mortgage guaranty insurance

NAIC Model Laws, Regulations, Guidelines and Other Resources—Summer 2023

MO-630-1

MORTGAGE GUARANTY INSURANCE MODEL ACT

Table of Contents

Section 1. Title

Section 2. Definitions

Section 3. Insurer’s Authority to Transact Business

Section 4. Mortgage Guaranty Insurance as Monoline

Section 5. Risk Concentration

Section 6. Capital and Surplus

Section 7. Geographic Concentration

Section 8. Advertising

Section 9. Investment Limitation

Section 10. Reserve Requirements

Section 11. Reinsurance

Section 12. Sound Underwriting Practices

Section 13. Quality Assurance

Section 14. Policy Forms and Premium Rates Filed

Section 15. Risk in Force and Waivers

Section 16. Conflict of Interest

Section 17. Compensating Balances Prohibited

Section 18. Limitations on Rebates, Commissions, Charges and Contractual Preferences

Section 19. Rescission

Section 20. Records Retention

Section 21. Regulations

Section 1. Title

This Act may be cited as the Mortgage Guaranty Insurance Act.

Section 2. Definitions

The definitions set forth in this Act shall govern the construction of the terms used in this Act but shall not affect any other

provisions of the code.

“Authorized Real Estate Security” means:

(1)

An amortized note, bond or other instrument of indebtedness, except for reverse mortgage loans

made pursuant to [insert citation of state law that authorizes reverse mortgages] of the real property

law, evidencing a loan, not exceeding one hundred three percent (103%) of the fair market value of

the real estate, secured by a mortgage, deed of trust, or other instrument that constitutes, or is

equivalent to, a first lien or junior lien or charge on real estate, with any percentage in excess of one

hundred percent (100%) being used to finance the fees and closing costs on such indebtedness;

provided:

(a)

The real estate loan secured in this manner is one of a type that a creditor, which is

supervised and regulated by a department of any state or territory of the U.S or an agency

of the federal government, is authorized to make, or would be authorized to make,

disregarding any requirement applicable to such an institution that the amount of the loan

not exceed a certain percentage of the value of the real estate;

(b)

The loan is to finance the acquisition, initial construction or refinancing of real estate that

is a:

(i)

Residential building designed for occupancy by not more than four families, a

one-family residential condominium or unit in a planned unit development, or any

other one-family residential unit as to which title may be conveyed freely; or

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(ii)

Mixed-use building with only one non-residential use and one one-family

dwelling unit; or

(iii)

Building or buildings designed for occupancy by five (5) or more families or

designed to be occupied for industrial or commercial purposes.

(c)

The lien on the real estate may be subject to and subordinate to other liens, leases, rights,

restrictions, easements, covenants, conditions or regulations of use that do not impair the

use of the real estate for its intended purpose.

(2)

Notwithstanding the foregoing, a loan referenced in Section 2A(1) of this Act may exceed 103% of

the fair market value of the real estate in the event that the mortgage guaranty insurance company

has approved for loss mitigation purposes a request to refinance a loan that constitutes an existing

risk in force for the company.

(3)

An amortized note, bond or other instrument of indebtedness evidencing a loan secured by an

ownership interest in, and a proprietary lease from, a corporation or partnership formed for the

purpose of the cooperative ownership of real estate and at the time the loan does not exceed one

hundred three percent (103%) of the fair market value of the ownership interest and proprietary

lease, if the loan is one of a type that meets the requirements of Section 2A(1)(a), unless the context

clearly requires otherwise, any reference to a mortgagor shall include an owner of such an ownership

interest as described in this paragraph and any reference to a lien or mortgage shall include the

security interest held by a lender in such an ownership interest.

“Bulk Mortgage Guaranty Insurance” means mortgage guaranty insurance that provides coverage under a

single transaction on each mortgage loan included in a defined portfolio of loans that have already been

originated.

“Certificate of Insurance” means a document issued by a mortgage guaranty insurance company to the initial

insured to evidence that it has insured a particular authorized real estate security under a master policy,

identifying the terms, conditions and representations, in addition to those contained in the master policy and

endorsements, applicable to such coverage.

“Commissioner.” The term “commissioner” shall mean the insurance commissioner, the commissioner’s

deputies, or the Insurance Department, as appropriate.

