Legislation Document

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend § 1323, Title 18 of the Delaware Code by making deletions as shown by strike through and insertions as show by underline as follows:

§ 1323. Real estate mortgages.

(a) An insurer may invest in bonds, notes or other evidences of indebtedness secured by first or second mortgages or deeds of trust representing first or second liens upon real estate, perpetual leases thereon or leasehold estates when the remaining term of such leasehold and enforceable renewals is not less than the term of such first or second lien, as the case may be, in the United States or Canada, subject to the following conditions:

(1) The amount loaned or the aggregate amount of bonds or other evidences of indebtedness issued upon the security of a mortgage or deed of trust (when added to the amount unpaid upon any prior first mortgage or deed of trust) shall not at the time of the investment exceed 75% of the fair market value of the real estate, as such value has been determined by a qualified appraiser for the purposes of the investment or at the time of issuance of the bonds or other evidences of indebtedness.

(2) In applying the limitation under paragraph (a)(1) of this section above, there may be excluded from the amount invested that portion of the investment which is guaranteed by the Administrator of Veterans’ Affairs pursuant to the Servicemen’s Readjustment Act of 1944 [38 U.S.C. § 1802 et seq.], as amended, or insured by the Federal Housing Administrator or other United States or Canadian government agency.

(3) Insurance not less comprehensive than fire and extended coverage must be carried on the improvements, if any, on the real estate, in an amount not less than 75% of the insurable value of the improvements or the unpaid balance of the investment, whichever is the lesser amount, and the policy or policies evidencing such insurance shall be endorsed to show the interest of the lender.

(4) No mortgage loan upon a leasehold shall be made or acquired by an insurer pursuant to this section unless the except under one of the following conditions:

a. The terms thereof shall provide for such payments of principal, whatever the period of the loan, so that at no time during the period of the loan shall the aggregate payments of principal theretofore required to be made under the terms of the loan be less than would have been necessary for a loan payable completely by the end of the lesser of a period of ⁴ / ₅ of the period of the leasehold, inclusive of the period or periods which may be provided by enforceable options of renewal, which is unexpired at the time the loan is made or 40 years, through payments of interest only for 5 years and equal payments applicable first to interest and then to principal at the end of each year thereafter.

b. The maturity date of the loan occurs on a date that is no later than 30 years prior to the leasehold termination date, inclusive of the period or periods which may be provided by enforceable options of renewal, and the loan to value ratio of the leasehold as of the date of acquisition of such loan does not exceed 70%.

(5) The total investments of any insurer permitted under this subsection in bonds, notes or other evidences of indebtedness secured by second mortgages or deeds of trust and under subsection (e) of this section in participations evidencing participating interests in bonds, notes or other evidences of indebtedness which are so secured, shall not exceed 5% of its assets, and no such investment shall be made or acquired by an insurer if the mortgagor, without the approval of the insurer, may increase the principal amount of the indebtedness secured by the prior first mortgage except to the extent that the amount of such increase is applied in reduction of the investment held by the insurer.

SPONSOR:	Rep. Bush & Sen. Mantzavinos
Sen. Walsh