Bill Text: CA SB1450 | 2011-2012 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Mortgage guaranty insurance.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2012-07-13 - Chaptered by Secretary of State. Chapter 105, Statutes of 2012. [SB1450 Detail]

Download: California-2011-SB1450-Introduced.html

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BILL NUMBER: SB 1450	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Calderon

                        FEBRUARY 24, 2012

   An act to amend Section 12640.09 of the Insurance Code, relating
to insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1450, as introduced, Calderon. Mortgage guaranty insurance.
   Existing law requires a mortgage guaranty insurer to limit its
coverage, 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, to no more than a net of 30%
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.
Existing law authorizes a mortgage guaranty insurer to extend its
coverage for this class of insurance beyond the established limits
provided the excess is insured by a contract of reinsurance.
   This bill would delete those requirements with regard to that
class of insurance.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 12640.09 of the Insurance Code is amended to
read:
   12640.09.  (a) A mortgage guaranty insurer shall limit its
coverage for the class of insurance defined in  paragraphs
(1) and   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, in lieu thereof, 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. In lieu thereof, 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, provided that 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 paragraphs (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  (1),  (2)  ,  and (3)
of subdivision (a) of Section 12640.02 beyond the limits established
by subdivisions (a) and (b) of this section, provided the excess is
insured by a contract of reinsurance.
   (d) (1) Notwithstanding any provision of law to the contrary,
mortgage guaranty insurance or reinsurance may be ceded by contract,
provided that 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 Section 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) Nothing herein contained shall be deemed to 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 shall 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.