Drafting Note: Insert the title of the chief insurance regulatory official wherever the word “commissioner” appears.

“Contingency Reserve” means an additional premium reserve established to protect policyholders against the

effect of adverse economic cycles.

“Domiciliary Commissioner” means the principal insurance supervisory official of the jurisdiction in which

a mortgage guaranty insurance company is domiciled.

“Effective Guaranty” refers to the assumed backing of existing or future holders of securities by virtue of

their issuer’s conservatorship or perceived access to credit from the U.S. Treasury, as opposed to the direct

full faith and credit guarantee provided by the U.S. government.

“Loss” refers to losses and loss adjustment expenses.

“Master Policy” means a document issued by a mortgage guaranty insurance company that establishes the

terms and conditions of mortgage guaranty insurance coverage provided thereunder, including any

endorsements thereto.

“Mortgage Guaranty Insurance” is insurance against financial loss by reason of nonpayment of principal,

interest or other sums agreed to be paid under the terms of any authorized real estate security.

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“Mortgage Guaranty Quality Assurance Program” means an early detection warning system for potential

underwriting compliance issues which could potentially impact solvency or operational risk within a

mortgage guaranty insurance company.

“NAIC” means the National Association of Insurance Commissioners.

“Pool Mortgage Guaranty Insurance” means mortgage guaranty insurance that provides coverage under a

single transaction or a defined series of transactions on a defined portfolio of loans for losses up to an

aggregate limit.

“Rescission” represents a remedy available to a mortgage guaranty insurance company to void a certificate

and restore parties to their original position, based on inaccurate, incomplete or misleading information

provided to, or information omitted or concealed from, the mortgage guaranty insurance company in

connection with the insurance application, resulting in an insured loan that did not meet the mortgage

guaranty insurance company’s eligibility requirements in effect on the date of submission of the insurance

application.

“Risk in Force” means the mortgage guaranty insurance coverage percentage applied to the unpaid principal

balance.

Section 3. Insurer’s Authority to Transact Business

A company may not transact the business of mortgage guaranty insurance until it has obtained a certificate of authority from

the commissioner.

Section 4. Mortgage Guaranty Insurance as Monoline

A mortgage guaranty insurance company that 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.

Section 5. Risk Concentration

A mortgage guaranty insurance company shall not expose itself to any loss on any one authorized real estate security risk in an

amount exceeding ten percent (10%) of its surplus to policyholders. Any risk or portion of risk which has been reinsured shall

be deducted in determining the limitation of risk.

Section 6. Capital and Surplus

Initial and Minimum Capital and Surplus Requirements. A mortgage guaranty insurance company shall

not transact the business of mortgage guaranty insurance unless, if a stock insurance company, it has paid-in

capital of at least $10,000,000 and paid-in surplus of at least $15,000,000, or if a mutual insurance company,

a minimum initial surplus of $25,000,000. A stock insurance company or a mutual insurance company shall

at all times thereafter maintain a minimum policyholders’ surplus of at least $20,000,000.

Minimum Capital Requirements Applicability. A mortgage guaranty insurance company formed prior to

the passage of this Act may maintain the amount of capital and surplus or minimum policyholders’ surplus

previously required by statute or administrative order for a period not to exceed twelve months following the

effective date of the adoption of this Act.

Minimum Capital Requirements Adjustments. The domiciliary commissioner may by order reduce the

minimum amount of capital and surplus or minimum policyholders’ surplus required under Section 6A under

the following circumstances:

(1)

For an affiliated reinsurer that is a mortgage guaranty insurance company and that is or will be

engaged solely in the assumption of risks from affiliated mortgage guaranty insurance companies,

provided that the affiliated reinsurer is in run-off and, in the domiciliary commissioner’s opinion,

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the business plan and other relevant circumstances of the affiliated reinsurer justify the proposed

reduction in requirements.

(2)

For mortgage guaranty insurance companies that are in run-off and not writing new business that is

justified in a business plan, in the domiciliary commissioner's opinion.

Section 7. Geographic Concentration

A mortgage guaranty insurance company shall not insure loans secured by a single risk in excess of ten

percent (10%) of the company’s aggregate capital, surplus and contingency reserve.

