77-2

77-2

January 11, 1977

Re: Opinion – Sale of Participation Interests in Real Estate Loans

(Pooled First Deeds of Trust) by ________ — Section 690(c)

Dear M________:

This is in reference to your letter of December 3, 1976.

First, please note certain misquotations stated in your letter. Sale of participation interests in real estate loans may be subject to regulation by the State Banking Department. This opinion relates solely to the question of whether the sale of such certificates of participation interests in real estate loans (here pooled first deeds of trust) by a state-chartered bank constitutes the issuance of a security pursuant to Section 690(c) of the California Financial Code and thereby a sale pursuant to Sections 690(b) and 691 requiring a permit from this department.

Our opinion is that such a sale of participation interests in real estate loans (pooled first deeds of trust) by a state-chartered bank to mortgage bankers and savings and loan institutions outside the state does not constitute an issuance of a security pursuant to Section 690(c) and therefor no permit from this department is required.

However, as a caveat, it may be such transactions are considered an issuance of a security by the California Department of Corporations.

We trust this answers your inquiry. Should you have further question concerning this matter, please contact us.

Very truly yours,

CARL J. SCHMITT Superintendent of Banks

By

DIANA H. NISHIURA
Counsel

DHN:ma

December 3, 1976

Diana Nishiura, Esq.
Office of the California
Superintendent of Banks
600 South Commonwealth Avenue
Suite 1501
Los Angeles, California 90005

Re: Planned Sale of Participation Interests in Real Estate Loans by ________

Dear Ms. Nishiura:

This will confirm our telephone conversation of November 5, 1976. During that conversation, you stated that the planned sale by ________ of participation interests in blocks of real estate loans made by ________ to other financial institutions is not an activity regulated by your department. However, you did indicate that the regulations of the Department of Corporations would apply.

I would appreciate a letter for our file confirming your opinion that the sale of loan participations by ________ is not subject to special regulation of the California State Department of Banks.

Please call if there is any problem in preparing such a letter.

Sincerely,