Current through Register Vol. 48, No. 12, March 22, 2024
a) A company shall not transact the business
of mortgage guaranty insurance unless it originally has and continues to have
capital and surplus of at least the amounts specified in Section 13 of the
Illinois Insurance Code.
b) A
mortgage guaranty insurance company:
1) Shall
not insure loans with balloon provisions unless either:
A) liability for the balloon payment is
specifically excluded; or
B) the
policy provides, by its terms, that at the time the lender calls the loan, the
lender will cause to be offered new or extended financing at then market
rates.
2) Shall not, at
any one time, have more than 20% of its insurance in force net of reinsurance
ceded but including reinsurance assumed, on adjustable rate loan instruments
which establish payments insufficient to fully amortize the loan over its term
and negatively amortizing graduated payment mortgage which, at any time during
the term of mortgage, causes the outstanding indebtedness to exceed 100% of the
initial fair market value of the real estate, thereby causing the outstanding
loan balance to increase following loan origination (vis, "dual rate"
mortgages).
3) Shall not insure
mortgages referred to in subsection(b)(2) above which:
A) Permit the accumulation of negative
amortization of principal to an amount exceeding 120% of the initial fair
market value, or
B) Provide for the
borrower to make payment in an amount less than would be required for the full
amortization of the mortgage at an interest rate of 10%, or
C) Were established under agreements which
authorize the lender to bind coverage on the insurer's behalf without prior
underwriting by the insurer.
4) Shall not, at any one time following two
years from receipt of its initial Certificate of Authority from its state of
domicile, have more than 10% of its insurance in force, net of reinsurance
ceded but including reinsurance assumed, on loans originating from any one
lender.
5) Which writes residential
mortgage guaranty insurance shall not, either directly or indirectly, have at
any time more than 20% of its insurance in force on commercial
properties.
6) Shall not assume
reinsurance in an amount exceeding 20% of the company's total insurance in
force.
7) Shall maintain a
policyholders reserve in an amount no less than the amount arrived at by the
calculations set forth in this subsection (b)(7) and if its policyholders
reserve is less than that amount it shall discontinue all writing of business
until its policyholders reserve equals or exceeds the minimum amount required
in this subsection (b)(7). The required policyholders reserve shall be
calculated in the following manner:
A)
subject to the provisions of subsections (b)(7)(B), (C), (D), (E), (F), and (G)
of this Section, if the indebtedness is:
i)
75% or greater of the value of the securing property:
Per Cent Coverage
|
Policyholders Reserve Per $100 of the Face Amount of
The Mortgage
|
5%
|
$ .20
|
10
|
.40
|
15
|
.60
|
20
|
.80
|
25
|
1.00
|
30
|
1.10
|
35
|
1.20
|
40
|
1.30
|
45
|
1.35
|
50
|
1.40
|
55
|
1.50
|
60
|
1.55
|
65
|
1.60
|
70
|
1.65
|
75
|
1.75
|
80
|
1.80
|
85
|
1.85
|
90
|
1.90
|
95
|
1.95
|
100
|
2.00
|
ii)
50% or greater but less than 75% of the value of the securing property, the
required amount of the policyholders reserve shall be 50% of the amount
required by subsection (b)(7)(A)(i) above; and
iii) less than 50% of the value of the
securing property, the required amount of the policyholders reserve shall be
25% of the amount required by subsection (b)(7)(A)(i) above.
B) In the case of mortgage pool
insurance:
i) If the total aggregate
indebtedness of the group of loans covered is 75% or greater of the total
aggregate value of the securing properties after giving appropriate credit for
any primary mortgage guaranty insurance thereon and/or deductibles:
Per Cent Coverage
|
Policyholders Reserve Per $100 of the Face Amount of
The Mortgage
|
1%
|
$ .60
|
5
|
1.00
|
10
|
1.20
|
15
|
1.30
|
20
|
1.40
|
25
|
1.50
|
30
|
1.55
|
40
|
1.60
|
50
|
1.65
|
60
|
1.70
|
70
|
1.75
|
75
|
1.80
|
80
|
1.85
|
90
|
1.90
|
100
|
2.00
|
ii) If
the total aggregate indebtedness of the group of loans covered is 50% or
greater but less than 75% of the total aggregate value of the securing
properties after giving appropriate credit for any primary mortgage guaranty
insurance thereon and/or deductibles, the required amount of policyholders
reserve shall be 50% of the amount required by subsection (b)(7)(B)(i) above;
and
iii) If the total aggregate
indebtedness of the group of loans covered is 50% of the total aggregate value
of the securing properties after giving appropriate credit for any primary
mortgage guaranty insurance and/or deductibles, the required amount of
policyholders reserve shall be 25% of the amount required by subsection
(b)(7)(B)(i) above.
