House Bill No. 143

Introduced By barnett

By Request of the State Auditor

A Bill for an Act entitled: "An Act limiting the amount of its assets an insurer may invest in mortgage loans; and amending section

33-2-830, MCA."

Be it enacted by the Legislature of the State of Montana:

Section 1.  Section 33-2-830, MCA, is amended to read:

"33-2-830.   Real estate mortgages. (1) An insurer may invest any of its funds in bonds, notes, or other evidences of indebtedness which that are secured by first mortgages or deeds of trust upon improved real property located in the United States or Canada or which that are secured by first mortgages or deeds of trust upon leasehold estates having an unexpired term of not less than 21 years, inclusive of the term or terms which that may be provided by enforceable options of renewal, in improved real property located in the United States or Canada. In all cases, the security for the loan must be a first lien upon such the real property, and there must may not be any condition or right of reentry or forfeiture not insured against, under which, in the case of real property other than leaseholds, such the lien can be cut off or subordinated or otherwise disturbed or under which, in the case of leaseholds, the insurer is unable to continue the lease in force for the duration of the loan. Nothing herein shall prohibit in this section prohibits any an investment by reason of the existence of any prior lien for ground rents, taxes, assessments, or other similar charges not yet delinquent. This section shall may not be deemed considered to prohibit investment in mortgages or similar obligations when made under 33-2-828.

(2)  "Improved real estate" means, for the purposes of this part, all farm lands used for tillage, crop, pasture, or timberlands and all real estate on which permanent improvements suitable for residential, institutional, commercial, or industrial use are situated.

(3)  (a) No such A mortgage loan or loans made or acquired by an insurer on any one property shall may not, at the time of investment by the insurer, exceed the larger of the following amounts as applicable:

(i)  80% of the value of the real property or leasehold securing the same, provided, however, loan or loans, but if said the real property or leasehold consists of one- or two-family residential property, 90% of said the value;

(ii) the amount of any insurance or guaranty of such the loan by the United States of America or by any agency or instrumentality thereof of the United States; or

(iii) the amounts amount provided in subsection (3)(a)(i), plus the amount by which the excess of such the loan over such that amount is insured or guaranteed by the United States of America or by any agency or instrumentality thereof of the United States.

(b)  In the case of a purchase money mortgage given to secure the purchase price of real estate sold by the insurer, the amount so loaned or invested shall may not exceed the unpaid portion of the purchase price.

(4)  No such A mortgage loan or loans shall may not be made or acquired by an insurer except after an appraisal made by a qualified appraiser for the purpose of such that investment.

(5)  No such A mortgage loan made or acquired by an insurer which that is a participation or a part of a series or issue secured by the same mortgage or deed of trust shall be is not a lawful investment under this section unless the entire series or issue which that is secured by the same mortgage or deed of trust is held by such the insurer or unless the insurer holds a senior participation in such the mortgage or deed of trust, giving it the insurer substantially the rights of a first mortgagee.

(6)  No A mortgage loan upon a leasehold shall may not be made or acquired pursuant to this section unless the terms thereof shall of the loan provide for amortization payments to be made by the borrower on the principal thereof at least once in each year in amounts sufficient completely to amortize the loan within a period of four-fifths of the term of the leasehold, inclusive of the term which that may be provided by an enforceable option of renewal, which is. The term of the leasehold must be unexpired at the time that the loan is made, but in no event exceeding and may not exceed 35 years.

(7) Except with the commissioner's consent, an insurer may not invest or have invested at any one time more than 20% of its assets in mortgage loans."

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