No mortgage guaranty insurance company shall have more than twenty percent (20%) of its total insurance

in force in any one Standard Metropolitan Statistical Area (SMSA), as defined by the U.S Department of

Commerce.

The provisions of this section shall not apply to a mortgage guaranty insurance company until it has possessed

a certificate of authority in this state for three (3) years.

Section 8. Advertising

No mortgage guaranty insurance company or an agent or representative of a mortgage guaranty insurance company shall

prepare or distribute or assist in preparing or distributing any advertising media or communication to the effect that the real

estate investments of any financial institution are “insured investments,” unless the advertising media or communication clearly

states that the loans are insured by mortgage guaranty insurance companies possessing a certificate of authority to transact

mortgage guaranty insurance in this state or are insured by an agency of the federal government.

Section 9. Investment Limitation

Investments in notes or other evidence of indebtedness secured by a mortgage or other liens upon residential real property shall

not be allowed as assets in any determination of the financial condition of a mortgage guaranty insurer. This section shall not

apply to obligations secured by real property, or contracts for the sale of real property, which obligations or contract of sale are

acquired in the course of good faith settlement of claims under policies of insurance issued by the mortgage guaranty insurance

company, or in the good faith disposition of real property so acquired. This section shall not apply to investments backed by

the full faith and credit of the U.S. Government or investments with the effective guaranty of the U.S. Government. This section

shall not apply to investments held by a mortgage guaranty insurance company prior to the passage of this Act.

Section 10. Reserve Requirements

Unearned premium Reserves, Loss Reserves, and Premium Deficiency Reserves. Financial reporting

will be prepared in accordance with the Accounting Practices and Procedures Manual and Annual Financial

Statement Instructions of the NAIC.

Contingency Reserve. Each mortgage guaranty insurance company shall establish a contingency reserve

subject to the following provisions:

(1)

The mortgage guaranty insurance company shall make an annual contribution to the contingency

reserve which in the aggregate shall be equal to fifty percent (50%) of the direct earned premiums

reported in the annual statement or net earned premiums reported if the reinsurer maintains the

contingency reserve.

(2)

Except as provided within this Act, a mortgage guaranty insurance company’s contributions to the

contingency reserve made during each calendar year shall be maintained for a period of 120 months,

to provide for reserve buildup. The portion of the contingency reserve established and maintained

for more than 120 months shall be released and shall no longer constitute part of the contingency

reserve.

(3)

Withdrawals may be made from the contingency reserve on a first-in, first-out basis or such other

basis, with the prior written approval of the domiciliary commissioner, based on the amount by

which:

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(a)

Incurred losses and loss adjustment expenses exceed 35% of the direct earned premium in

any year. Provisional withdrawals may be made from the contingency reserve on a

quarterly basis in an amount not to exceed 75% of the withdrawal as adjusted for the

quarterly nature of the withdrawal; or

(b)

Upon the approval of the domiciliary commissioner and 30-day prior notification to non-

domiciliary commissioners, a mortgage guaranty insurer may withdraw from the

contingency reserve any amounts which are in excess of the requirements of Section 15 as

required in [insert section of the mortgage guaranty Insurance model law requiring

minimum policyholder’s position] as filed with the most recently filed annual statement.

(i)

The mortgage guaranty insurance company’s domiciliary commissioner may

consider loss developments and trends in reviewing a request for withdrawal. If

any portion of the contingency reserve for which withdrawal is requested is

maintained by a reinsurer or in a segregated account or trust of a reinsurer, the

domiciliary commissioner may also consider the financial condition of the

reinsurer.

Miscellaneous. Unearned premium reserves and contingency reserves on risks insured before the effective

date of this Act may be computed and maintained as required previously.

Section 11. Reinsurance

Prohibition of Captive Reinsurance. A mortgage guaranty insurance company shall not enter into captive

reinsurance arrangements which involve the direct or indirect ceding of any portion of its insurance risks or

obligations to a reinsurer owned or controlled by an insured; any subsidiary or affiliate of an insured; an

officer, director or employee of an insured or any member of their immediate family; a corporation,

partnership, trust, trade association in which an insured is a member, or other entity owned or controlled by

an insured or an insured’s officer, director or employee or any member of their immediate family that has a

financial interest; or any designee, trustee, nominee or other agent or representative of any of the foregoing.

