Sec. 05.06.09.06. Insurance

A. Application. A lender shall submit an application, in the form prescribed by the Fund, which shall contain a complete credit package and any other documentation required by the Fund.

B. Underwriting and Appraisal. An application for insurance received from an approved lender may be subject to underwriting and appraisal review in accordance with the requirements of the Fund.

C. Scope of Insurance Coverage.

(1) Insurance coverage is limited to economic loss due to a monetary default and does not include loss due to casualty or title risk.

(2) Expenses incurred for property repair or replacement resulting from casualty loss, including losses due to negligence, flood, fire, termites, vandalism, theft, and defective construction, are not eligible for coverage.

(3) Expenses incurred by the lender in the preservation and normal maintenance of an insured property may be covered in accordance with the terms and conditions of the applicable insurance policy governing the insured loan.

D. Insurance on business project loans may be offered in the following forms:

(1) Mortgage or loan insurance;

(2) Credit enhancement;

(3) Loan guaranty; or

(4) Other type of insurance as approved by the Fund covering economic loss due to monetary default.

E. The Fund may offer insurance on loans that are within a pool of loans as described in the applicable insurance policy.

F. The Fund may enter into reinsurance, coinsurance, and risk-sharing arrangements with other insurers and lenders, as approved by the Secretary.

G. To maintain insurance coverage on an existing loan, the following transactions require prior approval of the Fund on terms and conditions acceptable to the Fund:

(1) A transfer of any interest in the secured property;

(2) An assignment of the insured loan;

(3) An assumption of an insured loan; or

(4) Any change or modification of the terms of the insured loan.