2006 Minnesota Statutes

116J.8765 RESERVE FUND; PREMIUMS.
    Subdivision 1. Creation. Upon execution of an agreement between the lender and the
commissioner, the commissioner shall establish a reserve fund account with the lender in the
name of the commissioner for the purpose of receiving all required premium charges to be paid by
the lender and the borrower and transfers made by the commissioner under sections 116J.876 to
116J.8769.
    Subd. 2. Premium payments and transfers to reserve fund. The premium charges payable
to the reserve fund by the lender and the borrower in connection with a loan filed for enrollment
are determined by the lender. The premium paid by the borrower may not be less than 1.5 percent
nor greater than 3.5 percent of the amount of the loan. The premium paid by the lender shall be
equal to the amount of the premium paid by the borrower. The lender may recover from the
borrower the cost of the lender's premium payment, in any manner in which the lender and
borrower agree. When enrolling a loan, the commissioner shall transfer into the reserve fund from
the account premium amounts determined as follows:
(a) If the amount of any loan, plus the amount of loans previously enrolled by the lender,
is less than $2,000,000, the premium amount transferred must be equal to 150 percent of the
combined premiums paid into the reserve fund by the borrower and the lender for each enrolled
loan.
(b) If, prior to the enrollment of the loan, the amount of loans previously enrolled by the
lender equals or exceeds $2,000,000, the premium amount transferred must be equal to the
combined premiums paid into the reserve fund by the borrower and the lender for each enrolled
loan.
(c) If the amount of loans previously enrolled by the lender is less than $2,000,000, but the
enrollment of a loan will cause the aggregate amount of all enrolled loans made by the lender
to exceed $2,000,000, the premium amount transferred must be equal to a percentage of the
combined amount paid by the lender and the borrower. The percentage must be determined by (1)
multiplying by 150 that portion of the loan which when added to the amount of all previously
enrolled loans totals $2,000,000, (2) multiplying the balance of the loan by 100, and (3) adding
the products of the two amounts and dividing the sum by the total amount of the loan.
    Subd. 3. Limitation of transfers. A maximum premium amount of $150,000 may be
transferred into the reserve funds of all lenders participating in the program by the commissioner
over any three-year period in connection with any one borrower or any group of borrowers among
which a common enterprise exists. This maximum premium amount may be exceeded upon the
written request by a lender only if the commissioner approves in writing the transfer of an amount
in excess of $150,000. For the purpose of this subdivision, the term "common enterprise" has the
meaning given it in Code of Federal Regulations, title 12, section 32, as amended.
    Subd. 4. Control and investment of reserve fund. (a) All money credited to the reserve
fund is under the exclusive control of the commissioner. The commissioner may not withdraw
money from the reserve fund except as specifically provided in this subdivision and sections
116J.8766 and 116J.8768.
(b) Money in the reserve fund must be deposited by the commissioner in an account with
the lender unless the commissioner determines that the lender is not in substantial compliance
with the requirements of the agreement. If money in the reserve fund is not deposited by the
commissioner in an account with the lender, it must be invested or reinvested by the commissioner
in (1) direct obligations of the United States or the state of Minnesota or in obligations the
principal and interest of which are unconditionally guaranteed by the United States or the state of
Minnesota, or (2) a deposit account at a depository institution whose deposits are insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation.
(c) Interest or income earned on the money credited to the reserve fund is part of the reserve
fund. The commissioner may withdraw at any time from the reserve fund 50 percent of all interest
or income that has been credited to the reserve fund, except that after the first withdrawal the
commissioner may not withdraw more than 50 percent of all interest or income that has been
credited to the reserve fund since the time of the last withdrawal. Any withdrawal made under this
subdivision may be made prior to paying any claim. None of the amounts withdrawn need to be
transferred back to the reserve fund. Any withdrawal under this subdivision must be credited in
the capital access account.
    Subd. 5. Pledge of the reserve fund. The commissioner shall pledge to the lender that the
money in the reserve fund will be available to pay claims under section 116J.8766, that the lender
will have a first security interest in the money in the reserve fund to pay the claims, and that the
commissioner will not encumber or pledge the money to any other party.
    Subd. 6. Quarterly reports; inspections. (a) If the reserve fund is not maintained with the
lender, the commissioner shall provide to the lender quarterly transaction reports indicating the
balance in the reserve fund, payments and transfers into the reserve fund, withdrawals from the
reserve fund, and interest or income earned on money credited to the reserve fund.
(b) The records of the commissioner with respect to all payments and transfers into the
reserve fund, withdrawals from the reserve fund, and interest or income earned on the money
credited to the reserve fund, are available to the lender at the offices of the commissioner during
normal business hours.
History: 1989 c 335 art 1 s 151