule refers to the driving distance between the main office of the appraiser and the property that is being appraised.

W. Va. Code R. § 106-5-10 Improper Influence of Appraisers

10.1. Any threat, oral or written, direct or implied, by a lender or broker to withhold payment of an appraiser’s fee constitutes an attempt to coerce or intimidate an appraiser for the purpose of influencing his or her independent judgment in violation of W. Va. Code §31-17-8(m)(2).

10.2. Any threat, oral or written, direct or implied, by a lender or broker to cease using the services of an appraiser in the future if that appraiser does not provide an appraisal amount in accordance with the expectations of that lender or broker constitutes an attempt to coerce or intimidate an appraiser for the purpose of influencing his or her independent judgment in violation of W. Va. Code §31-17-8(m)(2).

W. Va. Code R. § 106-5-11 Documentation of Ability to Repay

11.1. No lender should make a loan unless the lender reasonably believes at the time the loan is closed that the borrower(s) will be able to make the scheduled payments to repay the loan. This reasonable belief must be based upon a consideration of the income of the borrower(s), current debt, employment status and history, and other financial resources other than equity in the dwelling that will secure the loan.

11.2. If a borrower’s household debt-to-income ratio will exceed 50 percent upon the extension of new residential mortgage loan as determined from a credit report, credit application, financial statement, then the broker and initial lender must document, in writing and maintain in accordance with the provisions of subsections 3.1.30. or 6.1.24. of this rule, an assessment of the borrower’s ability to repay the loan according to its terms. Such assessment must be provided to the borrower(s) and must consider the household’s current debt obligations, the term of the loan, and the borrower(s) circumstances along with their current and projected income and assets, other than a security interest in the real estate taken to secure the loan.

11.3. The requirement of subsection 11.2 of this rule shall not apply if the loan obtained qualifies under guidelines established by the West Virginia Housing Development Fund or a non-profit housing provider licensed under W. Va. Code §31-17-1, et seq.

11.4. The requirement of subsection 11.2 of this rule shall not apply if the loan originated is insured or guaranteed by an agency of the federal government and meets the qualifications established by the insuring or guaranteeing federal agency. This includes, but is not limited to, Federal Housing Administration within the Department of Housing and Urban Development, Veteran’s Administration, and U.S. Department of Agriculture Rural Development loans.

W. Va. Code R. § 106-5-12 Payments to Unrelated Third Parties

12.1. Pursuant to W. Va. Code §31-17-8(m)(4), only payments of closing costs to unrelated third parties may not be included in the overall cap on fees, compensation, yield spread premium or points that a borrower is required to pay a licensee.

12.2. In order to qualify as an “unrelated third party” the individual or entity providing services may not be an “affiliated business arrangement” as that term is defined by the Real Estate Settlement Procedures Act, 12 U.S.C. §2602, and attendant regulations.

W. Va. Code R. § 106-5-13 Tangible Net Benefit Determinations

A broker and lender licensee must document tangible net benefit to the borrower before arranging or making any residential mortgage loan that refinances an existing residential mortgage loan that closed within 24 months of the proposed refinancing. This duty exists even if the broker or lender did not arrange or make the existing loan that will be refinanced.

W. Va. Code R. § 106-5-14 Determining Financial Responsibility for Mortgage Loan Originators

14.1. The Division of Financial Institutions will initially review the credit report of an applicant for a mortgage loan originator license to determine whether the applicant meets the standards of financial responsibility set forth at W. Va. Code §31-17A-5. If the initial review of the credit report reveals information that prevents a determination of sufficient financial responsibility, before making a final decision, the Division will contact the applicant and seek an explanation for his or her financial condition, any supporting documentation, and a plan to improve.

14.2. Additional factors that the Division may consider from the applicant include, but are not limited to:

14.2.1. The existence of a repayment agreement for unpaid debts;

14.2.2. Faithful performance of the applicant’s obligations under the repayment agreement;

14.2.3. Active participation in a consumer credit counseling service;

14.2.4. A pending appeal of a negative item on the credit report supported by documentation of the basis of the appeal;

14.2.5. Proof of satisfaction of judgment(s);

14.2.6. Proof of payment of charged off accounts; and

14.2.7. Sudden, significant medical expenses for the applicant or the applicant’s spouse or dependent.

W. Va. Code R. § 106-5-15 Temporary Authority for Mortgage Loan Originators

15.1. Mortgage Loan Originators seeking to avail themselves of temporary authority to operate while he or she seeks licensure by the Division of Financial Institutions may not engage in residential mortgage activity until an application has been filed and the individual has been assigned a status recognizing such temporary authority.

15.2. The maximum duration for temporary authority is 120 days. After 120 days have elapsed, the status conveying temporary authority to operate will be removed. An applicant for licensure who has previously received the benefit of the 120 days of temporary authority will not be conferred temporary authority status.

106CSR5

106CSR5

Series 07 Installation, Operation and Sharing of Customer Bank Communication Terminals and the Utilization of Nonexclusive Access Interchange System

W. Va. Code R. § 106-7-1 General

1.1. Scope. -- This rule establishes general rules implementing W. Va. Code §31A-8-12b, which permits the installation, operation and sharing of customer bank communication terminals and the utilization of nonexclusive access interchange systems.

1.2. Authority. -- W. Va. Code §31A-8-12b(f).

1.3. Filing Date. -- April 7, 2026.

1.4. Effective Date. -- May 1, 2026.

1.5. Sunset Provision. -- This rule shall terminate and have no further force or effect upon August 1, 2031.

W. Va. Code R. § 106-7-2 Sharing Customer Bank Communication Terminals

2.1. Mandatory sharing.

Pursuant to W. Va. Code §31A-8-12b(a)(1), any banking institution, which individually or jointly with one or more other banking institutions or other federally insured financial institutions, installs, operates and engages in banking business from a customer bank communication terminal in a location other than on the premises of its principal office, branch bank, or authorized off-premise facility, shall make such customer bank communication terminal available for use by other banking institutions on a nondiscriminatory basis. The fees and charges required to be paid by any banking institution which utilizes the customer bank communication terminal shall not exceed a pro rata share of the costs, determined in accordance with generally accepted accounting principles, of purchasing or leasing, installing, operating and maintaining the customer bank communication terminal, plus a reasonable rate of return on these costs to the owner or lessee of the customer bank communication terminal.

2.2. Permissive/nondiscriminatory sharing.

Pursuant to W. Va. Code §31A-8-12b(a)(2), any banking institution, which individually or jointly with one or more other banking institutions or other federally insured financial institutions, installs, operates and engages in banking business from a customer bank communication terminal may make such customer bank communication terminal available for use by other federally insured financial institutions on a nondiscriminatory basis. The charges to be paid by other federally insured financial institutions which utilize the customer bank communication terminal shall not exceed a pro rata share of the costs, determined in accordance with generally accepted accounting principles, of purchasing or leasing, operating and maintaining the customer bank communication terminal, plus a reasonable return on these costs to the owner of the customer bank communication terminal.

