Balloon Mortgages
We offer three and five year balloon loans, which are either called or modified based upon the Bank’s interest rates currently in effect at the balloon date. These loans are similar to adjustable rate loans in that the loans generally amortize over terms up to 30 years but are not indexed to any widely recognized rate, and do not interest rate caps or floors. Instead the majority of such loans are modified at the balloon date and the rate is adjusted to the Bank’s current rate offered for similar loans being originated on such dates.

Home Equity Loans
We offer home equity loans on one-to-four family residential properties, whether we have the first mortgage or not. These loans can be made in amounts up to 80% of the appraised value or adjusted tax basis of the property, and take into account the outstanding balance of the first mortgage in determining the loan to value ratio. Although subject to change, we currently offer such home equity loans at prime + 1%, with adjustments to the rate made monthly for any subsequent changes to prime. Interest charges are due monthly and the loans are made with a maximum term of 180 months.

Construction Loans
Construction loans to individuals are typically made in connection with the granting of the permanent loan on the property. Such loans convert to a fully amortizing adjustable or fixed-rate loan at the end of the construction term. In most cases, we require that the closing with respect to the permanent financing occur simultaneously with the closing of any construction loan to the borrower.
We also offer construction loans to local real estate contractors in our market area, generally for construction of one-to-four family residences. These loans are generally indexed to prime with maturities of six to nine months, and allow for extensions with Board approval. The Association’s policies provide that construction loans may be made in amounts up to 80% of the appraised value of the property or the cost of construction, whichever is less. The Association makes construction loans to local builders on either a pre-sold or speculative (unsold) basis. However, the Association generally limits the number of unsold homes under construction by its builders, with the amount dependent on the reputation of the builder, the present exposure of the builder, the location of the property, the size of the loan and prior sales of homes in the development.
We also originate construction loans on commercial properties. The underwriting requirements are similar to those required for construction loans on residential properties. However, the loan to value may not exceed 75% of the property’s appraised value, certain debt service and income ratios are considered, and financial projections and business plans are reviewed.

Commercial Real Estate Mortgages
Wake Forest Federal also originates commercial real estate mortgage loans that are generally secured by properties used for business purposes and retail facilities, such as small office buildings located in the Association’s market area as well as a significant number of church loans. The Association’s underwriting procedures provide that commercial real estate loans may be made in amounts up to the lesser of (i) 75% of the lesser of the appraised value or purchase price of the property and (ii) the Association’s current loans-to-one-borrower limit. These loans are generally originated as three or five year balloon loans with amortization periods of up to 20 years. The Association’s underwriting standards and procedures for these loans are similar to those applicable to its construction lending, whereby the Association considers factors such as the borrower’s expertise, credit history and profitability. Interest rates may be fixed or tied to prime.

Commercial Lines of Credit
Commercial lines of credit are made in amounts up to 75% of the appraised value of developed real estate or 65% of the appraised value of undeveloped land. Commercial lines of credit are generally made with terms of between 3 and 10 years at rates based upon prime, with adjustments to prime made on the first day of the month following a change in prime. Our underwriting policies require that commercial lines of credit be secured by real estate where we have a first mortgage position.