Title 42
State Affairs and Government

Chapter 55
Rhode Island Housing and Mortgage Finance Corporation

§ 42-55-10. Terms and conditions of the purchase and sale to mortgage lender of loans — Loans to mortgage lenders.

(a) No obligation purchased from a mortgage lender shall be eligible for purchase or commitment to purchase by the corporation unless at or before the time of transfer to the corporation the mortgage lender certifies that in its judgment the loan would in all respects be a prudent investment for its own account.

(b) The corporation shall purchase mortgage loans at a purchase price equal to the outstanding principal balance; provided, however, that a discount from the principal balance or the payment of a premium may be employed to effect a fair rate of return, as determined by the rate of return on comparable investments under market conditions existing at the time of the purchase. In addition to this payment of outstanding principal balance, the corporation shall pay the accrued interest due on the date the loan or obligation is delivered against the payment.

(c) Loans purchased or sold may include, but shall not be limited to, loans which are insured, guaranteed, or assisted by the United States or a governmental agency or instrumentality thereof or for which there is a commitment by the United States or a governmental agency or instrumentality thereof to insure, guaranty, or assist that loan.

(d)(1) The corporation shall from time to time adopt, modify, or repeal rules and regulations governing the making of loans to mortgage lenders and the purchase and sale of mortgage loans and the application of the proceeds thereof, including rules and regulations as to any or all of the following:

(i) Procedures for the submission of requests or the invitation of proposals for the purchase and sale of mortgage loans or for loans to mortgage lenders;

(ii) Limitations or restrictions as to the number of family units, location, or other qualifications or characteristics of residences to be financed by those mortgage loans;

(iii) Restrictions as to the interest rates on those mortgage loans or the return realized by mortgage lenders;

(iv) Requirements as to commitments by mortgage lenders with respect to the application of the proceeds of that purchase or loan;

(v) Schedules of any fees and charges necessary to provide for the expenses and reserves of the corporation; and

(vi) Any other matters related to the duties and the exercise of the powers of the corporation under this section.

(2) These rules and regulations shall be designed to effectuate the general purposes of this chapter and the following specific objectives:

(i) The expansion of the supply of funds in the state available for mortgage loans for residential housing for occupancy by persons and families of low and moderate income;

(ii) Provision of the additional housing needed to remedy the shortage of adequate housing in the state and eliminate the existence of a large number of substandard dwellings; and

(iii) The restriction of the financial return and benefit on those mortgage loans to that level necessary to protect against the realization by mortgage lenders of a financial return or benefit in excess of prevailing market conditions.

(e) The corporation may from time to time make loans to mortgage lenders so as to furnish, as rapidly as possible, funds to mortgage lenders for eligible mortgages.

(f) Loans to mortgage lenders shall be general obligations of the respective mortgage lenders owing them and shall bear the date or dates, shall mature at the time or times, shall be evidenced by a note, bonds, or other certificate of indebtedness, shall be subject to prepayment, and shall contain other provisions consistent with this section, all as the corporation shall by resolution determine.

(g) Any other provision of this chapter to the contrary notwithstanding, the interest rate or rates and other terms of the loans to mortgage lenders made from the proceeds of any issue of bonds of the corporation shall be at least sufficient so as to assure the payment of the bonds, and the interest on the bonds as they become due, from the amounts received by the corporation in repayment of loans and interest on the loans.

(h) The corporation shall require as a condition of each loan to a mortgage lender that that mortgage lender shall on or prior to the one hundred-eightieth (180th) day or an earlier day that shall be prescribed by the rules and regulations of the corporation) following the receipt of the loan proceeds have entered into written commitments to make, and shall proceed as promptly as practicable to make and disburse from those loan proceeds, eligible mortgages in an aggregate principal amount equal to the amount of the loan.