2.3. Written agreement or contract.

The terms and conditions of a banking institution's or other federally insured financial institution's use of a customer bank communication terminal pursuant to sections 2.1 or 2.2 of these rules shall be governed by a written agreement or contract between the banking institution which installs, operates and engages in banking business from that customer bank communication terminal and the banking institution or other federally insured financial institution whose customers shall use that customer bank communication terminal. The written agreement or contract shall specify all terms and conditions and shall include the fees and charges for the use of the customer bank communication terminal.

W. Va. Code R. § 106-7-3 Nonexclusive access interchange system

3.1. Access interchange system.

Any banking institution, which individually or jointly with one or more other banking institutions or other federally insured financial institutions, installs, operates and engages in banking business from a customer bank communication terminal, whether that customer bank communication terminal, is located on the premises of its principal office, branch bank or authorized off-premise facility or in a location other than on the premises of its principal office, branch bank or authorized off-premise facility, and makes that customer bank communication terminal available for use by another banking institution or other federally insured financial institution, has established an access interchange system for purposes of W. Va. Code §31A-8-12b(a).

3.2. Access interchange systems must be nonexclusive.

Any access interchange system established according to section 3.1 of this rule shall be nonexclusive. Any customer bank communication terminal that communicates with and permits financial transactions to be carried out through an exclusive access interchange system shall be considered to be an illegal branch bank of the banking institution that installs and operates that customer bank communication terminal.

3.3. Written agreement or contract required.

The terms and conditions for establishing any access interchange system shall be governed by a written agreement or contract. The written agreement or contract shall specify all terms and conditions and shall include the interchange fees or charges and the transaction fees or charges.

W. Va. Code R. § 106-7-4 Night Depository Box Attached to a Customer Bank Communication Terminal

For purposes of W. Va. Code §31A-8-12b(c), any night depository box that is attached to a customer bank communication terminal in such a way that a customer electronically communicates with a banking institution is considered to be associated equipment of that customer bank communication terminal, and as such, subject to sections 2 and 3 of this rule and W. Va. Code §31A-8-12b(a).

106CSR7

Series 17 Notice and Treatment of Joint Accounts

W. Va. Code R. § 106-17-1 General

1.1. Scope. -- This rule establishes procedures for the notice to holders of joint deposit accounts opened on or after July 1, 1994 regarding their rights and liabilities as to those accounts. In addition, this rule pertains to the treatment of joint deposit accounts in the event of receipt of written notice by a bank from one of their joint deposit account holders informing the bank not to pay, pledge, or encumber the account upon the demand or request of another named party to the joint account.

1.2. Authority. -- W. Va. Code §§31A-4-33 and 31A-2-4(c)(11).

1.3. Filing Date. -- April 7, 2026.

1.4. Effective Date. -- May 1, 2026.

1.5. Sunset Provision. – This rule shall terminate and have no further force or effect upon August 1, 2031.

W. Va. Code R. § 106-17-2 Definitions

2.1. "Joint Account" means a federally insured deposit account at a bank which is held in the name of two or more individual persons, wherein any one of the named account holders may, without the signature or approval of any other persons to the account, obtain account funds, close the account, or otherwise withdraw the whole amount in the account. Such accounts include, but are not limited to, joint checking accounts, joint savings accounts, joint passbook savings accounts, joint Christmas/Vacation club accounts, and joint certificate of deposit accounts.

2.2. "Bank" means any state-chartered or federally-chartered banking institution authorized to conduct the business of banking in West Virginia, including any savings bank, or savings and loan association.

W. Va. Code R. § 106-17-3 Notice

3.1. Opening New Joint Accounts -- Upon the request of a customer to open a new joint account, a bank shall provide notice to the joint account holders that the joint account may be paid out to, pledged by, or otherwise encumbered by each and any of the individuals to the joint account -- unless prior written notice is given by one of the account holders not to permit it. The wording of the notice provided by the banks to their customers must be printed in a clearly legible type size.

3.2. A bank may comply with this subsection by:

3.2.1. Obtaining the signature of at least one joint account holder on a separate document containing the required disclosures, and then maintaining this signed separate document either together with the joint account's signature card, or in another manner whereby the document is easily retrievable as to each joint account;

3.2.2. Incorporating the required and approved disclosure notice within the signature card or the account opening agreement with the bank; or

3.2.3. Establishing a procedure for ensuring that a person opening a covered joint account is given the required notice, and that fact is recorded by a checkbox marked upon the signature card or the account opening agreement accompanying that joint account.

W. Va. Code R. § 106-17-4 Effect of Written Notice

4.1. Closing the Account -- Upon receipt of written notice from a customer holding a joint account directing the bank not to allow one or more of the other named parties to that joint account to withdraw funds, close the account, pledge or otherwise encumber the account solely on that party's own signature, then the bank may, unless prevented by federal law, treat that notice as a request to end the joint account relationship and the bank may choose to close the account either by issuing a check in the name of the customer requesting the change, or by transferring the account monies to another account which is in the name of the customer requesting the change.

If there is any loss of accrued interest or other penalty for early withdrawal associated with closing the joint account, the bank may impose the loss or penalty.

4.2. Payment of Interest -- If the account is closed and the monies in the account placed in an escrow account by the bank, then interest shall accrue as is normally paid by the bank on its escrow accounts.

4.3. Noninterference with Bank Pledging Policy -- Nothing within this rule prohibits a bank from adopting as a matter of bank policy, a requirement that all joint account holders must agree and/or sign before any pledge of a joint account can be made.

W. Va. Code R. § 106-17-5 Non-Liability of Bank

5.1. Upon Closing the Account -- To the extent the bank closes the account acting upon written notice of a joint account holder made pursuant to W. Va. Code §31A-4-33 the bank has no liability to any affected joint account holder in consequence for taking such action.5.2. Upon Following Agreement of Parties -- To the extent the bank follows or complies with an agreement among and between all the parties to a joint account as to the apportionment or disposition of funds held in the joint account, the bank has no liability to any affected joint account holder in consequence for taking such action.

5.3. Upon Compliance with a Court Order -- To the extent the bank follows or complies in good faith with an order from a court as to the apportionment or disposition of funds held in a joint account affected by notice pursuant to W. Va. Code §31A-4-33, or makes any payment or attachment to a creditor or other legal claimant pursuant to legal process, the bank has no liability to any affected joint account holder in consequence for taking such action.

