17:46B-21. Minimum capital

An amount equivalent to the minimum capital requirements as defined in subsection a. of section 7 shall be retained as cash on hand or on deposit in banks, or shall be invested in the following classes of investments; provided, however, that the aggregate invested at any time in those classes of investments set forth in subsections g., h., i. and p. of this section shall not, without written approval of the commissioner, exceed 50% of the sum of the capital and surplus of such title insurance company as shown by its most recent statement on file with said commissioner:

a. Government obligations. Bonds, notes or obligations issued, assumed or guaranteed by the United States, or by any state, district or territory of the United States, or the Commonwealth of Puerto Rico.

b. Governmental subdivisions or public instrumentality obligations. Valid and legally authorized bonds, notes or obligations issued, assumed or guaranteed by:

(1) Any city, town, county, borough, township, municipality, school district, poor district, water, sewer, drainage, road or other governmental district or division located in the United States or any state, district or territory thereof and the Commonwealth of Puerto Rico; or by

(2) Any public instrumentality other than a municipal authority of one or more of the foregoing, if, by statutory or other legal requirements applicable thereto, such bonds or other evidences of indebtedness of such instrumentality are payable, as to principal and interest, from taxes levied or by law required to be levied, upon all taxable property or all taxable income within the jurisdiction of the governmental unit or units of which it is an instrumentality, or from revenue pledged or otherwise appropriated or by law required to be provided for the purpose of such payment;

(3) Any municipal authority issued pursuant to the laws of the State relating to the creation or operation of municipal authorities, if the obligations are not in default as to principal or interest and if the project for which the obligations were issued is under lease to a school district or school districts or if the obligations are not in default as to principal or interest and if the project for which the obligations were issued is under lease to a municipality or municipalities or subject to a service contract with a municipality or municipalities, pursuant to which the municipal authority will receive lease rentals or service charges available for fixed charges on the obligations, which will average not less than one and one-fifth times the average annual fixed charges of such obligations over the life thereof, or if the obligations are not in default as to principal or interest and if for a period of 5 fiscal years next preceding the date of acquisition, the income of such authority available for fixed charges has averaged not less than one and one-fifth times average annual fixed charges of such obligations over the life of such obligations. As used in this clause, the term "income available for fixed charges" shall mean income after deducting operating and maintenance expenses, and, unless the obligations are payable in serial, annual maturities, or are supported by annual sinking fund payments, depreciation, but excluding extraordinary nonrecurring items of income or expenses; and the term "fixed charges" shall include principal, both maturity and sinking fund, and interest on bonded debt. In computing such income available for fixed charges for the purposes of this section, the income so available of any corporation acquired by any municipal authority may be included, such income to be calculated as though such corporation had been operated by a municipal authority and an equivalent amount of bonded debt were outstanding.

The eligibility for investment purposes of obligations of each project of a municipal authority shall be separately considered hereunder.

c. Public utility obligations. Bonds, notes or obligations issued, assumed or guaranteed by any solvent public utility corporation or public utility business trust, incorporated or existing under the laws of the United States or of any state, district or territory thereof.

d. Other corporate obligations. Bonds, notes or obligations issued, assumed or guaranteed by any other corporation, including railroads, or business trust, incorporated or existing under the laws of the United States, or of any state, district or territory thereof, whose income available for fixed charges for the period of 5 fiscal years next preceding the date of investment shall have averaged not less than one and one-half times its average annual fixed charges applicable to such period. As used in this subsection, the term "income available for fixed charges" shall mean income, after deducting operating and maintenance expenses, depreciation and depletion, and taxes other than Federal or State income taxes, but excluding extraordinary nonrecurring items of income or expense appearing in the regular financial statements of the corporation or business trust, and the term "fixed charges" shall include interest on funded or unfunded debt and amortization of debt discount and expense. If income is determined in reliance upon consolidated income statements of parent and subsidiary corporations or business trusts, such income shall be determined after provision for Federal and State income taxes of subsidiaries, and after proper allowance for minority stock interest, if any, and the required coverage of fixed charges, shall be computed on a basis including fixed charges and preferred dividends of subsidiaries, other than those payable by subsidiaries to the parent corporation or business trust, or to any other such subsidiaries. In applying an income test under this section to any issuing, assuming or guaranteeing corporation or business trust, whether or not in legal existence during the whole or the 5-year period next preceding the date of the investment, which has at any time or times after the beginning of such period acquired the assets or the outstanding shares of capital stock of any other corporation or business trust by purchase, merger, consolidation or otherwise, substantially as an entirety, or has been reorganized pursuant to the bankruptcy law, the income of such other predecessor or constituent corporation or business trust or of the corporation or business trust so reorganized, available for interest and dividends for such portion of such period as shall have preceded acquisition or reorganization may be included in the income of such issuing, assuming or guaranteeing corporation or business trust for such portion of such period as may be determined in accordance with adjusted or pro forma consolidated income statements covering such portion of such period, and giving effect to all stock or shares outstanding and all fixed charges existing immediately after acquisition or reorganization.

e. Trustees', receivers' or equipment trust obligations.

