20-1550. Minimum policyholder position;
definitions
A. A mortgage guaranty insurer shall maintain at all times a minimum policyholder
position in an amount not less than the amount required by this section. The face amount
of an insured mortgage shall include reinsurance assumed and shall be calculated net of
reinsurance that is ceded to an insurer either:
1. Authorized to transact insurance or accredited to assume reinsurance in this
state.
2. Pursuant to section 20-1557, subsection C.
3. Otherwise approved by the director.
B. If a policy of mortgage guaranty insurance insures individual loans with a
percentage claim settlement option on the loans, the insurer shall maintain a minimum
policyholder position based on each one hundred dollars of the face amount of an insured
mortgage, the percentage coverage or claim settlement option and the loan-to-value
category. The required amount of minimum policyholder position is calculated in the
following manner:
1. If the total indebtedness is greater than seventy-five per cent of the value of
the collateral property at the date of insurance, the following applies:
Minimum policyholder
position per one hundred
Per cent dollars of the face
coverage amount of an
insured 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
If the per cent coverage is between any five percentage point increment, the factor for
minimum policyholder position per one hundred dollars of the face amount of an insured
mortgage shall be prorated.
2. If the total indebtedness is at least fifty per cent and not more than
seventy-five per cent of the value of the collateral property at the date of insurance,
the required amount of minimum policyholder position is fifty per cent of the amount
required by paragraph 1 of this subsection.
3. If the total indebtedness is less than fifty per cent of the value of the
collateral property at the date of insurance, the required amount of minimum policyholder
position is twenty-five per cent of the amount required by paragraph 1 of this
subsection.
C. If a policy of mortgage guaranty insurance provides coverage on a pool of loans
subject to an aggregate loss limit and if the equity:
1. Is not more than fifty per cent and not less than twenty per cent, or equity
plus any prior insurance or a deductible equals twenty-five per cent of the value of the
collateral property at the date of insurance, the required amount of minimum policyholder
position is calculated as follows:
Minimum policyholder
position per one hundred
Per cent dollars of the face
coverage amount of an
insured mortgage
1% $ .30
5 .50
10 .60
15 .65
20 .70
25 .75
30 .775
40 .80
50 .825
60 .85
70 .875
75 .90
80 .925
90 .95
100 1.00
If the per cent coverage is between any specified increment, the factor for minimum
policyholder position per one hundred dollars of the face amount of an insured mortgage
shall be prorated.
2. Is less than twenty per cent or the equity plus prior insurance or a deductible
is less than twenty-five per cent of the value of the collateral property at the date of
insurance, the required amount of minimum policyholder position is two hundred per cent
of the amount required by paragraph 1 of this subsection.
3. Is more than fifty per cent or the equity plus prior insurance or a deductible
is more than fifty-five per cent of the value of the collateral property at the date of
insurance, the required amount of minimum policyholder position is fifty per cent of the
amount of minimum policyholder position required by paragraph 1 of this subsection.
D. If a policy of mortgage guaranty insurance provides for layers of coverage,
deductibles or excess reinsurance, the required amount of minimum policyholder position
may be computed by subtracting the required minimum policyholder position for the lower
percentage coverage limits from the required minimum policyholder position for the upper
or greater coverage limit.
E. If a policy of mortgage guaranty insurance provides for coverage on loans
secured by second liens:
1. If the policy provides coverage on individual loans, the required amount of
minimum policyholder position is calculated according to subsection B of this section
after the per cent of coverage and the loan-to-value ratios have been determined as
follows:
(a) Divide the insured portion of the second loan by the entire loan indebtedness
on the collateral property to determine the per cent coverage.
(b) Divide the entire loan indebtedness on the property by the value of the
collateral property at the date of insurance to determine loan-to-value per cent.
2. If the policy provides coverage on a group of loans subject to an aggregate loss
limit, the minimum policyholder position is calculated according to subsection C of this
section after the per cent of coverage and the loan-to-value ratios have been determined
in accordance with this subsection.
F. If a policy of mortgage guaranty insurance provides for coverage on leases, the
minimum policyholder position is four dollars for each one hundred dollars of the insured
amount of the lease.
G. Among other remedial actions, the director may require a mortgage guaranty
insurer to cease transacting new business until such time as the minimum policyholder
position as required by this section is met.
H. A mortgage guaranty insurer shall include with its annual statement a report of
its minimum policyholder position on a form approved by the director.
I. For the purposes of this section, except as otherwise provided:
1. "Equity" means the complement of the loan-to-value per cent.
2. "Face amount of an insured mortgage":
(a) Means outstanding principal balance computed without any reduction because of
an insurer's option limiting its coverage, except that for the purposes of determining a
minimum policyholder position under subsection E "face amount of the mortgage" means the
entire loan indebtedness on the property.
(b) Does not include the outstanding principal balance of any indebtedness secured
by the subject real property to the extent that the insurer has established a loss
reserve for that indebtedness.
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