5.4. Upon Taking Commercially Reasonable Action -- To the extent the bank, in good faith, takes all commercially reasonable action to promptly prevent a joint account holder from withdrawing, closing, pledging or otherwise encumbering such account as directed by another joint account holder's written notice received by the bank, the bank has no liability to any affected joint account holder for being unable to prevent the withdrawal, closing, pledge, or encumberment.

W. Va. Code R. § 106-17-6 Severability

If any word, phrase, or provision of this rule is held to be invalid, the remainder of the rule shall, to the fullest extent possible, not be affected by that holding.

106CSR17 -2-

Series 20 Treatment of Derivative Transactions Under Legal Lending Limits

W. Va. Code R. § 31A-4-26 (a) (3), as "all direct or indirect advances of funds to a person made on the basis of any obligation of that person to repay the funds or repayable from specific property pledged by or on behalf of the person and to the extent specified by the Commissioner of Banking, the terms also include any liability of a state-chartered banking institution to advance funds to or on behalf of a person pursuant to a contractual commitment". 2.4 A "Contractual Commitment to Advance Funds" has been defined broadly in the Legislative Rule Pertaining to the Legal Lending Limit, 106 CSR, Series 9, Section 2.1 as " (a) an obligation on the part of the bank to make payments (directly or indirectly) to a designated third party contingent upon a default by the bank's customer in the performance of an obligation under the terms of that customer's contract with the third party or (b) an obligation to guarantee or stand as surety for the benefit of a third party. The term includes, but is not limited to, 'Standby Letters of Credit', guarantees, puts and other similar arrangements." 2.5 "Credit derivative" means a financial contract executed under standard industry credit derivative documentation that allows one party (the bank or protection purchaser) to transfer the credit risk of one or more exposures (reference exposure) to another party (the protection provider) . 2.6 "Effective margining arrangement" means a master legal agreement governing derivative transactions between a bank and a counterparty that requires the counterparty to post, on a daily

basis, variation margin to fully collateralize that amount of the bank's net credit exposure to the counterparty that exceeds $1 million created by the derivative transactions covered by the agreement. ### $106-20-3. Purpose of legal lending limits law and regulations. 3.1 The purpose of the state legal lending limits law and regulations, W. Va. Code $31A-4-26 (a), and 106 CSR Series 9 respectively, is to protect a bank from the credit risks associated with over-exposure to a single person, entity, or affiliated group of persons or entities through loans, extensions of credit, or other contractual commitments or obligations with that person, entity or affiliated group. ### $106-20-4. Applicability of legal lending limits to derivative transactions. 4.1 The state legal lending limits law and its applicable regulations apply to derivative transactions entered into by banks because those transactions are obligations that require a bank to commit funds, by contract, agreement, swap or otherwise.

Failure to properly limit the use of derivative transactions by a bank would pose a safety and soundness risk to the institution.

Therefore, for purposes of the state legal lending limits law and regulations, derivative transactions shall always be included in the calculation of lending limits. ### $106-20-5. Acceptable methods for calculating credit exposure from derivative transactions. 5.1 Banks may elect to use one of three methods to calculate their credit exposure for derivative transactions: the Conversion Factor Matrix Method; the Remaining Maturity Method; or an Internal Model Method. These methods are interpreted by the Division to be the same as those contained in 12 C.F.R. Part 32. 5.2 The Division of Financial Institutions encourages banks to use either the Conversion Factor Matrix Method or the Remaining Maturity Method since they provide a simpler method for calculating credit exposures. 5.3 A bank may only use the Internal Model Method to calculate credit exposure to derivative transactions after obtaining the prior approval to use that model from both its primary federal regulator and the Division of Financial Institutions. 5.4 A bank must declare and document at the origination of a derivative transaction which of the permitted methods it will use to determine potential future exposure of the derivative.

The bank may not change the method used to calculate potential future exposure during the life of that derivative. Furthermore, for each type of derivative, a bank must use the same method to calculate potential future exposure for that type unless it requests and receives prior written permission from the Division. 5.5 If the derivative transaction is a credit derivative and the bank has not established an effective margining arrangement, the bank must calculate its credit exposure to a counterparty by adding the net notional value of all protection purchased from the counterparty on each reference entity. $106-20-6. Applicability of the West Virginia bank parity law to derivative transactions. 6.1 West Virginia Code $31A-8C-1, et seq., allows banks, upon the prior approval of the Commissioner of Financial Institutions, to engage in or offer any "financially related" activities, products or services that are offered or engaged in by national banks, federal thrifts, credit unions, or any state bank chartered in a state other than West Virginia. 6.2 Engaging in a derivative transaction is a "financially related" activity as that term is defined in W.Va. Code $31A-8C-1. 6.3 Banks may engage in derivative transactions using the laws or regulations applicable to national banks, federal thrifts, credit unions or state banks chartered in a state other than West Virginia terms and conditions only if they have obtained the prior approval of the Commissioner of Financial Institutions. ## TITLE 106 INTERPRETIVE RULE COMMISSIONER OF FINANCIAL INSTITUTIONS ## SERIES 20 TREATMENT OF DERIVATIVE TRANSACTIONS UNDER LEGAL LENDING LIMITS ### $106-20-1. General. 1.1 Scope. -- This rule provides guidance to West Virginia state-chartered banking institutions as to how the Division of Financial Institutions will treat derivative transactions under the legal lending limits set forth by W. Va.

Code §31A-4-26 (a) and the legislative rule pertaining to the legal lending limit, Title 106, Series 9. 1.2 Authority. -- W.Va. Code §31A-2-4 (c) (11) 1.3 Filing Date. - January 3, 2013 1.4 Effective Date. - February 2, 2013 ### $106-20-2. Definitions. 2.1 "Bank" means a federally insured depository institution chartered under the laws of West Virginia. 2.2 "Derivative transaction" means an obligation, created by contract, agreement, swap, warrant, note or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets. 2.3 "Loans and extensions of credit" are defined in the state law with respect to legal lending limits, at W. Va. Code