Reinsurance Cessions. A mortgage guaranty insurer may, by written contract, reinsure any insurance that it

transacts, except that no mortgage guaranty insurer may enter into reinsurance arrangements designed to

circumvent the compensating control provisions of Section 17 or the contingency reserve requirement of

Section 10. The unearned premium reserve and the loss reserves required by Section 10 shall be established

and maintained by the direct insurer or by the assuming reinsurer so that the aggregate reserves shall be equal

to or greater than the reserves required by direct writer. The cession shall be accounted for as provided in the

accounting practices and procedures prescribed or permitted by the applicable Accounting Practices and

Procedures Manual of the NAIC.

Section 12. Sound Underwriting Practices

Underwriting Review and Approval Required. All certificates of mortgage guaranty insurance, excluding

policies of reinsurance, shall be written based on an assessment of evidence that prudent underwriting

standards have been met by the originator of the mortgage. Delegated underwriting decisions shall be

reviewed based on a reasonable method of sampling of post-closing loan documentation to ensure compliance

with the mortgage guaranty insurance company’s underwriting standards.

Quality Control Reviews. Quality control reviews for bulk mortgage guaranty insurance and pool mortgage

guaranty insurance shall be based on a reasonable method of sampling of post-closing loan documentation

for delegated underwriting decisions to ensure compliance with the representations and warranties of the

creditors or creditors originating the loans and with the mortgage guaranty insurance company’s underwriting

standards.

Minimum Underwriting Standards. Mortgage guaranty insurance companies shall establish formal

underwriting standards which set forth the basis for concluding that prudent underwriting standards have

been met.

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Underwriting Review and Approval. A mortgage guaranty insurance company’s underwriting standards

shall be:

(1)

Reviewed and approved by executive management, including, but not limited to the highest-ranking

executive officer and financial officer; and

(2)

Communicated across the organization to promote consistent business practices with respect to

underwriting.

Notification of Changes in Underwriting Standards. On or before March 1 of each year, a mortgage

guaranty insurance company shall file with the domiciliary commissioner changes to its underwriting

standards and an analysis of the changes implemented during the course of the immediately preceding year.

The annual summary of material underwriting standards changes should include any change associated with

loan to value ratios, debt to income ratios, borrower credit standing or maximum loan amount which has

resulted in a material impact on net premium written of +/- 5% from prior year to date.

Nondiscrimination. In extending or issuing mortgage guaranty insurance, a mortgage guaranty insurance

company may not discriminate on the basis of the applicant’s sex, marital status, race, color, creed, national

origin, disability, or age or solely on the basis of the geographic location of the property to be insured unless

the discrimination related to geographic location is for a business purpose that is not a mere pretext for unfair

discrimination; or the refusal, cancellation, or limitation of the insurance is required by law or regulatory

mandate.

Drafting Note: States and jurisdictions should consult their constitution or comparable governance documents and applicable civil rights legislation to

determine if broader protections against unacceptable forms of discrimination should be included in Section 12F.

Section 13. Quality Assurance

Quality Assurance Program. A mortgage guaranty insurance company shall establish a formal internal

mortgage guaranty quality assurance program, which provides an early detection warning system as it relates

to potential underwriting compliance issues which could potentially impact solvency or operational risk. This

mortgage guaranty quality assurance program shall provide for the documentation, monitoring, evaluation

and reporting on the integrity of the ongoing loan origination process based on indicators of potential

underwriting inadequacies or non-compliance. This shall include, but not limited to:

(1)

Segregation of Duties. Administration of the quality assurance program shall be delegated to

designated risk management, quality assurance or internal audit personnel, who are technically

trained and independent from underwriting activities that they audit.

(2)

Senior Management Oversight. Quality assurance personnel shall provide periodic quality

assurance reports to an enterprise risk management committee or other equivalent senior

management level oversight body.

(3)

Board of Director Oversight. Quality assurance personnel shall provide periodic quality assurance

reports to the board of directors or a designated committee of directors established to facilitate board

of director oversight.

