California Insurance Code
A mortgage insurer shall not make or purchase any investments or loans except as authorized by this chapter unless:
(a) The loan or investment was legally made or purchased by the insurer before August 21, 1933.
(b) The loan is a renewal or extension of any loan legally made before August 21, 1933.
A mortgage insurer shall not, directly or indirectly, make any loan to any of its officers, directors or other employees.
A mortgage insurer shall invest in, hold or own any of the capital stock of any other corporation or make any loan, in whole or in part, on security of such stock only as expressly permitted by this article.
In connection with its investment in an authorized real estate security, a mortgage insurer may, in its own name as pledgee, take stock, in a water or power corporation, where such stock represents the right to receive or obtain water or power for beneficial use on the real estate securing its investment, whether or not such right is appurtenant to the investment. The insurer may hold, use, or dispose of any such stock for the benefit and protection of such investment.
A mortgage insurer may invest in, hold, buy and sell, and may make collateral loans secured by:
(a) The securities specified in sections 1170 to 1175, inclusive.
(b) Authorized real estate securities, but not in excess of fifteen per cent of the insurer's paid-in capital in any one security.
(c) Securities, the payment of which is insured by itself or another domestic admitted mortgage insurer, and mortgage participation certificates issued by itself or another insurer pursuant to this chapter.
(d) Collateral trust bonds or notes secured by deposit with a trustee of securities authorized for investment by this article if such securities have a market value at least equal to one hundred fifteen per cent of the par value of the collateral trust bonds or notes then outstanding.
(e) The stock issued by any Federal Home Loan Bank or other similar Federal agency of which such mortgage insurer is eligible to become a member, and the bonds, debentures and notes issued by any Federal Home Loan Bank or other similar Federal agency.
(f) Bonds of a metropolitan water district.
(g) Stock of any corporation organized under the laws of California to transact the business of insurance agent or insurance broker; but a mortgage insurer shall not invest in the stock of such corporation unless it acquires at least fifty-one per cent of the voting stock thereof; provided, further, no insurer shall acquire, or purchase any stock pursuant to the provisions of this paragraph without having first obtained the approval in writing of the commissioner.
(h) Stocks, bonds, debentures, or other securities of any corporation where the same or any thereof are acquired by a mortgage insurer in full or partial satisfaction of a debt previously contracted or an obligation previously acquired in good faith and owned or insured by such insurer, or in exchange for any such debt or obligation; also stocks, bonds, debentures, or other securities of any corporation where the same or any thereof are acquired in connection with the sale or liquidation of any real estate owned by such insurer or held in any mortgage participation trust of such insurer, also stocks, bonds, debentures, or other securities of any corporation where the same or any thereof are acquired in connection with or as a part of any plan or agreement of reorganization, readjustment or rehabilitation of such insurer, which plan or agreement has been approved in the manner required by any present or future law or in connection with the amendment, modification or termination in a manner provided by any present or future law of any or all mortgage participation certificates issued by such insurer or of all or any part of the mortgage participation trusts created by such insurer; also stocks, bonds, debentures, or other securities of any corporation organized to take over and acquire all or any part of the assets of such mortgage insurer and all or any part of the assets of any existing mortgage participation trust or trusts created by such insurer; provided, however, no mortgage insurer shall acquire or invest in stocks, bonds, debentures, or other securities of any corporation in an amount greater than ten per cent of the then authorized, issued and outstanding capital stock of such mortgage insurer or in an amount greater than $25,000, without having first obtained the written consent of the commissioner.
(i) Any note or notes secured by a second mortgage or second deed of trust where such note is acquired in full or partial satisfaction of a debt, or in the sale or liquidation of any asset acquired in connection with the full or partial satisfaction of any debt.
A mortgage insurer may renew or extend any loan heretofore legally made or purchased or accept and hold any purchase money mortgage or deed of trust in connection with the liquidation of any real estate.
Mortgage insurers may make deposits with any bank or savings and loan associations the accounts of which are insured by an agency or instrumentality of the federal government. The making and maintenance of such deposits and investments is not subject to restrictions relating to investments.