W. Va. Code R. § 31A-4-26 (a) (3), as "all direct or indirect advances of funds to a person made on the basis of any obligation of that person to repay the funds or repayable from specific property pledged by or on behalf of the person and to the extent specified by the Commissioner of Banking, the terms also include any liability of a state-chartered banking institution to advance funds to or on behalf of a person pursuant to a contractual commitment". 2.4 A "Contractual Commitment to Advance Funds" has been defined broadly in the Legislative Rule Pertaining to the Legal Lending Limit, 106 CSR, Series 9, Section 2.1 as " (a) an obligation on the part of the bank to make payments (directly or indirectly) to a designated third party contingent upon a default by the bank's customer in the performance of an obligation under the terms of that customer's contract with the third party or (b) an obligation to guarantee or stand as surety for the benefit of a third party. The term includes, but is not limited to, 'Standby Letters of Credit', guarantees, puts and other similar arrangements." 2.5 "Credit derivative" means a financial contract executed under standard industry credit derivative documentation that allows one party (the bank or protection purchaser) to transfer the credit risk of one or more exposures (reference exposure) to another party (the protection provider) . 2.6 "Effective margining arrangement" means a master legal agreement governing derivative transactions between a bank and a counterparty that requires the counterparty to post, on a daily

basis, variation margin to fully collateralize that amount of the bank's net credit exposure to the counterparty that exceeds $1 million created by the derivative transactions covered by the agreement. ### $106-20-3. Purpose of legal lending limits law and regulations. 3.1 The purpose of the state legal lending limits law and regulations, W.Va. Code $31A-4-26 (a), and 106 CSR Series 9 respectively, is to protect a bank from the credit risks associated with over-exposure to a single person, entity, or affiliated group of persons or entities through loans, extensions of credit, or other contractual commitments or obligations with that person, entity or affiliated group. ### $106-20-4. Applicability of legal lending limits to derivative transactions. 4.1 The state legal lending limits law and its applicable regulations apply to derivative transactions entered into by banks because those transactions are obligations that require a bank to commit funds, by contract, agreement, swap or otherwise.

Failure to properly limit the use of derivative transactions by a bank would pose a safety and soundness risk to the institution.

Therefore, for purposes of the state legal lending limits law and regulations, derivative transactions shall always be included in the calculation of lending limits. ### $106-20-5. Acceptable methods for calculating credit exposure from derivative transactions. 5.1 Banks may elect to use one of three methods to calculate their credit exposure for derivative transactions: the Conversion Factor Matrix Method; the Remaining Maturity Method; or an Internal Model Method. These methods are interpreted by the Division to be the same as those contained in 12 C. F.R. Part 32. 5.2 The Division of Financial Institutions encourages banks to use either the Conversion Factor Matrix Method or the Remaining Maturity Method since they provide a simpler method for calculating credit exposures. 5.3 A bank may only use the Internal Model Method to calculate credit exposure to derivative transactions after obtaining the prior approval to use that model from both its primary federal regulator and the Division of Financial Institutions. 5.4 A bank must declare and document at the origination of a derivative transaction which of the permitted methods it will use to determine potential future exposure of the derivative.

The bank may not change the method used to calculate potential future exposure during the life of that derivative. Furthermore, for each type of derivative, a bank must use the same method to calculate potential future exposure for that type unless it requests and receives prior written permission from the Division. 5.5 If the derivative transaction is a credit derivative and the bank has not established an effective margining arrangement, the bank must calculate its credit exposure to a counterparty by adding the net notional value of all protection purchased from the counterparty on each reference entity. $106-20-6. Applicability of the West Virginia bank parity law to derivative transactions. 6.1 West Virginia Code $31A-8C-1, et seq., allows banks, upon the prior approval of the Commissioner of Financial Institutions, to engage in or offer any "financially related" activities, products or services that are offered or engaged in by national banks, federal thrifts, credit unions, or any state bank chartered in a state other than West Virginia. 6.2 Engaging in a derivative transaction is a "financially related" activity as that term is defined in W.Va. Code

W. Va. Code R. § 31A-8C-1 6.3 Banks may engage in derivative transactions using the laws or regulations applicable to national banks, federal thrifts, credit unions or state banks chartered in a state other than West Virginia terms and conditions only if they have obtained the prior approval of the Commissioner of Financial Institutions. 101 South Queen Street Martinsburg, West Virginia 25401 7000 Hampton Center Morgantown, West Virginia 26505 511 7th Street Moundsville, West Virginia 26041 501 Avery Street Parkersburg, West Virginia 26101 Bowles RiceM

I.LP

ATTORNEYS AT LAW 600 Quarrier Street Charleston, West Virginia 25301 Post Office Box 1386 Charleston, West Virginia 25325-1386 (304) 347-1100 www.bowlesrice.com December 10, 2012 6000 Town Center Boulevard, Suite 210 Canonsburg. Pennsylvania 15317 333 West Vine Street, Suite 1700 Lexington, Kentucky 40507 480 West Jubal Early Drive, Suite 130 Winchester, Virginia 22601 R ECEIVE DA DEC | 0.2012 WWV DIV OF DRANCIAL INSTITUTIONS E-Mail Address: smurhv@@bowlesrice.com Sandra M. Murphy Telephone - (304) 347-1131 Facsimile - (304) 343-3058 Robert J. Lamont, Esquire West Virginia Division of Financial Institutions General Counsel 900 Pennsylvania Avenue, Suite 306 Charleston, West Virginia 25302-3542 VIA HAND DELIVERY AND E-MAIL Re: Treatment of Derivative Transactions under Legal Lending Limits Dear Mr. Lamont:

The Community Bankers of West Virginia and the West Virginia Bankers Association (the "Associations") appreciate the opportunity to comment on the proposed rule submitted by the Division of Financial Institutions relating to the treatment of derivative transactions under the West Virginia legal lending limit statute (the "Proposed Rule").

The Associations and their members support a strong and effective regulatory system, and a fundamental element of that system is appropriately designed rules to limit risk concentrations, including exposures of a bank to a single counterparty in derivative transactions.

The Associations acknowledge and appreciate the Division of Financial Institutions efforts to develop a rule that accomplishes this regulatory objective while allowing banks flexibility in implementation. This flexibility not only enables banks to avoid undue regulatory burden by providing optional approaches to calculating credit exposure, it also promotes important safety and soundness principles at West Virginia banks.

Consistent with these goals, the Associations request that the Division of Financial Institutions reconsider the requirement under the Proposed Rule that for each type of derivative, a bank must use the same method to calculate potential future exposure for that type. The Associations believe banks should be permitted to apply different calculation methods based on a particular transaction. For example, legitimate business reasons exist for a bank that enters into a derivative transaction to hedge against interest rate risk to choose among the acceptable methods for calculating risk exposure set forth in the Proposed Rule, including whether the derivative instrument has short or long term features. This added flexibility would be appropriately limited by the requirement that a bank may not change the method used to calculate potential future exposure during the life of a particular derivative. Accordingly, the Associations respectfully request that the last sentence in Section 5.4 be deleted in the final rule.

Bowles Rice ...

Robert J. Lamont, Esquire December 10, 2012 For these reasons, the Associations support the proposed rule as drafted and will not be submitting substantive comments at this time. Should you have any questions, please do not hesitate to contact me.

