N.J. Stat. tit. 17, ch. 46A

in effect

N.J. Stat. § 17:46A-1 Short title

This act may be cited as the Mortgage Guaranty Insurance Act. L.1968, c. 248, s. 1, eff. Aug. 12, 1968.

N.J. Stat. § 17:46A-2 Definitions.

2. Definitions. The definitions set forth in this section shall govern the construction of the terms used in this act. (a) "Mortgage guaranty insurance" means: (1) Insurance against financial loss by reason of nonpayment of principal, interest and other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust, or other instrument constituting a lien or charge on real estate, provided the improvement on such real estate is a residential building or a condominium unit or buildings designed for occupancy by not more than four families; (2) Insurance against financial loss by reason of nonpayment of principal, interest or other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust or other instrument constituting a lien or charge on real estate, provided the improvement on such real estate is a building or buildings designed for occupancy by five or more families or designed to be occupied for industrial or commercial purposes; (3) Insurance against financial loss by reason of nonpayment of rent or other sums agreed to be paid under the terms of a written lease for the possession, use or occupancy of real estate, provided the improvement on such real estate is a building or buildings designed to be occupied for industrial or commercial purposes. (b) "Authorized real estate security" means a note, bond or other evidence of indebtedness not exceeding 103 percent of the fair market value of the real estate, secured by a mortgage, deed of trust, or other instrument constituting a first lien or charge on real estate; provided: (1) The real estate loan secured in such manner is one which a bank, savings and loan association, or an insurance company, which is supervised and regulated by a department of this State or an agency of the federal government, is authorized to make. (2) The improvement on such real estate is a building or buildings designed for occupancy as specified by subsections (a)(1) and (a)(2) of this section. (3) The lien on such real estate may be subject and subordinate to the following: (i) The lien of any public bond, assessment, or tax, when no installment, call or payment of or under such bond, assessment or tax is delinquent. (ii) Outstanding mineral, oil or timber rights, rights-of-way, easements or rights-of-way or support, sewer rights, building restrictions or other restrictions or covenants, conditions or regulations of use, or outstanding leases upon such real property under which rents or profits are reserved to the owner thereof. (c) "Contingency reserve" means an additional premium reserve established for the protection of policyholders against the effect of adverse economic cycles. (d) "Policyholders' surplus" means the aggregate of capital, surplus and contingency reserve. L.1968,c.248,s.2; amended 1971, c.460, s.1; 1975, c.122, s.1; 1981, c.567, s.1; 1994, c.103; 2002, c.17; 2004, c.164.

N.J. Stat. § 17:46A-3 Capital, surplus and contingency reserve requirements.

