North Dakota bankers are all smiles.
The reason: After years of losing fights to bring real estate laws into the 20 century, they saw the state Legislature pass two key bills that take effect this month.
"The legislation session was very favorable to lenders," said Gary Preszler, the state's banking commissioner, who regulates 115 state-chartered banks with $4.3 billion in assets.
|Some Pretty Big Hits'
One bill allows banks to foreclose on a commercial property and seek a deficiency judgment for funds that are owned on the loan. Before, a borrower who ran, say, an apartment complex could collect as much rent on the property as possible before the bank foreclosed.
Once the bank took action it had no way of collecting the difference on the loan even though the borrower may have had enough assets to pay part or all of it off.
"A number of banks took some pretty big hits out here in the mid-1980s when we were going through recession," said James D. Schlosser, executive vice president of the North Dakota Bankers Association. "There were people who had the means to repay commercial loans who walked away."
The other new law will apply when a borrower who the lender suspects has the ability to repay the loan is in default. It gives the lender a choice of foreclosing on a junior mortgage or seeking a judgment.
Until now, if the borrower defaulted on the junior mortgage, the lender had to either pay off the first mortgage in full or make payments on the first mortgage so it wouldn't go into default.
"It's a big deal," said Kenneth D. Reno, president of United Bank of Bismarck. "Those are two steps in the right direction."
Mr. Schlosser attributes the legislative victories to the fact that his group and the Independent Community Banks of North Dakota are finally working together.
"It think we were very effective," he said. "We look at what is happening in Washington and we are just getting murdered."
North Dakota's legislature doesn't meet until January 1995, but Mr. Preszler is already drafting new bills.
One concerns banks whose facilities have been affected by the recent floods. The bill would permit bank hit by floods, tornadoes, or fires to temporarily relocate.
"We've wondered how the procedure would work," Mr. Preszler said. "You don't want to disrupt services to the people."