Any mortgage insurer may purchase and hold or convey real estate of the following character only:
(a) Subject to the limit on aggregate cost contained in subdivision (b), the land, with improvements thereon, on which its office is located, if the cost of the land together with improvements does not exceed twenty-five per cent of its paid-in capital.
(b) Such as is requisite for its accommodation in the convenient transaction of its business. The aggregate cost of real estate with improvements acquired under the authority granted in subdivisions (a) and (b) shall not exceed twenty-five per cent of its paid-in capital.
(c) Such as is conveyed to it or to any person for it to secure or provide for the payment of loans contracted or moneys due.
(d) Subject to the provisions of section 12488, such as is purchased at sales under mortgages or judgments for such loans or moneys.
(e) Subject to the provisions of section 12488, such as is conveyed to it in full or partial satisfaction of any debts previously contracted in the course of its dealings.
(f) Subject to the provisions of section 12488, such as is acquired by it by virtue of the provisions of any mortgage policy issued by it or for its protection from loss under such policy.
(g) Subject to the provisions of section 12488 such as is conveyed to it by a trustee under the provisions of a mortgage participation trust created by it.
(h) Subject to the provisions of section 12488, all such other real estate as in the opinion of the board of directors of the insurer may be necessary or desirable for the protection or enhancement of the value of any property owned by such insurer or held in any mortgage participation trust, if the acquisition thereof is first approved in writing by the commissioner.
All real estate held by a mortgage insurer may be sold, conveyed or exchanged by it. Property received by it upon such sale or exchange need not be of the classes permitted for investment by this article, but, except with the consent of the commissioner, an exchange shall not be made which results in increasing the total amount of all encumbrances then outstanding against the assets of the insurer.
After five years have elapsed from the date of the acquisition by any insurer of any real estate acquired under the provisions of subdivisions (d), (e), (f), (g) and (h) of section 12486 and as well any real estate obtained on the sale or exchange thereof, the commissioner may, in his discretion, require such insurer to set up on its books a reserve account for such real estate in such an amount as he may designate, but not in excess of the cost value at which such assets are carried on the books.
A mortgage insurer may purchase furniture or other personal property in order to operate or sell any real estate, if such purchase is advisable in the opinion of the officers of such insurer.
A mortgage insurer may make such expenditure as its officers deem advisable in the repair, maintenance or improvement of any real estate acquired by it, including the construction of buildings thereon.
Irrespective of any other provision of this code, a mortgage insurer may invest in, hold, buy and sell and make collateral loans secured by shares of stock, bonds, notes, debentures or other obligations of any national mortgage association or other similar credit institution now or hereafter organized under the National Housing Act and any amendments thereto; also the stock, bonds, debentures, notes and other securities or instruments issued by any Federal agency or corporation organized under Federal authority whose powers include loaning money on real estate or guaranteeing or insuring loans on real estate or otherwise dealing in such loans.
Irrespective of any other provision of this code, a mortgage insurer (a) either with or without security, may make loans, advance credit, and purchase obligations representing loans and advances of credit, for the purpose of financing alterations, repairs, and improvements pursuant to the National Housing Act and any amendments thereto upon real property securing a loan then held by or insured by such mortgage insurer, if the Federal Housing Administrator shall insure such mortgage insurer against losses which it may sustain as a result of such loans, advances of credit and purchases made by such mortgage insurer for such purpose to the extent provided in Title I of the National Housing Act and any amendments thereto; (b) may make loans upon the security of real property pursuant to the Federal Housing Act and any amendments thereto, if the Federal Housing Administrator pursuant to said act shall have insured, or shall have made a commitment to insure, such mortgage insurer against losses of principal which it may sustain as a result of such loans; and (c) may secure insurance pursuant to said National Housing Act and any amendments thereto. No law of this State prescribing the nature, amount or form of security or requiring security upon which loans or advances of credit may be made or prescribing or limiting the period for which loans or advances of credit may be made, and no provision of this code prescribing or limiting interest rates upon loans or advances of credit, shall apply to loans, advances of credit or purchases made pursuant to this section.