(i)(1) The corporation shall require that the loans to mortgage lenders shall be additionally secured as to the payment of both principal and interest by a pledge of and lien upon collateral security in those amounts that the corporation shall by resolution determine to be necessary to assure the payment of the loans and the interest on the loans as they become due. The collateral security shall consist of:

(i) Direct obligations of, or obligations guaranteed by, the United States;

(ii) Bonds, debentures, notes, or other evidences of indebtedness, satisfactory to the agency, issued by any of the following federal agencies: bank for cooperatives, federal intermediate credit bank, federal home loan bank system, export-import bank of Washington, federal land banks, the federal national mortgage association, or the government national mortgage association;

(iii) Direct obligations of, or obligations guaranteed by, the state; or

(iv) Mortgages insured or guaranteed by the United States or an instrumentality of the United States as to payments of principal and interest;

(v) Mortgages secured by real estate on which there is located single family residential housing and which is insured by a mortgage guaranty insurance company licensed to do business by the state and approved by the corporation;

(vi) Uninsured mortgages secured by real estate on which there is located single family residential housing; or

(vii) Those other obligations and securities that the corporation shall by resolution determine to be necessary to assure the payment of those loans and the interest as they become due.

(2) The corporation may require in the case of any or all mortgage lenders that the collateral be lodged with a bank or trust company located in the state designated by the corporation as custodian. In the absence of the requirement, a mortgage lender shall upon receipt of the loan proceeds from the corporation enter into an agreement with the corporation containing those provisions that the corporation shall deem necessary to adequately identify and maintain that collateral and service it and shall provide that the mortgage lender shall hold the collateral as an agent for the corporation and shall be held accountable as the trustee of an express trust for the application and disposition thereof and the income therefrom solely for the uses and purposes in accordance with the provisions of the agreement. A copy of each agreement and any revisions or supplements shall be filed with the secretary of state and no further filing of other action under chapter 9 of title 6A or any other law of the state shall be required to perfect the security interest of the corporation in that collateral or any additions or substitutions, and the lien and trust for the benefit of the corporation created shall be binding from and after the time made against all parties having claims of any kind in tort, contract, or otherwise against the mortgage lender. The corporation may also establish any additional requirements that it shall deem necessary with respect to pledging, assigning, setting aside, or holding that collateral and making substitutions or additions to it and disposition of income and receipts from it.

(j) The corporation shall require the submission to it by each mortgage lender to which the corporation has made a loan of evidence satisfactory to the corporation of the making of eligible mortgages as required by this section and prescribed by rules and regulations of the corporation and in connection therewith may inspect the books and records of the mortgage lender.

(k) The corporation may require as a condition of any loans to mortgage lenders those representations and warranties that it shall determine to be necessary to secure those loans and carry out the purposes of the chapter.

(l) All eligible mortgages made as required by this section shall comply with the applicable provisions of the laws of the state, and, where federal law or the law of another jurisdiction governs the affairs of the mortgage lender, shall comply with applicable provisions of that law.

(m) Compliance by any mortgage lender with the terms of this section and its undertaking to the corporation with respect to the making of eligible mortgages may be enforced by a decree of the superior court for the county of Providence. The corporation may require as a condition of any loan to any mortgage lender the consent of the mortgage lender to the jurisdiction of the superior court for the county of Providence over this proceeding. The corporation may also require agreement by any mortgage lender, as a condition of the loan to the mortgage lender, to the payment of penalties to the corporation for violation by the mortgage lender of any provision of this section or its undertaking to the corporation with respect to the making of eligible mortgages, and those penalties shall be recoverable at the suit of the corporation.

(n) If at any time the corporation shall determine that an adequate supply of funds exists in regular banking channels for eligible mortgages, the corporation shall discontinue making loans to mortgage lenders until the time that the corporation may subsequently determine that the supply of funds available for eligible mortgages is again inadequate.

(o) For the purposes of this section, the term “eligible mortgage” means a loan made by a mortgage lender and secured by a mortgage upon residential property, health care facilities, or housing for the elderly; provided that each mortgage loan shall be made to the original mortgagor from the proceeds of a loan made by the corporation to the mortgage lender pursuant to this section of the chapter.