3. Capital, surplus and contingency reserve requirements. (a) An insurance company shall not transact the business of mortgage guaranty insurance unless it has paid-in capital of at least $1,000,000.00 and paid-in surplus of at least $1,000,000.00. (b) In addition to the paid-in capital and surplus provided in subsection (a), each mortgage guaranty insurance company shall establish a contingency reserve out of net premiums remaining (gross premiums less premiums returned to policyholders) after establishment of the unearned premium reserve. To the contingency reserve the insurance company shall contribute an amount equal to 50% of such remaining premiums. The yearly contributions to the contingency reserve made during each calendar year shall be maintained for a period of 180 months, except that withdrawals may be made by the insurance company in any given year in which the actual losses exceed the expected losses. The commissioner shall, by regulation, determine when an insurance company may make withdrawals from its contingency reserve. (c) (1) Except as provided in paragraph (2) of this subsection, a mortgage guaranty insurance company shall not at any time have outstanding a total liability under its aggregate insurance policies exceeding 25 times its policyholders' surplus, such liability to be computed on the basis of the insurance company's liability under its election as provided in subsection (c) of section 4 of P.L.1968, c.248 (C.17:46A-4). In the event that any insurance company has outstanding total liability exceeding 25 times its policyholders' surplus, it shall cease transacting new business until such time as its total liability no longer exceeds 25 times its policyholders' surplus. (2) On and after the first day of the third month following enactment of P.L.2010, c.93 and continuing for the 72 months thereafter, the commissioner may waive the limit on liability exposure set forth under paragraph (1) of this subsection at the written request of a mortgage guaranty insurance company. The commissioner may approve the request of the mortgage guaranty insurance company upon a finding that the company's financial position is reasonable in relation to the company's outstanding total liability under its aggregate insurance policies, as well as adequate to its financial needs. A company granted a waiver pursuant to this paragraph shall submit quarterly reports to the commissioner concerning the company's financial condition. The commissioner shall promulgate regulations concerning the process for a mortgage guaranty insurance company to submit a written request pursuant to this paragraph, and concerning the information to be indicated in the quarterly reports. The regulations shall specify the information deemed necessary by the commissioner to review the request and any factors to be considered in approving or disapproving the request. The commissioner shall provide an annual briefing to the Assembly Financial Institutions and Insurance Committee and the Senate Commerce Committee, or their successors, on the financial condition of the mortgage guaranty insurance industry. (d) A mortgage guaranty insurance company shall not declare any dividends except from undivided profits remaining on hand over and above the aggregate of its paid-in capital, paid-in surplus and contingency reserve. L.1968, c.248, s.3; amended 2010, c.93; 2013, c.226.

N.J. Stat. § 17:46A-4 Limitations and restrictions for transacting business.

4. Limitations and restrictions for transacting business. (a) Mortgage guaranty insurance may be transacted in this State only by a stock insurance company holding a certificate of authority for the transaction of such insurance, and shall be written only to insure loans secured by authorized real estate securities as defined in section 2 of this act. (b) A mortgage guaranty insurance company shall not insure loans secured by properties in a single housing tract or a contiguous tract in excess of 10% of the insurance company's policyholders' surplus. In determining the amount of such risk, applicable reinsurance in any assuming insurance company authorized to transact mortgage guaranty insurance in this State shall be deducted from the total direct risk insured. "Contiguous," for the purposes of this section, means not separated by more than 1/2 mile. (c) The liability of a mortgage guaranty insurance company for an insured loan shall in no event exceed the actual loss. In lieu of paying the percentage of the insured loan as specified in the policy, a mortgage guaranty insurance company may elect to pay the entire indebtedness to the insured and acquire title to the authorized real estate security. (d) (Deleted by amendment; P.L.1975, c.122, s.2.) (e) (1) A mortgage guaranty insurance company which anywhere transacts any class of insurance other than mortgage guaranty insurance is not eligible for the issuance of a certificate of authority to transact mortgage guaranty insurance in this State nor for the renewal thereof. (2) A mortgage guaranty insurance company which anywhere transacts the classes of insurance defined in paragraph (a) (2) or (a) (3) of section 2 of this act is not eligible for a certificate of authority to transact in this State the class of mortgage guaranty insurance defined in paragraph (a) (1) of section 2 of this act. (f) Nothing in this act shall be construed as limiting the right of any mortgage guaranty insurance company to impose reasonable requirements upon the lender with regard to the terms of any note or bond or other evidence of indebtedness secured by a mortgage or deed of trust, such as requiring a stipulated down payment by the borrower. L.1968, c.248, s.4; amended 1975, c.122, s.2; 1981, c.567, s.2; 2015, c.145, s.1.

