Magazine article American Banker

Thrift Offers to Share Loan Earnings: Depositors Get Added Interest When Real Estate Borrowings Are Repaid

Magazine article American Banker

Thrift Offers to Share Loan Earnings: Depositors Get Added Interest When Real Estate Borrowings Are Repaid

Article excerpt

DALLAS -- Murray Savings Association here has begun offering certificates of deposit that allow savers to reap returns from the thrift's loans to real estate developments.

The 12-year certificates guarantee investors 10% simple annual interest. But if Murray's real estate loans are profitable, savers share in the returns.

"It is the first CD of its kind to be offered that gives customers the ability to participate in the upside opportunities of real estate without any of the risk," said Robert W. Stallings, executive vice president of Murray Savings.

"Normally, you only get a fixed guaranteed rate, and if we go out and make a home run on your money, tough luck for you. But now, if we go out an make money, we are going to pass on the additional money to the CD holder."

The certificates require a minimum investment of $5,000. For individual retirement accounts and Keogh plans, the minimum investment is $2,000. The maximum term of the loans will be 12 years and depositors will have no say over which projects their deposits will be used to finance.

The amount of interest earned by depositors on Murray's real estate loans is based on the returns earned by the S&L.

Depositors will get 85% of the interest income earned by Murray in excess of the guaranteed annual 10% rate when the loans are fully paid.

In addition, Murray said it plans to receive profit participations on real estate projects from developers as part of its loan packages and will also be sharing those participations with CD depositors.

The depositors will get 100% of Murray's profit participations until they receive a 13.5% cumulative annual return. Between 13.5% and 18% cumulative annual return, depositors will get 75% of the profit participations. Over the 18% total return level, depositors will get 50% of Murray's remaining profit participations.

Texas regulators said they did not foresee any problems with the Murray CD program. …

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