SECTIONS 12640.01-12640.02 - California Statutes

INSURANCE CODE

SECTION 12640.01-12640.02

12640.01. This chapter may be cited as the Mortgage Guaranty
Insurance Act.

12640.02. The definitions set forth in this article shall govern
the construction of the terms used in this chapter but shall not
affect any other provisions of this code.
(a) "Mortgage guaranty insurance" means:
(1) Insurance against financial loss by reason of nonpayment of
principal, interest, and other sums agreed to be paid under the terms
of any note or bond or other evidence of indebtedness secured by a
mortgage, deed of trust, or other instrument constituting a first
lien or charge on real estate, provided the improvement on the real
estate is a residential building or a condominium unit or buildings
designed for occupancy by not more than four families.
(2) Insurance against financial loss by reason of nonpayment of
principal, interest, and other sums agreed to be paid under the terms
of any note or bond or other evidence of indebtedness secured by a
mortgage, deed of trust, or other instrument constituting a junior
lien or charge on real estate, provided the improvement on the real
estate is a residential building or a condominium unit or building
designed for occupancy by not more than four families.
(3) Insurance against financial loss by reason of nonpayment of
principal, interest, and other sums agreed to be paid under the terms
of any note or bond or other evidence of indebtedness secured by a
mortgage, deed of trust, or other instrument constituting a lien or
charge on real estate, provided the improvement on the real estate is
a building or buildings designed for occupancy by five or more
families or designed to be occupied for industrial or commercial
purposes.
(4) Insurance against financial loss by reason of nonpayment of
rent and other sums agreed to be paid under the terms of a written
lease for the possession, use, or occupancy of real estate, provided
the improvement on the real estate is a building or buildings
designed to be occupied for industrial or commercial purposes.
(b) (1) "Authorized real estate security" for the purposes of this
chapter means either (A) real estate, plus the balance of any
pledged cash account, pledged borrower retirement account, or
collateralized guaranty agreement contracted for by parents, blood
relatives, employers, or nonprofit corporations for the benefit of
the borrower; or (B) real estate securing a note, bond, or other
evidence of indebtedness by a junior mortgage, deed of trust, or
other instrument constituting a junior lien or charge on the real
estate, which, when combined with all existing mortgage loan amounts,
does not exceed a total indebtedness equal to 103 percent of the
fair market value of the real estate at the time the junior loan is
made, provided that, in determining the foregoing 103-percent
limitation, if the loan securing the junior lien is an equity line of
credit loan, the full amount of the line of credit to be secured by
the junior lien shall be considered the amount of the loan, and
further provided, in all cases that both of the following are true:
(i) The real estate loan secured in this manner is any type of
loan that a bank, savings association, mortgage banker, credit union,
mortgage loan broker, or insurance company, which is supervised and
regulated by a department of this state or an agency of the federal
government, is authorized to make or arrange, or would be authorized
to make or arrange, disregarding any requirement applicable to an
institution that the amount of the loan not exceed a certain
percentage of the value of the real estate.
(ii) The improvement on the real estate is a building or buildings
designed for occupancy as specified by paragraphs (1), (2), and (3)
of subdivision (a).
(2) The lien on the real estate may be subject and subordinate to
the following:
(A) The lien of any public bond, assessment, or tax, when no
installment, call, or payment of or under the bond, assessment, or
tax is delinquent.
(B) Outstanding mineral, oil or timber rights, rights-of-way,
easements or rights-of-way or support, sewer rights, building
restrictions or other restrictions or covenants, conditions or
regulations of use, or outstanding leases upon the real property
under which rents or profits are reserved to the owner thereof.
(3) "Authorized real estate security" also means a stock or
membership certificate issued to a tenant-stockholder or
resident-member by a completed fee simple cooperative housing
corporation, as defined in Section 17265 of the Revenue and Taxation
Code and Section 216 of the United States Internal Revenue Code.
(c) "Contingency reserve" means an additional premium reserve
established for the protection of policyholders against the effect of
adverse economic cycles.
(d) "Policyholders surplus" means the aggregate of capital,
surplus, and contingency reserve.