Respectfully submitted, Sandra M. Duph Sandra M. Murphy Counsel to and on behalf of West Virginia Bankers Association and Community Bankers of West Virginia SMM/jam SMM/jam bcc:

Donna Tanner Joe Ellison # WEST VIRGINIA DIVISION OF FINANCIAL INSTITUTIONS 900 PENNSYLVANIA AVENUE, SUITE 306 (304) 558-2294 Fax: (304) 558-0442 Earl Ray Tomblin CHARLESTON, WEST VIRGINIA 25302-3542 Sara M. Cline Governor www.dfi.wv.gov Commissioner December 18, 2012 Sandra M. Murphy, Esq.

Bowles Rice McDavid Graff & Love LLP P.O. Box 1386 Charleston, WV 25325-1386 Re: Treatment of Derivative Transactions under Legal Lending Limits Dear Ms. Murphy:

Thank you for your December 10, 2012 comments on behalf of the Community Bankers of West Virginia and the West Virginia Bankers Association (the "Associations") regarding the Division of Financial Institution's proposed Interpretive Rule, Title 106 Series 20, Treatment of Derivative Transactions under Legal Lending Limits. We appreciate your statement that the Associations support the proposed rule as drafted and would have no substantive comments.

Your letter did contain a suggestion that the last sentence of Section 5.4 be deleted. That sentence provides that a bank must use the same method for calculating credit exposure for each type of derivative transaction. The suggestion states that there may be legitimate business reasons for a bank to elect to use one method for valuing one particular derivative transaction that is a hedge against interest rate risk and then decide to use a different method for a subsequent derivative transaction that is also intended to be a hedge against interest rate risk.

The purpose of the last sentence of Section 5.4 was to promote consistency and prevent a bank from "shopping" for the most favorable method to measure exposure. The Division also believes that encouraging a variety of methods to measure credit exposure could complicate the job of our field examiners if exposures for one type of derivative transaction are measured in different ways at different times.

Nevertheless, the Division recognizes that there may be value in providing banks with sufficient flexibility in the conduct of derivative transactions. Therefore, in lieu of removing the last sentence in its entirety, the Division has decided to add a phrase at the end of that sentence which provides an option for a bank to obtain the prior written approval of the Division for using a Sandra M. Murphy, Esq.

Bowles Rice McDavid Graff & Love LLP December 18. 2012 different valuation method. We hope that this will provide the flexibility a bank may need when faced with what it believes to be a legitimate business reason to use a different method at a particular time for the same type of derivative.

Sincerely, General Counsel ## REASONS FOR AMENDMENTS TO INTERPRETIVE RULE TITLE 106 SERIES 20 TREATMENT OF DERIVATIVE TRANSACTIONS UNDER LEGAL LENDING LIMITS The Division of Financial Institutions made two amendments to its proposed Interpretive

Rule, Title 106 CSR Series 20 following the comment period.

The first amendment is at the last sentence of subsection 5.4. The Division added the final phrase which allows a bank to obtain the written permission of the Division to change that bank's method for calculating credit exposure for a particular type of derivative. The Division received only one comment during the comment period. That comment requested that the entire last sentence of subsection 5.4 be deleted so that a bank would have the flexibility to make changes in the methods by which it would calculate credit exposure for derivative types. As outlined in its response to the comment, the Division believes that the change it made affords a bank sufficient flexibility in the event it has a legitimate business reason to use a different method.

The second amendment is at subsection 5.1. On its own initiative, the Division has elected to add the last sentence to that subsection thereby clarifying that the three acceptable methods for calculating credit exposure are to be interpreted as the same as those contained in the Office of the Comptroller of the Currency's rule at 12 C.F.R. Part 32.

Neither of the changes made after the comment period change the nature of the proposed

rule or alter the calculations in the Fiscal Note previously filed.

Series 21 Rule Pertaining to the Fintech Regulatory Sandbox Program

W. Va. Code R. § 106-21-1 General

1.1. Scope. -- This rule establishes the general method for implementing West Virginia Code §§31A-8G-1, et seq.; it applies to all participants in the Fintech Regulatory Sandbox Program under that statute.

1.2. Authority. -- W.Va. Code §§31A-8G-3 and 31A-2-4.

1.3. Filing Date. -- April 7, 2026.

1.4. Effective Date. -- May 1, 2026.

1.5. Sunset Provision. – This rule shall terminate and have no further force or effect upon August 1, 2031.

W. Va. Code R. § 106-21-2 Definitions

2.1. General Rule. – Unless a specific definition is provided in subsection 2.2 of this section, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided in W.Va. Code §§31A-1-2 and 31A-8G-1, et seq.

2.2. Terms defined.

2.2.1. “Participant” means a regulatory sandbox participant as that term is defined in W. Va. Code §31A-8G-2.

2.2.2. “Sandbox” means the regulatory sandbox program as that term is defined in W. Va. Code §31A-8G-2.

2.2.3. “Self-regulatory organization” means an entity, such as a non governmental organization, which has the power to create and enforce stand-alone industry and professional regulations and standards on its own, such as the Global Financial Innovation Network and the American Consumer Financial Innovation Network.

W. Va. Code R. § 106-21-3 Objectives; Initial and Extension Applications

3.1. The operation of the fintech regulatory sandbox program shall have the following objectives:

3.1.1. The testing of innovative financial products or services;

3.1.2. The analysis of regulatory, supervisory, and consumer protection statutes and rules in the use of financial technology; and

3.1.3. The identification of potential amendments to existing laws and rules and their application to financial products and services that would encourage and enable innovation in financial services.

3.2. The Commissioner or his or her designee may consult with prospective sandbox participants before an application is filed to learn about the business model of the prospective participant and determine whether the innovative financial product or service is appropriate for the sandbox. Consultations made pursuant to the section shall be confidential and not subject to disclosure.

3.3. A prospective sandbox participant shall complete and submit an application to the Commissioner on a form prescribed by the Commissioner. The Commissioner may direct an applicant to file a license application through the Nationwide Mortgage Licensing System and Registry operated by the State Regulatory Registry, LLC. The application shall be attested to as to its completeness and veracity.

3.4. The Commissioner may refuse to accept an incomplete application. The time period for making a determination on an application shall not commence until a complete application is received.

3.5. As a part of the application process, at the Commissioner’s discretion, the following individuals may be required to submit release forms as a part of the fingerprint based background review process for participation in the sandbox: Chief Executive Officer, President, owners and investors controlling either directly or indirectly 10% or more of the applicant as well as other individuals that are identified as controlling the day to day activity of the applicant.

W. Va. Code R. § 106-21-4 Consumer Protection Bond

4.1. The consumer protection bond required by the sandbox shall be in place before an innovative product or service is made available to consumers.

4.2. The Commissioner may require a sandbox participant to increase or decrease its consumer protection bond depending upon the risk profile of the product or service and the number of consumers served. In no event shall a bond amount be less that that required by statute.