(1) Certificates, notes or obligations issued by trustees or receivers of any corporation or business trust created or existing under the laws of the United States or of any state, district or territory thereof which, or the assets of which, are being administered under the direction of any court having jurisdiction, if such obligation is adequately secured as to principal and interest.

(2) Equipment trust obligations or certificates, which are adequately secured, or other adequately secured instruments, evidencing an interest in transportation equipment, wholly or in part within the United States, and a right to receive determined portions of rental, purchase or other fixed obligatory payments for the use or purchase of such transportation equipment.

f. Acceptances and bills of exchange. Bank and bankers acceptances, and other bills of exchange of the kind and maturities made eligible pursuant to law for purchase in the open market by Federal Reserve Banks.

g. Real estate loans. Ground rents and bonds, notes or other evidences of indebtedness, secured by first mortgages or trust deeds upon unencumbered and improved real property located in any state, district or territory of the United States, and in investments in the equity of the seller under contracts for deeds covering the entire balance due on bona fide sales of such real property; provided that a loan guaranteed or insured in full by the Administrator of Veterans' Affairs pursuant to the provisions of the Servicemen's Readjustment Act of 1944, c. 268, Title II, 58 Stat. 284, as heretofore or hereafter amended may be subject to a prior encumbrance. Real property shall not be considered to be encumbered within the meaning of this section by reason of the existence of instruments reserving mineral, oil, water or timber rights, rights-of-way, sewer rights, rights in walls or driveways, by reason of liens inferior to the lien securing the loan of the insurance company, or liens for taxes or assessments not yet delinquent, or by reason of building restrictions or other restrictive covenants or by reason of any lease under which rents or profits are reserved to the owner, if, in any event, the security for such loan is a first lien upon such real property, and if there is no condition or right of reentry or forfeiture under which such lien can be cut off, subordinated or otherwise disturbed. No mortgage or trust deed, loan or investment in a seller's equity under a contract for deed made or acquired by the insurance company on any one property shall at the date of investment exceed two-thirds of the value of the real property securing the loan, or subject to such contract; provided that such limitation in respect to value shall not apply to a loan which is:

(1) Insured by, or for which a commitment to insure has been made by, the Federal Housing Administrator or commissioner pursuant to the provisions of the National Housing Act, 12 U.S.C. s. 1702 et seq. (1934), as heretofore or hereafter amended;

(2) Guaranteed by the Administrator of Veterans' Affairs pursuant to the provisions of the Servicemen's Readjustment Act of 1944, c. 288, Title II, 58 Stat. 284, as heretofore or hereafter amended, except, that if only a portion of a loan is so guaranteed, such limitation shall apply to the portion not so guaranteed;

(3) Insured by the administrator pursuant to the provisions of the Servicemen's Readjustment Act, c. 288, Title II, 58 Stat. 284, of 1944, as heretofore or hereafter amended;

(4) Upon real estate under lease to a corporation or business trust, incorporated or existing under the laws of the United States or any state, district or territory thereof, whose income available for fixed charges for the period of 5 fiscal years next preceding the date of investment, shall have averaged not less than one and one-half times its average annual fixed charges applicable to such period, if there is pledged and assigned, as additional security for the loan, and for application thereon, sufficient of the rentals payable under the lease to provide for repayment of the loan within the unexpired term of the lease;

(5) Upon such terms that the principal thereof will be amortized by repayments of principal at least once in each year in amounts sufficient to repay the loan within a period of not more than 30 years, and such loan is upon improved real estate, and at the date of investment does not exceed three-fourths of the value of the real estate securing the loan.

h. Purchase money securities. Purchase money mortgages or like securities received by it upon the sale or exchange of real property, acquired pursuant to subsection p. of this section.