(4)

Policy and Procedures Documentation. Mortgage guaranty quality assurance program, excluding

policies and procedures of reinsurance, shall be formally established and documented to define

scope, roles and responsibilities.

(5)

Underwriting Risk Review. Quality assurance review shall include an examination of underwriting

risks including classification of risk and compliance with risk tolerance levels.

(6)

Lender Performance Reviews. Quality assurance monitoring provisions shall include an

assessment of lender performance.

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(7)

Underwriting Performance Reviews. Quality assurance monitoring provisions shall assess

compliance with underwriting standard.

(8)

Problem Loan Trend Reviews. Quality assurance monitoring provisions shall assess prospective

risks associated with timely loan payment including delinquency, default inventory, foreclosure and

persistency trends.

(9)

Underwriting System Change Oversight. Underwriting system program changes shall be

monitored to ensure the integrity of underwriting and pricing programs, which impact automated

underwriting system decision making.

(10)

Pricing and Performance Oversight. Pricing controls shall be monitored to ensure that business

segment pricing supports applicable performance goals.

(11)

Internal Audit Validation. Periodic internal audits shall be conducted to validate compliance with

the mortgage guaranty quality assurance program.

Regulator Access and Review of Quality Assurance Program. The commissioner shall be provided access

to an insurer’s mortgage guaranty quality assurance program for review at any reasonable time upon request

and during any financial regulatory examination. Nothing herein shall be construed to limit a regulator’s right

to access any and all of the records of an insurer in an examination or as otherwise necessary to meet

regulatory responsibilities.

Section 14. Policy Forms and Premium Rates Filed

Policy Forms. Policy forms, endorsements, and modifications (excluding bulk mortgage guaranty insurance

and pool mortgage guaranty insurance) shall be filed with and be subject to the approval of the commissioner.

With respect to owner-occupied, single-family dwellings or a mixed-use building described in Section

2A(1)(b), which is owner-occupied at the time of loan origination and for at least 50% of the days within the

twelve (12) consecutive months prior to borrower default, the borrower shall not be liable to the insurance

company for any deficiency arising from a foreclosure sale.

Premium Rates. Each mortgage guaranty insurance company (excluding bulk mortgage guaranty insurance

and pool mortgage guaranty insurance) shall file with the commissioner the rate to be charged including all

modifications.

Premium Charges. Every mortgage guaranty insurance company shall make available to insureds the

premium charges for mortgage guaranty insurance policies via a company website or an integration with a

third-party system. The premium rate provided shall show the entire amount of premium charge for the type

of mortgage guaranty insurance policy to be issued by the insurance company.

Drafting Note: Open rating states may delete a portion or all of Section 14 and insert their own rating law.

Section 15. Risk in Force and Waivers

Risk in Force. A mortgage guaranty insurance company shall not at any time have outstanding risk in force,

net of reinsurance, under its aggregate mortgage guaranty insurance policies exceeding twenty-five (25) times

its capital, surplus and contingency reserve. In the event that any mortgage guaranty insurance company has

outstanding total risk in force exceeding twenty-five (25) times its capital, surplus and contingency reserve,

it shall cease transacting new mortgage guaranty business until such time as its total risk in force no longer

exceeds twenty-five (25) times its capital, surplus and contingency reserve. Total risk in force shall be

calculated on an individual entity basis.

Waiver. The commissioner may waive the requirement found in Section 15A at the written request

of a mortgage guaranty insurer upon a finding that the mortgage guaranty insurer's policyholders position

is reasonable in relationship to the mortgage guaranty insurer's aggregate insured risk in force and adequate

to its financial needs. The request must be made in writing at least 90 days in advance of the date that the

mortgage guaranty insurer expects to exceed the requirement of Section 15A and shall, at a minimum,

address the factors specified in Section 15C.

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Waiver Criteria. In determining whether a mortgage guaranty insurer's policyholders position is

reasonable in relation to the mortgage guaranty insurer's aggregate insured risk in force and adequate to its

financial needs, all of the following factors, among others, may be considered:

(1)

The size of the mortgage guaranty insurer as measured by its assets, capital and surplus, reserves,

premium writings, insurance in force, and other appropriate criteria.