W. Va. Code R. § 106-21-5 Information Sharing Agreements

5.1. The Commissioner may enter into information sharing agreements with other governmental agencies or self-regulatory organizations to carry out the purpose of the regulatory sandbox program or for any other purpose relating to the sandbox.

5.2. The Commissioner may participant in multi-jurisdictional agreements to further the purposes of the regulatory sandbox program.

W. Va. Code R. § 106-21-6 Applicability of Administrative Due Process Provisions

6.1. Existing administrative procedure laws and rules which are applicable to a particular program or body of law shall apply to the extent not inconsistent with the regulatory sandbox program. If a sandbox participant would have required a license as a money transmitter, for example, to operate outside of the sandbox, those administrative procedure laws applicable to money transmitters would apply.

6.2. If a sandbox participant offers a product or service that would normally require a license in more than one program or body of law, the Commissioner shall use the procedural laws and rules most applicable to the product or service at issue.

W. Va. Code R. § 106-21-7 Partnership with Existing Financial Institution

7.1. The Commissioner or his or her designee shall make available a list of financial institutions currently licensed and regulated by the Division of Financial Institutions upon request of an applicant.

7.2. An applicant shall attest on its application that it has either entered into a partnership with an existing financial institution to access the market in West Virginia to test an innovative product or service or demonstrate that it has in good faith attempted to establish a partnership with an existing financial institution in this state.

W. Va. Code R. § 106-21-8 Disclosures Related to Activity in Other Sandbox Jurisdictions

8.1. Applicants must disclose whether they have conducted a similar test of the same product or services or a similar product or services in another jurisdiction operating a sandbox program.

8.2. An applicant must also submit the following information as a part of the application process:

8.2.1. A copy of any approved or denied application by the applicant that was submitted to another jurisdiction operating a sandbox program, if any.

8.2.2. A statement concerning whether the applicant’s regulatory sandbox participation elsewhere, if any, were successful or not, or remain ongoing.

8.2.3. A statement by the applicant describing any complaints tied to its regulatory sandbox participation in another jurisdiction, if any, and their status or resolution.

106CSR21

106CSR21

Series 22 Exempt Purchasing

W. Va. Code R. § 106-22-1 General

1.1. Scope. -- This rule contains the procedures of the West Virginia Division of Financial Institutions for procurements exempt from the requirements of the West Virginia State Purchasing Division in compliance with W. Va. Code §5A-1-12, under which agencies exempt from some or all of the requirements of Chapter 5A of the West Virginia Code are to adopt purchasing procedures.

1.2. Authority. -- W. Va. Code §5A-1-12, W. Va. Code §31A-8A-8, W.Va. Code §31A-8D-7, W. Va. Code §31A-8E-8, and W. Va. Code §31A-8F-22.

1.3. Filing Date. -- February 16, 2021.

1.4. Effective Date. -- April 1, 2021.

W. Va. Code R. § 106-22-2 Definitions

2.1. “Agency” or “DFI” means the West Virginia Division of Financial Institutions.

2.2. “Award” means the written determination of the selection of a vendor to perform under a contract issued after encumbrance and final approval by the agency.

2.3. “Bid” means an offer by a vendor in response to a procurement document to provide services in accordance with the specifications of the agency-issued procurement document.

2.4. “Change order” means a written modification or amendment to an agency issued contract in the manner provided in the contract or upon the mutual consent of DFI and the vendor.

2.5. “Contract” means the binding agreement entered into between DFI and a vendor to provide the services requested in the procurement and includes a purchase order.

2.6. “Direct award” means the procurement method to award a contract to a vendor able to provide the services without competitive bidding when there is no known competition.

2.7. “FOIA” means the Freedom of Information Act found in W. Va. Code §29B-1-1 et seq.

2.8. “Non-disclosure agreement” means a contract between two or more parties to prohibit the release of information defined in the agreement as confidential, sensitive, or private in a manner that violates the non-disclosure agreement.

2.9. “Procurement” means the process of contracting for or otherwise acquiring, receiving, or maintaining services in accordance with this rule.

2.10. “Procurement document” means any document and all attachments related to acquiring services.

2.11. “Responsible vendor” means a vendor believed to have the capability to perform a contract and the integrity and reliability to assure good faith performance.

2.12. “Responsive vendor” means a vendor submitting a bid that conforms in all material respects to the requirements and specifications of a procurement document.

2.13. “Services” means intangible items, that include labor, time, expertise, maintenance, software, and service agreements.

2.14. “State” means the State of West Virginia.

2.15. “Vendor” means a person or entity considering or submitting a bid or a person or entity that has been awarded the contract.

W. Va. Code R. § 106-22-3 General information

3.1. DFI procurements for services shall be centrally processed at DFI to provide economical and efficient services at a reasonable cost.

3.2. The requirements or limitations in a procurement document shall be reasonable in consideration of DFI needs.

3.3. Documentation shall be maintained by the agency for all procurements and purchases to protect the processes.

3.4. DFI shall solicit an unrelated agency to audit exempt procurements and exempt purchasing processes and files every two years beginning in 2023 to cover the period of the effective date of this rule through December 31, 2022, and then every two years thereafter. When DFI does not utilize any exempt procurement, no audit shall be required.

3.5. DFI contracts shall comply with all applicable laws, rules, and regulations. Procurement documents must contain standard agency terms and conditions to aid in compliance with West Virginia law.

3.6. Every contract issued shall contain a clause that permits the agency to cancel the contract upon 30 days’ written notice to the vendor without penalty.

3.7. Bids shall not be altered and are considered public records available for review or copying after they are opened. After award, the entire file shall be public records and available for review or copying unless otherwise exempt by law.

3.8. Use of a purchasing card offered through the West Virginia State Auditor’s Office may be required in any procurement if use is determined appropriate.

3.9. Negotiation may be used to finalize a contract and when needing a change order to amend or modify a current contract. Negotiation of a change in scope is permitted when circumstances dictate. A justification for a negotiated change order must be included in the file.

3.10. The agency shall abide by the West Virginia Ethics Act and the associated promulgated rules and shall not make a purchase from a conflicted vendor or a vendor with a significant financial interest as prohibited under the West Virginia Ethics Act.

W. Va. Code R. § 106-22-4 Purchasing requirements

4.1. Documentation associated with all procurements shall be maintained in files in accordance with DFI record retention policy.

4.2. All purchases of services shall be subject to expenditure approval.

4.3. Contracts shall be issued for all procurements regardless of dollar amounts to assist with tracking and ensure proper internal controls.

4.4. Vendors shall be responsible for submitting a correct and accurate bid to the agency by the specified bid opening time, date, and location and in accordance with the procurement documents.

