12 U.S.C. § 1711 — General Surplus and Participating Reserve Accounts

submitted 92 years ago by ch. 847 to r/title-12-BANKS-AND-BANKING · 742 words · no verdicts yet

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This section creates General Surplus and Participating Reserve Accounts in the Mutual Mortgage Insurance Fund and governs credits, distributions, and capital ratios. It also sets limits on mortgagor rights and requires the Fund to meet specified ratios.

(a) As of July 1, 1954, the Secretary must establish a General Surplus Account and a Participating Reserve Account in the Mutual Mortgage Insurance Fund. All General Reinsurance Account assets move to the General Surplus Account, and that account is abolished. The various group accounts must transfer to the Participating Reserve Account the amount that would have been distributed if all their mortgages had been paid in full on that date. Their remaining balances then move to the General Surplus Account, and the group accounts are abolished. (b) Later net income or net losses of the Fund in each six-month period must be credited or charged to the accounts as the Secretary decides is consistent with sound actuarial and accounting practice. (c) When the Fund’s insurance obligation ends because an insured mortgage is paid, the Secretary may distribute to the mortgagor a fair share of the Participating Reserve Account under sound actuarial and accounting practice. The share may never exceed the mortgagor’s scheduled annual premiums through the termination year. No share may be distributed beginning six years after the Secretary first sent written eligibility notice to the mortgagor’s last known address unless the mortgagor applied under Secretary procedures within those six years. Amounts no longer eligible must move to the General Surplus Account. (d) A mortgagor or mortgagee has no vested right to a balance in either account and has no liability arising from the Fund’s mutual structure. The Secretary’s payment determination is final. (e) To decide whether a surplus exists for distributions, the Secretary must consider the actuarial status of the entire Fund. (f)(1) The Secretary must ensure that the Fund reaches and maintains a capital ratio of at least 1.25 percent within 24 months after November 5, 1990. (2) The Secretary must try to reach 2 percent within 10 years after that date and must maintain at least 2 percent thereafter. (3) After the 24-month period, the Secretary must report to Congress the actions planned to reach the paragraph (2) ratio. (4) “Capital” means the Fund’s economic net worth determined in the required annual audit. “Capital ratio” means capital divided by unamortized insurance-in-force. “Economic net worth” means current cash plus the net present value of expected future cash inflows and outflows from outstanding mortgages. “Unamortized insurance-in-force” means the remaining obligation on outstanding mortgages that the Fund insures, as estimated by the Secretary.

the actual law source: uscode.house.gov ↗public domain

(a) Establishment; abolishment of General Reinsurance Account

The Secretary shall establish as of July 1, 1954, in the Mutual Mortgage Insurance Fund a General Surplus Account and a Participating Reserve Account. All of the assets of the General Reinsurance Account shall be transferred to the General Surplus Account whereupon the General Reinsurance Account shall be abolished. There shall be transferred from the various group accounts to the Participating Reserve Account as of July 1, 1954, an amount equal to the aggregate amount which would have been distributed under the provisions of this section in effect on June 30, 1954, if all outstanding mortgages in such group accounts had been paid in full on said date. All of the remaining balances of said group accounts shall as of said date be transferred to the General Surplus Account whereupon all of said group accounts shall be abolished.

(b) Credits and charges

The aggregate net income thereafter received or any net loss thereafter sustained by the Mutual Mortgage Insurance Fund in any semiannual period shall be credited or charged to the General Surplus Account and/or the Participating Reserve Account in such manner and amounts as the Secretary may determine to be in accord with sound actuarial and accounting practice.

Upon termination of the insurance obligation of the Mutual Mortgage Insurance Fund by payment of any mortgage insured thereunder, the Secretary is authorized to distribute to the mortgagor a share of the Participating Reserve Account in such manner and amount as the Secretary shall determine to be equitable and in accordance with sound actuarial and accounting practice: Provided, That, in no event, shall any such distributable share exceed the aggregate scheduled annual premiums of the mortgagor to the year of termination of the insurance. The Secretary shall not distribute any share to an eligible mortgagor under this subsection beginning on the date which is 6 years after the date the Secretary first transmitted written notification of eligibility to the last known address of the mortgagor, unless the mortgagor has applied in accordance with procedures prescribed by the Secretary for payment of the share within the 6-year period. The Secretary shall transfer any amounts no longer eligible for distribution under the previous sentence from the Participating Reserve Account to the General Surplus Account.