i. Federal Housing Administrators debentures. Debentures issued by the Federal Housing Administrator or commissioner in settlement of claims pursuant to the National Housing Act, 12 U.S.C. s. 1701 et seq. (1934), as heretofore or hereafter amended.

j. National mortgage association securities. Securities of national mortgage associations or similar national mortgage credit institutions organized under the Federal Housing Act, as heretofore or hereafter amended.

k. Federal Land Bank, Federal Intermediate Credit Bank and Bank for Cooperatives Securities. Bonds, debentures and other obligations of Federal Land Banks or Federal Intermediate Credit Banks issued pursuant to the Federal Farm Loan Act, 12 U.S.C. s. 642 et seq. (1916), as heretofore or hereafter amended, or of Banks for Cooperatives issued pursuant to the Farm Credit Act of 1933, c. 98, Title VIII, 48 Stat. 257, as heretofore or hereafter amended.

l . Loans upon leaseholds. Loans upon leasehold estates on unencumbered real estate located in any state, district or territory of the United States; provided that no such loan shall exceed two-thirds of the value of the leasehold at the date of investment, unless:

(1) Such loan is guaranteed or insured by, or for which a commitment to guarantee or insure such loan has been made by, the Federal Housing Administrator or commissioner, pursuant to the provisions of the Federal National Housing Act, 12 U.S.C. s. 1701 et seq. (1934), as heretofore or hereafter amended; or

(2) Such leasehold is of improved real estate and such loan provides for amortization by repayments of principal at least once in each year in amounts sufficient to repay the loan within a period of four-fifths of the unexpired term of the leasehold, but within a period of not more than 30 years, and does not exceed three-fourths of the value of the leasehold at the date of investment; or

(3) Such real estate is under lease to a corporation or business trust, incorporated or existing under the laws of the United States or any state, district or territory thereof, whose income available for the fixed charges for the period of 5 fiscal years next preceding the date of investment shall have averaged not less than one and one-half times its average annual fixed charges applicable to such period, if there is pledged and assigned as additional security for the loan and for application thereon sufficient of the rentals payable under such lease to provide for repayment of the loan within the unexpired term of the lease. Provided further, that the term of any such loan shall require repayments of principal at least once in each year in amounts sufficient to repay the loan within the term of the leasehold, unexpired at the date of investment, unless a shorter period is required under subparagraph (2).

m. Savings and loan shares. Shares of any Federal savings and loan association, or of any building and loan or savings and loan association, to the extent that the withdrawal or repurchasable value of such shares is insured by the Federal Savings and Loan Insurance Corporation, under the National Housing Act, 12 U.S.C. s. 1701 et seq. (1934), as heretofore or hereafter amended, and shares of any building and loan or savings association to the extent that the withdrawal or repurchasable value of such shares is insured by a State regulated and supervised savings and loan insurance corporation.

n. Federal Savings and Loan Insurance Corporation obligations. Bonds, notes or obligations issued, assumed or guaranteed by the Federal Savings and Loan Insurance Corporation, under the provisions of the National Housing Act, 12 U.S.C. s. 1701 et seq. (1934), as heretofore or hereafter amended.

o . Federal Home Loan Bank obligations. Bonds, notes or obligations issued, assumed or guaranteed by the Federal Home Loan Bank or issued, assumed or guaranteed by the Federal Home Loan Bank Board under the provisions of the Federal Home Loan Bank Act, 12 U.S.C. s. 1421 et seq. (1932), as heretofore or hereafter amended.

p. Real estate; right to acquire. It shall be lawful for any title insurance company organized under the laws of this State to purchase, receive, hold and convey real estate or any interest therein:

(1) Required for its convenient accommodation in the transaction of its business with reasonable regard to future needs;

(2) Acquired in connection with a claim under a policy of title insurance;

(3) Acquired in satisfaction or on account of loans, mortgages, liens, judgments or decrees, previously owing to it in the course of its business;

(4) Acquired in part payment of the consideration of the sale of real property owned by it if the transaction shall result in a net reduction in the company's investment in real estate;

(5) Reasonably necessary for the purpose of maintaining or enhancing the sale value of real property previously acquired or held by it under subparagraphs (1), (2), (3), or (4) of this subsection.

Provided, however, that no title insurance company shall continue to hold any real estate acquired by it under subparagraph (2), (3), or (4) for more than 5 years from the date of acquisition thereof, unless it shall obtain the written approval of the commissioner to hold such real estate for a longer period of time.

L.1975, c. 106, s. 21, eff. May 29, 1975.