4.5. A vendor shall not commence work on any procurement without receipt of the awarded contract and any required notice to proceed. The agency shall not be responsible for any work by a vendor prior to and not in accordance with the contract awarded.

4.6. Commissioner approval is required to obtain any services using an exempt procurement pursuant to this rule.

4.7. DFI will utilize the Direct Award method of procurement because the service and vendor to be sought pursuant to the identified statutory authority is on the “Impossible to Bid” list set forth in Section 9 of the West Virginia State Purchasing Division Procedures Handbook,

4.8. When competitive bidding is not expressly required by statute and not used for a direct award, DFI will evaluate vendors based upon the following criteria, where applicable, and will document its evaluation:

4.8.1. Overall experience;

4.8.2. Professional certifications or designations;

4.8.3. Company specific experience;

4.8.4. Company type experience;

4.8.5. Knowledge of company or line of business;

4.8.6. Prior work for the agency;

4.8.7. Professional reputation;

4.8.8. Availability and commitment to required timeframes;

4.8.9. Adequacy of staffing, including the ability of assigned staff members to complete the contract without substitution;

4.8.10. Quality of work;

4.8.11. Experience with Conference of State Bank Supervisors’ accreditation review process and knowledge of federal agency examination guidelines;

4.8.12. References from other state bank regulators or subject matter experts;

4.8.13. Projected costs;

4.8.14. Conflicts of interest;

4.8.15. Support services available to the vendor, including but not limited to information technology services; and

4.8.16. Any other guidelines or procedures DFI considers appropriate.

4.9. Any required vendor terms and conditions must be submitted and approved before a contract is awarded. DFI will obtain approval from the Attorney General as to contract form and conformity with applicable law when required by statute.

4.10. All procurements over $2,500 will use a purchase order.

4.11. Aggregate procurements in excess of $25,000 shall not circumvent the formal procurement requirements in any 12-month rolling period.

4.12. Non-responsive bids shall be rejected. A non-responsive bid is one that fails to conform to the solicitation in all material respects.

W. Va. Code R. § 106-22-5 Vendor complaints and protests

5.1. Complaints – A vendor may verbally or in writing complain about a procurement or purchase to the agency. The agency will provide a written response to the complaint.

5.2. Protests

5.2.1. Types of Protests

5.2.1.a. Protests of Requirements, Specifications or Terms – Any protest relating to a procurement document, including any requirement, specification, or term, or any combination thereof, must be filed in writing with DFI no later than five business days prior to the specified bid opening date and time. Protests received after that date shall not be considered.

5.2.1.b. Direct Awards – Any vendor desiring to protest the specifications of a planned direct award may do so prior to five working days before the direct award process opening date. Any vendor desiring to protest a direct award may do so within five working days of the direct award.

5.2.2. Written Letter of Protest – A letter of protest must be submitted in writing and contain the name and address of the protesting vendor, the procurement document number, a statement explaining why the protest has been filed, the relief sought, and any other information that may assist the agency in reaching a decision on the matter. The agency must receive the letter of protest by the established deadline to be considered.

5.2.3. Review of Protest and Issuing Decision – The agency shall review the letter of protest and issue a written decision. The agency may contact the protesting vendor or any other entity or perform such research or investigation it considers necessary to reach a decision. Evaluation or award of the contract may be delayed as considered appropriate by the agency.

W. Va. Code R. § 106-22-6 Public records

6.1. A bid shall be available to the public after opening unless otherwise exempt by law.

6.2. Procurement documents shall inform vendors that the entire agency file for that procurement and any resulting contract will be considered public documents after award. As public documents, procurement documents may be disclosed to the public following the award of a contract in accordance with FOIA. Any bid or other document in a procurement file may be disclosed pursuant to a FOIA request even if the bid or other document contains statements or labels attempting to prevent disclosure, such as confidential, trade secret, private, or any other claim.

6.3. The agency shall not be liable for any disclosure of a procurement document pursuant to this rule.

6.4. If a vendor requests the agency execute a non-disclosure agreement to protect portions of its bid from disclosure, it must make the request at least one week prior to the date of the bid opening. A non-disclosure agreement may be executed at any time to prospectively protect any procurement documents, contracts, or information.

W. Va. Code R. § 106-22-7 Violations

7.1. Any person who authorizes or approves a purchase or contract in violation of federal or state law, this rule, or any policy or procedure adopted by the agency may be held personally liable for the cost of the procurement or contract. Procurements and contracts violating federal or state law or this rule are void and of no effect.

7.2. The agency will follow vendor suspensions and debarments by the federal government or the West Virginia State Purchasing Division.

Series 23 Rule Pertaining to Money Transmission Services

W. Va. Code R. § 106-23-1 General

1.1. Scope. -- This rule establishes provisions related to the regulation of money transmission services, implemented in West Virginia Code §§32A-2-1, et seq.; it applies to all entities licensed under that statute.

1.2. Authority. -- W.Va. Code §§32A-2-7 and 31A-2-4.

1.3. Filing Date. -- April 14, 2023.

1.4. Effective Date. -- July 1, 2023.

1.5. Sunset Provision. – This rule will terminate and have no further force or effect on August 1, 2028.

W. Va. Code R. § 106-23-2 Definitions

2.1. General Rule. – Unless a specific definition is provided in subsection 2.2 of this section, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided in W.Va. Code §§31A-1-2 and 32A-2-1, et seq.

2.2. Terms defined.

2.2.1. “Eligible rating” means a credit rating of any of the three highest rating categories provided by an eligible rating service, whereby each category may include rating category modifiers such as “plus” or “minus” for Standard & Poor’s (S&P), or the equivalent for any other eligible rating service. Long-term credit ratings are deemed eligible if the rating is equal to A- or higher by S&P, or the equivalent from any other eligible rating service. Short-term credit ratings are deemed eligible if the rating is equal to or higher than A-2 or SP-2 by S&P, or the equivalent from any other rating service. In the event that ratings differ among eligible rating services, the highest rating shall apply when determining whether a security bears an eligible rating.

2.2.2. “Eligible rating service” means any Nationally Recognized Statistical Rating Organization (NRSRO) as defined by the U.S. Securities and Exchange Commission, and any other organization designated by the commissioner by rule or order.

W. Va. Code R. § 106-23-3 Permissible Investments

3.1. Cash and cash equivalents. In addition to the permissible investments enumerated in W. Va. Code §32A-2-8b(e)(1), cash and cash equivalents shall also include automated clearing house (ACH) items in transit to the licensee and ACH items or international wires in transit to a payee, cash in transit via armored car, cash in smart safes, cash in licensee-owned locations, debit card or credit card-funded transmission receivables owed by any bank, or money market mutual funds rated “AAA” by S&P, or the equivalent from any eligible rating services.