(d) Rights and liabilities

No mortgagor or mortgagee of any mortgage insured under section 1709 of this title shall have any vested right in a credit balance in any such account or be subject to any liability arising out of the mutuality of the Fund and the determination of the Secretary as to the amount to be paid by him to any mortgagor shall be final and conclusive.

(e) Actuarial status of entire Fund

In determining whether there is a surplus for distribution to mortgagors under this section, the Secretary shall take into account the actuarial status of the entire Fund.

(f) Capital ratio for Mutual Mortgage Insurance Fund

(1)

The Secretary shall ensure that the Mutual Mortgage Insurance Fund attains a capital ratio of not less than 1.25 percent within 24 months after November 5, 1990, and maintains such ratio thereafter, subject to paragraph (2).

(2)

The Secretary shall endeavor to ensure that the Mutual Mortgage Insurance Fund attains a capital ratio of not less than 2.0 percent within 10 years after November 5, 1990, and shall ensure that the Fund maintains at least such capital ratio at all times thereafter.

(3)

Upon the expiration of the 24-month period beginning on November 5, 1990, the Secretary shall submit to the Congress a report describing the actions the Secretary will take to ensure that the Mutual Mortgage Insurance Fund attains the capital ratio required under paragraph (2).

(4)

For purposes of this subsection:

(A)

The term “capital” means the economic net worth of the Mutual Mortgage Insurance Fund, as determined by the Secretary under the annual audit required under section 1735f–16 of this title.

(B)

The term “capital ratio” means the ratio of capital to unamortized insurance-in-force.

(C)

The term “economic net worth” means the current cash available to the Fund, plus the net present value of all future cash inflows and outflows expected to result from the outstanding mortgages in the Fund.

(D)

The term “unamortized insurance-in-force” means the remaining obligation on outstanding mortgages which are obligations of the Mutual Mortgage Insurance Fund, as estimated by the Secretary.

Source credit: (June 27, 1934, ch. 847, title II, § 205, 48 Stat. 1250; May 28, 1935, ch. 150, § 29(b), 49 Stat. 300; Feb. 3, 1938, ch. 13, § 3, 52 Stat. 15; June 3, 1939, ch. 175, § 11, 53 Stat. 807; Apr. 20, 1950, ch. 94, title I, § 122, 64 Stat. 59; June 30, 1953, ch. 170, § 4, 67 Stat. 122; Aug. 2, 1954, ch. 649, title I, § 114, 68 Stat. 594; Pub. L. 90–19, § 1(a)(3), May 25, 1967, 81 Stat. 17; Pub. L. 101–508, title II, §§ 2104, 2105, Nov. 5, 1990, 104 Stat. 1388–19; Pub. L. 102–550, title V, § 508(a), Oct. 28, 1992, 106 Stat. 3782; Pub. L. 110–289, div. B, title I, § 2118(c)(1), July 30, 2008, 122 Stat. 2835.)

history & why it existsrecord from the source credit

1934Enacted · Act of June 27, 1934, ch. 847 · 48 Stat. 1250
1935Amended · Act of May 28, 1935, ch. 150 · 49 Stat. 300
1938Amended · Act of Feb. 3, 1938, ch. 13 · 52 Stat. 15
1939Amended · Act of June 3, 1939, ch. 175 · 53 Stat. 807
1950Amended · Act of Apr. 20, 1950, ch. 94 · 64 Stat. 59
1953Amended · Act of June 30, 1953, ch. 170 · 67 Stat. 122
1954Amended · Act of Aug. 2, 1954, ch. 649 · 68 Stat. 594
1967Amended · Pub. L. 90-19 · 81 Stat. 17
1990Amended · Pub. L. 101-508 · 104 Stat. 1388
1992Amended · Pub. L. 102-550 · 106 Stat. 3782
2008Amended · Pub. L. 110-289 · 122 Stat. 2835

A history note hasn’t been published yet. The record shows enactment by ch. 847 on 1934-06-27.

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