SECTION 177.10. Loan Security

(a) An approved loan must be secured by a mortgage, deed of trust, or other lien on the home prior to any disbursement of funds to the participating lending institution by the board. All paperwork associated with the note and lien shall be deposited for safekeeping with the administrator.

(b) The security for the board's loan will be provided by:

(1) a participation first lien mortgage with the board and the participating lending institution joining as mortgagees, each receiving a share of the mortgage payment in proportion to each's loan, or a first or second lien and deed of trust securing the full amount of the board's loan;

(2) mortgage insurance providing for repayment of at least 50% of the total outstanding principal balances of all loans, or repayment of at least 50% of all anticipated losses, based upon the administrator's analysis and forecast of potential losses shown by the actual experience of the mortgage lending industry on similar types of loans. The board may contract with a mortgage insurance company for pooled coverage or with individual companies for insurance on each loan, or the board may elect to be self insured in part or in whole in order to meet the requirements of the Natural Resources Code, §162.011(d);

(3) hazard insurance on the structure naming the board loss payee in at least the amount of the board's loan.

(c) When the board has determined that a transaction under this program has been completed and the board's loan is secured as provided in subsections (a) and (b) of this section, the board shall disburse funds to the participating lending institution for the board's portion of the mortgage.

(d) The board may establish a master policy for group insurance which will be made available to all purchasers under this program for payment of the outstanding principal balance of the board's portion of the loan upon the death of the borrower.

Source Note: The provisions of this §177.10 adopted to be effective May 4, 1984, 9 TexReg 2263; amended to be effective December 21, 2010, 35 TexReg 11391