Bill Text: CA AB1645 | 2015-2016 | Regular Session | Chaptered
Bill Title: Mortgage guaranty insurance.
Sponsorship: Partisan Bill (Democrat 1)
Status: (Passed) 2016-07-22 - Chaptered by Secretary of State - Chapter 62, Statutes of 2016. [AB1645 Detail]
Download: California-2015-AB1645-Chaptered.html
BILL NUMBER: AB 1645 CHAPTERED
BILL TEXT
CHAPTER 62
FILED WITH SECRETARY OF STATE JULY 22, 2016
APPROVED BY GOVERNOR JULY 22, 2016
PASSED THE SENATE JUNE 30, 2016
PASSED THE ASSEMBLY APRIL 14, 2016
INTRODUCED BY Assembly Member Dababneh
JANUARY 12, 2016
An act to amend and repeal Section 12640.09 of the Insurance Code,
relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 1645, Dababneh. Mortgage guaranty insurance.
Existing law, beginning January 1, 2018, requires, among other
things, that a mortgage guaranty insurer limit its coverage to no
more than a net of 30% at risk of the entire indebtedness to the
insured for the class of insurance that insures against financial
loss by reason of nonpayment of principal, interest, and other sums
under any evidence of indebtedness secured by a mortgage, deed of
trust, or other instrument constituting a first lien or charge on a
residential building or a condominium unit or buildings designed for
occupancy by not more than 4 families. Existing law, beginning
January 1, 2018, also authorizes a mortgage guaranty insurer to
extend its coverage for this class of insurance beyond the
established limits if the excess is insured by a contract of
reinsurance.
This bill would delete the above provisions.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 12640.09 of the Insurance Code, as amended by
Section 1 of Chapter 105 of the Statutes of 2012, is amended to read:
12640.09. (a) A mortgage guaranty insurer shall limit its
coverage for the class of insurance defined in paragraph (3) of
subdivision (a) of Section 12640.02 to no more than a net of 30
percent at risk of the entire indebtedness to the insured or, a
mortgage guaranty insurer may elect to pay the entire indebtedness to
the insured and acquire title to the authorized real estate
security.
(b) (1) A mortgage guaranty insurer shall limit its coverage for
the class of insurance defined in paragraph (2) of subdivision (a) of
Section 12640.02, to no more than a net of 30 percent of risk of the
combined indebtedness of all existing mortgage loan amounts secured
by all liens or charges on the real estate. Instead, a mortgage
guaranty insurer may elect to pay the entire indebtedness to the
insured and acquire title to the authorized real estate security.
(2) Notwithstanding paragraph (1), a mortgage guaranty insurer may
elect to insure a portfolio of loans secured by instruments
constituting junior liens on real estate, if the total amount at risk
in any one portfolio shall not at any time exceed 20 percent of the
original principal amount of mortgage loans secured by junior liens.
(3) If the borrower is required to pay the cost of insurance
written under paragraph (1) or (2), the lender shall disclose in
writing to the borrower that the borrower is not a party to or a
beneficiary of the mortgage guaranty insurance policy.
(4) Notwithstanding subdivision (a) and paragraph (1) of
subdivision (b), if Freddie Mac or Fannie Mae increases the required
amount of mortgage guaranty insurance, the commissioner may adopt
regulations to increase the maximum coverage limitation of a mortgage
guaranty insurer to an amount not to exceed a net of 35 percent of
risk of the entire indebtedness.
(c) Notwithstanding subdivision (a) or (b), a mortgage guaranty
insurer may extend its coverage for the class of insurance defined in
paragraphs (2) and (3) of subdivision (a) of Section 12640.02 beyond
the limits established by subdivisions (a) and (b) of this section,
if the excess is insured by a contract of reinsurance.
(d) (1) Notwithstanding any law to the contrary, mortgage guaranty
insurance or reinsurance may be ceded by contract, if the assuming
insurer is either of the following:
(A) A mortgage guaranty insurer, which may be under common control
with the ceding mortgage guaranty insurer, but which does not own,
and is not owned by, in whole or in part, directly or indirectly, the
ceding mortgage guaranty insurer.
(B) An insurer or reinsurer, that may be under common control with
the ceding mortgage guaranty insurer, but that is not owned by, in
whole or in part, directly or indirectly, the ceding mortgage
guaranty insurer or another mortgage guaranty insurer, that writes
any type or types of insurance or reinsurance and that meets the
following requirements:
(i) Has paid-in capital and paid-in surplus totaling at least
thirty-five million dollars ($35,000,000).
(ii) Derives, on an annual basis, at least 50 percent of its
premium income from reinsurance; or, alternatively, derives at least
twenty-five million dollars ($25,000,000) of premium income per year
from reinsurance.
(iii) Establishes and maintains its share of the reserve
liabilities required by Section 12640.16 if licensed in this state,
or establishes, maintains, and funds in accordance with Section 922.4
or 922.5, its share of the reserve liabilities required by Section
12640.16 if not licensed in this state.
(iv) Establishes and maintains its share of an amount equal to the
greater of either the reserve liabilities required by Section
12640.04 or the policyholders surplus required by Section 12640.05 in
a segregated trust which meets the requirements of Section
12640.091.
(2) This section does not permit the assuming insurer or reinsurer
to directly write mortgage guaranty insurance.
(3) Any assuming insurer or reinsurer and the ceding mortgage
guaranty insurer shall establish and maintain in the aggregate the
reserves required by Sections 12640.04 and 12640.16.
(e) This section does not apply to the California Housing Loan
Insurance Fund or to any program it may develop in conjunction with
any federal or federally sponsored mortgage lender or insurer.
SEC. 2. Section 12640.09 of the Insurance Code, as added by
Section 2 of Chapter 105 of the Statutes of 2012, is repealed.