3.2. Irrevocable Letters of Credit.

3.2.1. The irrevocable letter of credit authorized by W. Va. Code §32A-2-8b(e)(4) must:

3.2.1.a. Be issued by a federally insured depository financial institution, a foreign bank that is authorized under federal law to maintain a federal agency or federal branch office in a state or states, or a foreign bank that is authorized under state law to maintain a branch in a state that: (1) bears an eligible rating or whose parent company bears an eligible rating; and (2) is regulated, supervised, and examined by United States federal or state authorities having regulatory authority over banks, credit unions, and trust companies;

3.2.1.b. Be irrevocable, unconditional and indicate that it is not subject to any condition or qualifications outside of the letter of credit;

3.2.1.c. Not contain reference to any other agreements, documents or entities, or otherwise provide for any security interest in the licensee; and

3.2.1.d. Contain an issue date and contain an expiration date, which expiration shall be December 31, and expressly provide for automatic extension, without a written amendment, for an additional period of one year from the present or each future expiration date, unless the issuer of the letter of credit notifies the commissioner in writing by certified or registered mail or courier mail or other receipted means, at least 60 days prior to any expiration date, that the irrevocable letter of credit will not be extended.

3.2.2. In the event of any notice of expiration or non-extension of a letter of credit issued pursuant to section 3.2.1 of this rule and W. Va. Code §32A-2-8b(e)(4), the licensee shall be required to demonstrate to the satisfaction of the commissioner, 15 days prior to expiration, that the licensee maintains and will maintain permissible investments in accordance with W. Va. Code §32A-2-8b(a) upon the expiration of the letter of credit. If the licensee is not able to do so, the commissioner may draw on the letter of credit in an amount up to the amount necessary to meet the licensee’s requirements to maintain permissible investments in accordance with W. Va. Code §32A-2-8b(a). Any such draw shall be offset against the licensee’s outstanding money transmission obligations. The drawn funds shall be held in trust by the commissioner or the commissioner’s designated agent, to the extent authorized by law, as agent for the benefit of the purchasers and holders of the licensee’s outstanding money transmission obligations.

3.2.3. The letter of credit shall provide that the issuer of the letter of credit will honor, at sight, a presentation made by the beneficiary to the issuer of the following documents on or prior to the expiration date of the letter of credit to receive funds within seven days of presentment:

3.2.3.a. The original letter of credit, including any amendments;

3.2.3.b. A written statement from the beneficiary stating that any of the following events have occurred:

3.2.3.b.1. the filing of a petition by or against the licensee under the United States Bankruptcy Code, 11 U.S.C. Sections 101-110, as amended or recodified from time to time, for bankruptcy or reorganization;

3.2.3.b.2. the filing of a petition by or against the licensee for receivership, or the commencement of any other judicial or administrative proceeding for its dissolution or reorganization;

3.2.3.b.3. the seizure of assets of a licensee by the commissioner pursuant to an emergency order issued in accordance with applicable law, on the basis of an action, violation, or condition that has caused or is likely to cause the insolvency of the licensee;

3.2.3.b.4. the beneficiary has received notice of expiration or non-extension of a letter of credit and the licensee failed to demonstrate to the satisfaction of the beneficiary that the licensee will maintain permissible investments in accordance with W. Va. Code §32A-2-8b(a)upon the expiration or non-extension of the letter of credit.

3.2.4. The commissioner may designate an agent to serve on the commissioner’s behalf as beneficiary to a letter of credit so long as the agent and letter of credit meet requirements established by the commissioner. The commissioner’s agent may serve as agent for multiple licensing authorities for a single irrevocable letter of credit if the proceeds of the drawable amount for the purposes of this section are assigned to the commissioner.

3.2.5. The commissioner is authorized and encouraged to participate in multistate processes designed to facilitate the issuance and administration of letters of credit, including but not limited to services provided by the Nationwide Multistate Licensing System and State Regulatory Registry, LLC.

3.3. Additional Permissible Investments.

3.3.1. Unless permitted by the commissioner by order to exceed the limit set forth herein, the following investments are permissible under W.Va. Code §32A-2-8b(a) to the extent specified:

3.3.1.a. Receivables that are payable to a licensee from its authorized delegates in the ordinary course of business that are less than seven days old, up to 50% of the aggregate value of the licensee’s total permissible investments;

3.3.1.b. Of the receivables permissible under section 3.3.1.a. of this rule, receivables that are payable to a licensee from a single authorized delegate in the ordinary course of business may not exceed 10% of the aggregate value of the licensee’s total permissible investments.

3.3.2. The following investments are permissible up to 20% per category and combined up to 50% of the aggregate value of the licensee’s total permissible investments:

3.3.2.a. A short term (up to six months) investment bearing an eligible rating;

3.3.2.b. Commercial paper bearing an eligible rating;

3.3.2.c. A bill, note, bond, or debenture bearing an eligible rating;

3.3.2.d. U.S. tri-party repurchase agreements collateralized at 100% or more with U.S. government or agency securities, municipal bonds, or other securities bearing an eligible rating;

3.3.2.e. Money market mutual funds rated less than “AAA” and equal to or higher than “A-“ by S&P, or the equivalent from any other eligible rating service; and

3.3.2.f. A mutual fund or other investment fund composed solely and exclusively or one of more permissible investments listed in W. Va. Code §32A-2-8b(e)(1) to (3) and section 3.1 of this rule.

3.3.3. Cash (including demand deposits, savings deposits, and funds in such accounts held for the benefit of the licensee’s customers) at foreign depository institutions are permissible up to 10% of the aggregate value of the licensee’s total permissible investments if the licensee has received a satisfactory rating in its most recent examination and the foreign depository institution:

3.3.3.a. has an eligible rating;

3.3.3.b. is registered under the Foreign Account Tax Compliance Act (26 U.S.C. Sections 1471 - 1474);

3.3.3.c. is not located in any country subject to sanctions from the Office of Foreign Asset Control; and

3.3.3.d. is not located in a high-risk or non-cooperative jurisdiction as designated by the Financial Action Task Force.

3.4. Phased Implementation for Permissible Investments.

3.4.1. All licensees and applicants shall be expected to comply with W. Va. Code §32A-2-8b(a).

3.4.2. The Division of Financial Institutions will examine current licensees for compliance with these provisions upon their effective date at a scheduled examination and will note instances of non-compliance and direct licensees to make appropriate changes as necessary to achieve compliance.

3.4.3. Beginning January 1, 2024, any licensee not in full compliance with W. Va. Code §32A-2-8b(a)may be subject to penalties for failure to comply as provided in the statute.

106CSR23

106CSR23