(2)

The extent to which the mortgage guaranty insurer's business is diversified across time,

geography, credit quality, origination, and distribution channels.

(3)

The nature and extent of the mortgage guaranty insurer's reinsurance program.

(4)

The quality, diversification, and liquidity of the mortgage guaranty insurer's assets and its

investment portfolio.

(5)

The historical and forecasted trend in the size of the mortgage guaranty insurer's policyholders

position.

(6)

The policyholders position maintained by other comparable mortgage guaranty insurers in

relation to the nature of their respective insured risks.

(7)

The adequacy of the mortgage guaranty insurer's reserves.

(8)

The quality and liquidity of investments in affiliates. The c ommissioner may treat any such

investment as a nonadmitted asset for purposes of determining the adequacy of surplus as

regards policyholders.

(9)

The quality of the mortgage guaranty insurer's earnings and the extent to which the reported

earnings of the mortgage guaranty insurer include extraordinary items.

(10)

An independent actuary's opinion as to the reasonableness and adequacy of the mortgage

guaranty insurer's historical and projected policyholders position.

(11)

The capital contributions which have been infused or are available for future infusion into the

mortgage guaranty insurer.

(12)

The historical and projected trends in the components of the mortgage guaranty insurer's

aggregate insured risk, including, but not limited to, the quality and type of the risks included in

the aggregate insured risk.

Authority to Retain Experts. The commissioner may retain accountants, actuaries, or other experts to

assist in the review of the mortgage guaranty insurer's request submitted pursuant to Section 15B. The

mortgage guaranty insurer shall bear the commissioner's cost of retaining those persons.

Specified Duration. Any waiver shall be:

(1)

For a specified period of time not to exceed two years; and

(2)

Subject to any terms and conditions that the commissioner shall deem best suited to

restoring the mortgage guaranty insurer's minimum policyholders position required by

Section 15A.

Section 16. Conflict of Interest

A mortgage guaranty insurer may underwrite mortgage guaranty insurance on mortgages originated by the holding company

system or affiliate or on mortgages originated by any mortgage lender to which credit is extended, directly or indirectly by the

holding company system or affiliate only if the insurance is underwritten on the same basis, for the same consideration and

subject to the same insurability requirements as insurance provided to nonaffiliated lenders. Mortgage guaranty insurance

underwritten on mortgages originated by the holding company system or affiliate or on mortgages originated by any mortgage

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lender to which credit is extended, directly or indirectly by the holding company system or affiliate shall be limited to 50% of

the insurer's direct premium written in any calendar year, or such higher percentage established in writing for the insurer in the

domiciliary commissioner's discretion, based on the domiciliary commissioner's determination that a higher percentage is not

likely to adversely affect the financial condition of the insurer.

Section 17. Compensating Balances Prohibited

Except for commercial checking accounts and normal deposits in support of an active bank line of credit, a mortgage guaranty

insurance company, holding company or any affiliate thereof is prohibited from maintaining funds on deposit with the lender

for which the mortgage guaranty insurance company has insured loans. Any deposit account bearing interest at rates less than

what is currently being paid other depositors on similar deposits or any deposit in excess of amounts insured by an agency of

the federal government shall be presumed to be an account in violation of this section. Furthermore, a mortgage guaranty

insurance company shall not use compensating balances, special deposit accounts or engage in any practice that unduly delays

its receipt of monies due or that involves the use of its financial resources for the benefit of any owner, mortgagee of the real

property or any interest therein or any person who is acting as agent, representative, attorney or employee of the owner,

purchaser or mortgagee as a means of circumventing any part of this section.

Section 18. Limitations on Rebates, Commissions, Charges and Contractual Preferences

Inducements. A mortgage guaranty insurance company shall not pay or cause to be paid either directly or

indirectly, to any owner, purchaser, lessor, lessee, mortgagee or prospective mortgagee of the real property

that secures the authorized real estate security or that is the fee of an insured lease, or any interest therein, or

to any person who is acting as an agent, representative, attorney or employee of such owner, purchaser, lessor,

lessee or mortgagee, 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.