N.J. Stat. § 17:46A-5 Rebates and commissions

(a) Every mortgage guaranty insurance company shall adopt, print and make available a schedule of premium charges for mortgage guaranty insurance policies. Premium charges made in conformity with the provisions of this act shall not be deemed to be interest or other charges under any other provision of law limiting interest or other charges in connection with mortgage loans. The schedule shall show the entire amount of premium charge for each type of mortgage guaranty insurance policy issued by the insurance company. (b) No mortgage guaranty insurance company shall pay to any person who is acting as agent, representative, attorney or employee of the owner, mortgagee of the prospective owner, or mortgagee of the real property or any interest therein, either directly or indirectly, any commission, or any part of its premium charges or any other consideration as an inducement for or as compensation on any mortgage guaranty insurance business. (c) No mortgage guaranty insurance company shall make any rebate of any portion of the premium charge shown by the schedule required by subsection (a). No mortgage guaranty insurance company shall quote any premium charge to any person which is less than that currently available to others for the same type of mortgage guaranty insurance policy. The amount by which any premium charge is less than that called for by the current schedule of premium charges is an unlawful rebate. (d) No mortgage guaranty insurance company shall pay any compensation to any person for transacting insurance for or with it based in whole or in part upon a commission basis unless such person is licensed pursuant to section 6 of this act, subject to all the other provisions of and restrictions in chapter 22 of Title 17. This subsection shall not be construed so as to affect the meaning of any other provisions of this section. (e) The commissioner may after a hearing suspend or revoke the certificate of authority of any mortgage guaranty insurance company which, after 10 days written notice from the commissioner requiring it to cease and desist, continues to pay any commission or to make any unlawful rebate in willful violation of the provisions of this act. L.1968, c. 248, s. 5, eff. Aug. 12, 1968. Amended by L.1971, c. 460, s. 2, eff. Feb. 29, 1972.

N.J. Stat. § 17:46A-7 Financial statements

(a) The provisions of chapter 23 of Title 17 shall apply to mortgage guaranty insurance companies. (b) The unearned premium reserve shall be computed as required by the annual statement form, except that on all policies covering a risk period of more than 1 year the unearned premium reserve shall be computed in accordance with standards promulgated by the commissioner. (c) In addition to the contingency reserve required under subsection (b) of section 3, the case basis method shall be used to determine the loss reserve, which shall include a reserve for claims reported and unpaid and claims incurred but not reported, including: (i) Estimated losses on insured loans which have resulted in the conveyance of property which remains unsold. (ii) Insured loans in the process of foreclosure. (iii) Insured loans in default for 4 or more months. L.1968, c. 248, s. 7, eff. Aug. 12, 1968.

N.J. Stat. § 17:46A-8 Applicability of other laws

All the applicable provisions of Title 17 and Title 54 of the Revised Statutes, chapter 227 (C. 54:16A-1 et seq.) of the laws of 1952, and chapter 132 (C. 54:18A-1 et seq.) of the laws of 1945, except as may be in conflict with this act, shall apply to mortgage guaranty insurance companies licensed under this act. L.1968, c. 248, s. 8, eff. Aug. 12, 1968.

N.J. Stat. § 17:46A-9 Additional powers of commissioner

The commissioner may adopt, pursuant to the provisions of chapters 66 (C. 17:1-8.1 et seq.) and 68 (C. 17:1-8.5 et seq.) of the laws of 1958, such reasonable rules and regulations as may be necessary to carry out the provisions of this act, including, but not limited to, appropriate restrictions as to investments, giving full consideration to the desirability of high liquidity. L.1968, c. 248, s. 9, eff. Aug. 12, 1968.

N.J. Stat. § 17:46A-10 Advertising

No bank, savings and loan association or insurance company, any of whose authorized real estate securities are insured by mortgage guaranty insurance pursuant to this act may state in any brochure, pamphlet, report or any form of advertising that the real estate loans of the bank, savings and loan association or insurance company are "insured loans" unless the brochure, pamphlet, report or advertising also clearly states that the loans are insured by private insurers and the names of the private insurers are given and shall not make any such statement at all unless such insurance is by an insurance company authorized to transact business in this State pursuant to this act. L.1968, c. 248, s. 10, eff. Aug. 12, 1968.

N.J. Stat. § 17:46A-11 Repeal

Chapter 46 of Title 17 of the Revised Statutes is repealed. L.1968, c. 248, s. 11, eff. Aug. 12, 1968.

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