A. An insurer may invest in bonds or notes secured by mortgages or deeds of trust representing first liens upon unencumbered and improved real estate located in this or another state, or in Canada, subject to the following conditions:

(1) the amount loaned, or aggregate amount of bonds issued upon the security of a mortgage or deed of trust, shall not at time of the investment exceed sixty-five percent of the fair market value of the real estate. The value of the real estate shall be substantiated by the appraisal of a recognized real estate appraiser acceptable to the superintendent. Before making the investment, a certificate of the value of the property, based on such appraisal, shall be executed by the insurer's board of directors or by an investment committee of the board of directors making or authorizing the investment on the insurer's behalf;

(2) there shall not have been any default as to payment of any part of the principal or interest of any such bond or note;

(3) the total investment in any one such note, or bond or bonds secured by the same real estate, shall not exceed seventy-five thousand dollars ($75,000) or ten percent of the insurer's assets, whichever is the greater; and

(4) in applying the limitation under this subsection there may be excluded from the amount invested that portion which is guaranteed by the superintendent for veteran affairs pursuant to the Servicemen's Readjustment Act of 1944 [repealed], as amended, or insured by the federal housing administrator or other agency of the United States government, or by an agency of the Canadian government.

B. "Improved real estate" means all real estate within limits of an incorporated village, town or city on which permanent buildings suitable for residence or commercial use are situated, and such other real estate as may be deemed to be "improved" for the purposes of this section under rules and regulations of the superintendent.

C. For purposes of this section real estate shall not be deemed to be encumbered:

(1) by existence of taxes or assessments which are not delinquent, instruments creating or reserving mineral, oil or timber rights, rights-of-way, joint driveways, sewer rights, rights in walls, or by building restrictions or other restrictive covenants; or

(2) when such real estate is subject to lease in whole or in part whereby rents or profits are reserved to the owner, if the security for such investment is a full and unrestricted first lien upon such real estate and there is no condition or rights of reentry or forfeiture under which the investment can be cut off, subordinated or otherwise disturbed.

D. A mortgage or deed of trust shall be deemed to represent a first lien upon the real estate for purposes of this section despite existence of a prior first mortgage or first deed of trust on the same real estate if the lending or investing insurer assumes and agrees to pay such prior first mortgage or deed of trust; and the balance owing on such prior first mortgage or deed of trust at time of the insurer's investment or loan, together with the additional amount loaned by the insurer on the security of the same real estate, shall be deemed to be the aggregate amount so invested by the insurer in the mortgage or deed of trust loan for purpose of limitations imposed thereon by this section and article.

E. Any such mortgage or deed of trust shall require the borrower to maintain insurance of improvements against the hazards of fire and those represented by extended coverage, for not less than seventy-five percent of the appraised value of the improvements.

History: Laws 1984, ch. 127, § 155.

Compiler's notes. — The Servicemen's Readjustment Act of 1944, referred to in Paragraph A(4), was repealed and the provisions thereof reenacted as 38 U.S.C. § 1801 et seq. by Pub. L. 85-857, 72 Stat. 1105 (1958).