Compensation for Placement. In connection with the placement of any mortgage guaranty insurance, a

mortgage guaranty insurance company shall not cause or permit the conveyance of anything of value,

including but not limited to any commission, fee, premium adjustment, remuneration or other form of

compensation of any kind whatsoever to be paid to, or received by an insured lender or lessor; any subsidiary

or affiliate of an insured; an officer, director or employee of an insured or any member of their immediate

family; a corporation, partnership, trust, trade association in which an insured is a member, or other entity in

which an insured or an officer, director or employee or any member of their immediate family has a financial

interest; or any designee, trustee, nominee or other agent or representative of any of the foregoing, except for

the value of the insurance itself or claim payments thereon as provided by contract or settlement.

Rebates. A mortgage guaranty insurance company shall not make a rebate of any portion of the premium

charge, as shown by the schedule required by Section 14C. No mortgage guaranty insurance company shall

quote any rate or premium charge to a person that is different than that currently available to others for the

same type of coverage. The amount by which a premium charge is less than that called for by the current

schedule of premium charges is an unlawful rebate.

Undue Contractual Preferences.

(1)

Any contract, letter agreement, or other arrangement used to clarify any terms, conditions, or

interpretations of a master policy or certificate shall be documented in writing.

(2)

Any contractual or letter agreements used to modify or clarify general business practices and

administrative, underwriting, claim submission or other information exchange processes shall not

contain provisions which override or significantly undermine the intent of key provisions of the

mortgage guaranty insurance model act, including mortgage insurer discretion, rights and

responsibilities related to:

(a)

Underwriting standards.

(b)

Quality assurance.

(c)

Rescission.

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Sanctions. The commissioner may, after notice and hearing, suspend or revoke the certificate of authority of

a mortgage guaranty insurance company, or in his or her discretion, issue a cease and desist order to a

mortgage guaranty insurance company that pays a commission, rebate, or makes any unlawful conveyance

of value under this section in willful violation of the provisions of this Act. In the event of the issuance of a

cease and desist order, the commissioner may, after notice and hearing, suspend or revoke the certificate of

authority of a mortgage guaranty insurance company that does not comply with the terms thereof.

Educational Efforts and Promotional Materials Permitted. A mortgage guaranty insurance company may

engage in any educational effort with borrowers, members of the general public, and officers, directors,

employees, contractors and agents of insured lenders that may reasonably be expected to reduce its risk of

Loss or promote its operational efficiency and may distribute promotional materials of minor value.

Section 19. Rescission

All mortgage guaranty insurance company master policies shall include a detailed description of provisions governing

rescissions, re-pricing, and cancellations, which specify the insurer’s and insured’s rights, obligations and eligibility terms

under which those actions may occur to ensure transparency.

Section 20. Records Retention

Record Files. A licensed mortgage guaranty insurance company shall maintain its records in a manner which

allows the commissioner to readily ascertain the insurer’s compliance with state insurance laws and rules

during an examination including, but not limited to, records regarding the insurer’s management, operations,

policy issuance and servicing, marketing, underwriting, rating and claims practices.

Retention Period. Policy and claim records shall be retained for the period during which the certificate or

claim is active plus five (5) years, unless otherwise specified by the insurance commissioner. Recordkeeping

requirements shall relate to:

(1)

Records to clearly document the application, underwriting, and issuance of each master policy and

certificate of insurance; and

(2)

Claim records to clearly document the inception, handling, and disposition.

Record Format. Any record required to be maintained by a mortgage insurer may be created and stored in

the form of paper, photograph, magnetic, mechanical or electronic medium.

Record Maintenance. Record maintenance under this Act shall comply with the following requirements:

(1)

Insurer maintenance responsibilities shall provide for record storage in a location that will allow the

records to be reasonably produced for examination within the time period required.

(2)

Third-Party maintenance related responsibilities shall be set forth in a written agreement, a copy of

which shall be maintained by the insurer and available for purposes of examination.

Section 21. Regulations

The commissioner shall have the authority to promulgate rules and regulations deemed necessary to effectively implement the

requirements of this Act.

Chronological Summary of Actions (all references are to the Proceedings of the NAIC).

1976 Proc. II 15, 17, 647, 686, 747-753 (adopted).

1979 Proc. I 44, 47-48, 49, 719, 968-969 (corrected).

2023 Summer National Meeting (amended).

2024 1st Quarter (technical edit).