One- to Four-Family Real Estate Mortgages. Historically, our primary focus of
our lending activity was the origination of one- to four-family first mortgage
loans. We continue to offer fixed rate, conventional mortgage loans with terms
from 5 to 30 years.
We also originate adjustable rate mortgages, or ARMs, with up to 30 year terms
at rates based upon the U.S. Treasury One Year Constant Maturity as an index.
Our ARMs currently reset on an annual basis, beginning with the first year,
and have a 200 basis point annual increase cap and a 600 basis point lifetime
adjustment cap. We do not originate “teaser” rate or negative amortization
loans.
We are also offering a loan program whereby we offer an initial rate for a
fixed period of time, normally 7 to 10 years, and thereafter there is one preset
interest rate adjustment based on competitive rates.
Substantially all residential mortgages include “due on sale” clauses,
which are provisions giving us the right to declare a loan immediately payable
if the borrower sells or otherwise transfers an interest in the property to
a third party. Property appraisals on real estate securing one-to four-family
residential loans are made by state certified or licensed independent appraisers
and are performed in accordance with applicable regulations and policies. We
require title insurance policies on all first lien one-to four-family residential
loans and all home equity loans over $250,000. Homeowners, liability, fire and,
if applicable, flood insurance policies are also required.
Commercial and Multi-Family Real Estate Mortgages. Our commercial real estate
lending includes multi-family dwellings/apartment buildings, service/retail
and mixed-use properties, churches and non-profit properties, medical and dental
facilities and other commercial real estate. Our commercial real estate mortgage
loans are typically a 5 to 10 year balloon mortgage. Multi-family and commercial
real estate loans can be amortized over 30 years with periodic rate resets or
15 year fixed duration mortgages. This type of lending is made available to
proprietorships, partnerships, limited liability companies and corporations
with personal guarantees and/or carve out guarantees. All commercial property
is underwritten on its ability substantially to provide satisfactory cash flows.
A cash flow and lease analysis is performed for each property. Preference is
given to those loans where rental income covers all operating expenses, including
but not limited to principal and interest, real estate tax, hazard insurance,
utilities, maintenance, and reserves. The cash coverage ratio to cover operating
expenses must be at least 1.20 times for multi-family and 1.25 times for all
other commercial loans. Any negative cash flow will be included in the limit
on the borrower’s total debt ratio. Cash from other assets of the borrower,
who may own multiple properties and generate a surplus, can be made available
to cover debt-service shortages of the financed property. Maximum loan-to-value
ratios on commercial real estate loans range from 65% to 80%.
Construction Loans. We originate construction loans for an owner-occupied residence
or to a builder with a valid contract of sale. We also provide financing for
speculative residential or commercial construction and development with individual
consideration given to builders based on their past performance, workmanship,
and financial worth. Our construction lending includes loans for construction
or major renovations or improvements of owner-occupied residences. The portfolio
consists primarily of properties held by real estate developers.
Consumer Loans. Our consumer lending products consist of new and used automobile
loans, secured and unsecured personal loans, account loans and overdraft lines
of credit. The maximum term for a loan on a new or used automobile is six years
and four years, respectively. We will lend up to 80% of retail value or dealer
invoice on a car loan. We offer a reduction on the interest rate for car loans
if payments are automatically deducted from a Millington Bank checking or statement
savings account.
Home Equity Loans and Lines of Credit. We offer fixed rate home equity loans
and variable rate home equity lines of credit with a minimum credit limit of
$5,000. Collateral valuation is established through a variety of methods, including
an on-line appraisal valuation estimator, drive by appraisals, recent assessed
tax value, purchase price or consideration value as evidenced by a deed or property
search report or a report of comparable real estate properties from a licensed
realtor. Loan requests over $50,000, however, require a drive by appraisal and
amounts over $100,000 require full appraisals. Loan requests over $500,000 require
Loan Committee approval. Any policy exception requires approval from the Board
of Directors. The loan-to-value limit on home equity lending varies depending
on the collateral value and ranges from 65% up to 80%. The variable rate on
home equity lines of credit is adjusted monthly and is currently set at prime
for owner occupied properties and prime plus a premium for investment properties.
The fixed rate loans on investment property are also higher than fixed rate
owner occupied home equity loans. We generally provide home equity financing
only for a first or second lien position.