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Who cares
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Sponsors
1 Co-sponsor
History
- Referred to insurance
- Delivered to assembly
- Passed senateVote 53–7
- Advanced to third reading
- 2nd report cal.
- 1st report cal.1284
- Referred to insurance
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Relates to requirements for coverage by mortgage guaranty insurance
In Assembly Committee · Insurance · Sponsor Francisco Moya
Full text
The text isn't available here yet. Check nysenate.gov.
Sponsor's memo
Title of bill
An act to amend the insurance law, in relation to mortgage guaranty insurance
Purpose
To eliminate a reinsurance requirement currently imposed on mortgage guaranty insurance companies that is outdated, duplicative and unnecessary.
Summary of provisions
This bill would repeal a section of the Insurance Law that prohibits a mortgage guaranty insurer from insuring more than 25% of a borrower's mortgage indebtedness to an insured lender unless the mortgage guaranty insurer obtains reinsurance for amounts over that 25% limit.
Justification
Mortgage guaranty insurance is a type of insurance coverage that protects banks and other lenders from losses if borrowers default on their residential home loans.
To limit the exposure of mortgage guaranty insurance companies, legislation was enacted in 1994 to require that they obtain reinsurance for any coverage they provide that exceeds 25% of a borrower's total indebtedness to the insured lender. For pool loans, reinsurance is currently required on any portion of loans over 25% of the pool's total indebtedness. This legislation was based in part on a Mortgage Guaranty Insurance Model Act developed by the National Association of Insurance Commissioners (NAIC).
Since the statute was enacted, the market for unaffiliated reinsurance companies to provide the type of reinsurance contemplated by the current law on such loans has been essentially non-existent. Over time, mortgage guaranty insurance companies began creating affiliated reinsurers to comply with the reinsurance requirements, preferring to retain their own risk rather than assume those underwritten by their competitors.
Requiring that risk and capital be divided between up to four affiliated insurers/reinsurers instead of being concentrated in one insurer does not provide any additional protection to insured lenders. Instead, it has resulted in a financial and administrative burden on mortgage guaranty insurance companies that must individually register and maintain these affiliated but legally separate companies. For example, in addition to the individual state licensing fees each affiliated entity must pay, multiple licensed entities require separate maintenance, financial accounting, actuarial opinions, reporting and examinations.
In recognition of this problem, the NAIC is revising its Model Act to eliminate this outdated and unnecessary requirement. In fact, 7 of the 9 states that originally enacted similar laws have since repealed this reinsurance requirement. New York is one of only two states that has this form of risk limitation on first-lien loans.
Passage of this legislation will have no negative effect on consumers or the insured lenders. This legislation alleviates the unnecessary administrative and financial burden that has been placed on the mortgage guaranty insurance marketplace without making any changes to risk and capital requirements.
Legislative history
New bill.
Fiscal implications
None.
Effective date
Immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.