C)
In the case of:
i) mortgage guaranty
insurance covering loans secured by liens other than first liens, the
policyholders reserve shall be calculated in accordance with subsection
(b)(7)(A) above after first dividing the insured portion of the junior loan by
the entire loan indebtedness on the securing property to determine the
percentage coverage and then dividing the total of all loans on the securing
property to determine the percentage of loan-to-value ratio; and
ii) mortgage pool insurance on a group of
loans secured by liens other than first liens, the policyholders reserve shall
be calculated in accordance with subsection (b)(7)(B) above after the
percentage of coverage and loan-to-value ratios have been determined.
D) In the case of mortgage
guaranty insurance covering all of the risk in excess of a fixed percentage of
the initial fair market value of the real estate, the required amount of
policyholders reserve shall be 125% of the amount required under subsection
(b)(7)(A)(i).
E) In the case of
mortgage guaranty insurance covering loan installments referenced in
subsection(b)(2) above, the required amount of policyholders reserves shall be
150% of the amount required under subsection (b)(7)(A). In the case of such
mortgage also meeting conditions under subsection (b)(7)(D) above, the required
reserve shall be 175% of the amount required under subsection
(b)(7)(A)(i).
F) In the case of
mortgage guaranty insurance which specifically covers leasehold obligations,
the policyholders reserve shall be $4.00 for each $100 of leasehold rentals
insured.
G) If a policy of mortgage
guaranty insurance or of mortgage pool insurance provides for layers of
coverage, deductibles or reinsurance, the required amount of policyholders
reserves shall be computed by subtraction of the required policyholders reserve
for the lower percentage coverage limit from the required policyholders reserve
for the upper or greater coverage limit.
H) All calculations done under subsection
(b)(7) shall be done in a uniform and consistent fashion to assure that the
policyholders reserve so established and maintained bears a reasonable
relationship to the risk undertaken by the company.
8) Shall, in connection with the writing of
mortgage guaranty insurance, individually underwrite all loans
insured.
9) Which anywhere
transacts, directly or indirectly, any class of insurance other than mortgage
guaranty insurance and/or mortgage pool insurance shall not be permitted to
transact any insurance business in the State of Illinois.
10) Shall not declare any dividends except
from undivided profits remaining on hand over and above the amount of its
policyholders reserve.
11) Shall
adopt, print and make available a schedule of premium charges for mortgage
guaranty insurance policies which schedule shall show the entire amount of
premium charge for each type of mortgage guaranty insurance policy issued by
the company.
12) Shall not pay to
any person who is acting as agent, representative, attorney or employee of the
owner, mortgage of the prospective owner, or mortgagee of real property or any
interest therein, either directly or indirectly, any commission, or any part of
its premium charges or any other consideration as an inducement for or as
compensation on any mortgage guaranty insurance policy.
13) Rebates
No mortgage guaranty company shall make any rebate of any
portion of the premium charge shown by the schedule required by subsection
(b)(11). No mortgage guaranty company shall quote any premium charge to any
person which is less than that currently available to others for the same type
of mortgage guaranty insurance policy. The amount by which any premium charge
is less than that called for by the current schedule of premium charge is an
unlawful rebate.
c) Whenever a mortgage guaranty company
provides coverage exceeding 30% of the mortgage indebtedness at the time
foreclosure proceedings are completed and title to the authorized real estate
security is vested in such assured, unless the coverage provides that the
lender be a not less than 5% co-insurer of losses, no mortgage guaranty insurer
shall permit an insured to bind coverage on its behalf and shall not assume
contracts of insurance without first individually underwriting each mortgage
loan insured.
d) A mortgage
guaranty insurance company:
1) Must not have
a total liability, net of reinsurance, of mortgage pool insurance on mortgages
from any one originating lender which exceeds 10% of the mortgage guaranty
insurance company's surplus, including contingency reserve.
2) Shall not permit substitutions in a pool
of mortgages and shall not permit additions to a pool of mortgages after 3
years following the issuance of a policy providing mortgage pool
insurance.
e) An
insurance company with multiple line authority that transacts insurance
business other than mortgage insurance and/or mortgage pool insurance is
prohibited, either directly or indirectly, from transacting mortgage insurance
and/or mortgage pool insurance in the State of Illinois.