Esta ley enmienda el Código de Seguros de Puerto Rico para permitir el seguro de préstamos hipotecarios con financiamiento superior al 97% y autorizar a las aseguradoras hipotecarias a ofrecer mayor cobertura cuando el exceso es reasegurado. Busca facilitar la adquisición de viviendas para familias con pocos ahorros para el pronto pago, alineando la legislación local con las prácticas del mercado secundario de hipotecas en Estados Unidos.
(Approved May 16, 2002)
To amend subsection (2) of Section 23.010 and subsection (2) of Section 23.030 of Act No. 77 of June 19, 1957, as amended, known as "Insurance Code of Puerto Rico," to allow the insurance of mortgage loans with financing in excess of ninety-seven (97) percent and to allow mortgage insurers to offer higher coverage when the excess is reinsured.
The mortgage loan insurance provided in the "Insurance Code of Puerto Rico" provides protection to lenders against financial losses arising from default in the payment of a mortgage secured by encumbrance on residential real property or buildings occupied for industrial or commercial purposes. Should the defaulter fail to comply with the payment of the loan, the creditor may claim from the insurance the amount of the loss suffered up to the sum of the policy coverage.
However, the loss insured by a mortgage loan insurance is limited. The Insurance Code of Puerto Rico limits the obligation of a mortgage insurer to a maximum of thirty (30) percent of the amount of any claim payable and also limits it to provide insurance on mortgages with a maximum financing of ninety-seven (97) percent. As a result, the Insurance Code hinders the institutions in Puerto Rico from obtaining the coverage needed to meet the requirements of the secondary market agencies and even more, hinders them
front granting financing to families that wish to buy a home but do not have enough funds to pay the down payment.
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), both quasi-governmental agencies, are agencies that acquire the largest part of conventional residential mortgages in the secondary market, which originate in Puerto Rico. The presence of this active market is absolutely necessary, especially to help those families that do not have enough money saved to buy a home. Both agencies have approved the purchase of mortgages with $97 %$ of financing. This means that in some cases the family would contribute only $3 %$ or $0 %$ of the down payment.
In the United States, the Insurance Codes have been amended during the past years to allow the insurers to offer coverage higher than $30 %$, as long as the excess is reassured. In addition, there have been legislative changes made allowing that mortgages in excess of ninety-seven (97) percent of financing to be insured. Puerto Rico is the only jurisdiction of the United States where mortgage insurers are hindered from providing coverage in excess of thirty (30) percent and insure loans in excess of ninety-seven (97) percent financing. This situation hinders the granting of financing to families that wish to buy a home, and do not have enough funds to make the down payment.
This Administration deems it necessary to amend the Insurance Code in order to eliminate the aforementioned limits so the families that do not have enough savings can acquire their homes by contributing only three or cero percent down payment.
Section 1.- Subsection (2) of Section 23.010 of Act No. 77 of June 29, 1957, as amended, is hereby amended to read as follows: "Section 23.010.- Short title; definitions This Act shall be known as the Mortgage Loans Insurance Act and may be cited as such.
For the purposes of this Act: (1) ... (2) Authorized Realty Guaranty - means a promissory note, bond, or any other evidence of amortizable indebtedness not exceeding one hundred (100) percent of the reasonable market value of the realty, secured by a mortgage, trust deed, or any other instrument constituting the first encumbrance or lien on the realty; Provided: ..." Section 2.- Subsection (2) of Section 23.030 of Act No. 77 of June 19, 1957, as amended is hereby amended to read as follows: "Section 23.030.- Limitations and restrictions in transacting business (1) ... (2) An insurer shall limit the amount of his obligation to a maximum of thirty (30) percent of the amount of any claim payable under the terms of his policy, but instead of paying the above-mentioned amount the insurer may elect to pay in full the amount of the claim as defined in his policy, and acquire the ownership title to the realty guaranty. Upon determining his obligation, the insurer may deduct from it the portion ceded through the reinsurance authorized by Section 4.120 of this Act. (3) $\ldots$
(4) ..." Section 3.- This Act shall take effect immediately after its approval.
I hereby certify to the Secretary of State that the following Act No. 65 (H.B. 2091) of the $\underline{3}^{ ext {rd }}$ Session of the $\underline{14}^{ ext {th }}$ Legislature of Puerto Rico:
AN ACT to amend subsection (2) of Section 23.010 and subsection (2) of Section 23.030 of Act No. 77 of June 19, 1957, as amended, known as "Insurance Code of Puerto Rico," to allow the insurance of mortgage loans with financing in excess of ninety-seven (97) percent and to allow mortgage insurers to offer higher coverage when the excess is reinsured, has been translated from Spanish to English and that the English version is correct.
In San Juan, Puerto Rico, today $30^{ ext {th }}$ of April of 2004.
Elba Rosa Rodríguez-Fuentes Director