PROPOSED
HOUSE OF REPRESENTATIVES AMENDMENTS TO S.B. 1221
(Reference to Senate engrossed bill)
Strike everything after the enacting clause and insert:
"Section 1. Title 41, chapter 27, article 2, Arizona Revised Statutes, is amended by adding section 41-3022.01, to read:
41-3022.01. Termination of Arizona mortgage solution program July 1, 2022
A. The Arizona mortgage solution program terminates on July 1, 2022.
B. Section 41‑5102 is repealed on January 1, 2023.
Sec. 2. Title 41, Arizona Revised Statutes, is amended by adding chapter 51, to read:
CHAPTER 51
ARIZONA MORTGAGE SOLUTION PROGRAM
ARTICLE 1. GENERAL PROVISIONS
41-5101. Definitions
In this article, unless the context otherwise requires:
1. "Agreement" means any loan or other agreement, deed of trust, contract, note, mortgage, trust indenture, lease, sublease or other such instrument entered into by the department.
2. "Arizona home insurance fund" means the monies managed by the program administrator under the supervision of the department that shall be used solely to pay insurance claims for interest and principal on bonds and home certificates and as provided in section 41-5113, subsection D.
3. "Authorized debt holders" means any of the following:
(a) A trustee that does not hold any direct or indirect equity interest, including convertible debt, in the program administrator.
(b) Any bank or trust company with authority to exercise banking powers under any federal statute or regulatory authority that does not hold any direct or indirect equity interest, including convertible debt, in the program administrator.
(c) Any governmental authority or department authorized to make loans.
(d) Any other person that does not have any direct or indirect equity interest in the program administrator, and is subject to license and regulatory oversight by a state agency and satisfies such other criteria as established from time to time by the department.
4. "Bonds" means any bonds issued pursuant to this article.
5. "Certificates" includes the following:
(a) A home certificate. For the purposes of this subdivision "home certificate" means an insured investor debt instrument issued by the department that shall have a stated term and interest rate and that may be associated on a one-to-one basis with a time-out mortgage loan, as determined by the program administrator in which interest is paid periodically, as specified on the issuance of the specific home certificate, and principal is paid at or before the end of its stated term.
(b) A loss recapture certificate. For the purposes of this subdivision, "loss recapture certificate" means a debt instrument provided by the department on behalf of the homeowner-borrower in an amount equal to the unpaid debt owed to the holder of the partial in the money loan immediately prior to the purchase of the subject property by the department under section 41‑5114, less the portion of the title clearance payment paid to the servicer of the partial in the money loan for the benefit of its holder. A loss recapture certificate shall have a principal balance only, is not interest bearing, and shall be the obligation of the homeowner-borrower only; the loss recapture certificate is not the obligation of this state, the department, or the program administrator.
(c) Any other certificate issued by the department pursuant to program rules adopted by the program administrator.
6. "Competent person" means an individual who satisfies at least one of the following:
(a) Is a demonstrated expert.
(b) Is or was a senior executive officer in at least two of the following:
(i) A nonprofit organization focused on providing sustainable housing solutions.
(ii) A mortgage brokerage firm.
(iii) A real estate investment firm.
(c) Is licensed to practice law, is licensed as a certified public accountant, has demonstrated domain expertise and has experience in the field of captive insurance.
(d) Satisfies such other equivalent criteria as may be established from time to time by the department.
7. "costs" means all costs incurred in the issuance of bonds or certificates, including costs for an insurance policy, credit enhancement, legal, accounting, consulting, printing, advertising and travel expenses, plus any department administrative fees and may include interest on bonds or home certificates issued pursuant to this article for a reasonable time before and during the time the proceeds are used.
8. "Current" means that all interest is paid through and including the purchase closing date and all scheduled principal payments before the purchase closing date have been paid excluding accelerated interest and accelerated principal payments.
9. "Deferred recapture amount" means the full remaining principal balance of the partial in the money loan after receipt of the title clearance payment.
10. "Demonstrated domain expertise" means an individual named as an inventor on any patent or provisional patent filed with united states the patent and trademark office on or before March 1, 2011 involving market based, nonbank sourced financing, using insurance as a component and designed to provide monthly payment reduction to homeowners whose mortgage debt is greater than the value of the property.
11. "Demonstrated expert" means an individual who satisfies each of the following:
(a) Has demonstrated domain expertise.
(b) Has demonstrated lending program regulatory compliance.
12. "Demonstrated lending program regulatory compliance" means an individual who serves as an executive officer of, controls, and has a controlling economic interest in a nonbank federally licensed business lender.
13. "Department" means the Arizona department of housing.
14. "Federal agency" means the United States or any agency or agencies of the united states.
15. "Governing body" means, with respect to a corporation, the corporation's board of directors and with respect to a limited liability company, the limited liability company's board of managers.
16. "Loss recapture certificate lien" means a lien on the residential real property associated with, and in the amount of, a loss recapture certificate.
17. "Negative credit filing" means a filing with a credit reporting agency indicating no payment, insufficient payment, non-timely payment, default, demand, foreclosure, or any other negative filing.
18. "Pre-program loans" include all of the following:
(a) A fully in the money loan. For the purposes of this subdivision, "fully in the money loan" means a first priority lien loan secured by residential real property the principal amount of which, as of the purchase closing date, is less than or equal to the program fair market value, or a junior priority lien loan secured by residential real property for which the principal amount of that loan plus the principal amounts of all lien loans on the same property senior to it, as of the purchase closing date, are less than or equal to the program fair market value. There may be none, one or more than one fully in the money loans on each parcel of real property.
(b) A partial in the money loan. For purposes of this subdivision, "partial in the money loan" a first priority lien loan secured by residential real property the principal amount of which, as of the purchase closing date, is greater than the program fair market value, or a junior priority lien loan which is junior only to fully in the money loans and its principal amount plus the sum of the principal amounts of all more senior fully in the money loans is greater than the program fair market value. There can only be none or one partial in the money loan on each parcel of real property.
(c) A not in the money loan. For the purposes of this subdivision, "not in the money loan" means a junior priority lien loan which is junior to the partial in the money loan.
19. "Pre-program monthly payment" means monthly payment obligations on pre-program loans for interest and principal only, as further defined in program rules.
20. "Principal amount" when considered in respect of a pre-program loan means the principal balance due of a pre-program loan as reflected in a payoff letter or statement or monthly statement prepared by the lender or servicer of that pre-program loan.
21. "Program" means the Arizona mortgage solution program.
22. "Program administrator" means the qualified person engaged to manage the program by and under the supervision of the department.
23. "Program fair market value" means the fair market value as prescribed in section 41‑5114.
24. "Purchase closing date" means the date and time the homeowner‑borrower's residential real property is purchased through the title clearance procedure under section 41‑5114.
25. "Qualified person" means a corporation or a limited liability company with a board of managers that has the authority to manage the limited liability company's business and affairs in a manner equivalent to the authority granted to the board of directors of a corporation organized under the laws of this state that satisfies each of the following:
(a) Has as its chief executive officer, chief financial officer or chief operating officer at least one demonstrated expert.
(b) Has two competent persons serving as the chief executive officer, chief financial officer or chief operating officer.
(c) Has at least one demonstrated expert serving as a member of its governing body and a majority of the members of its governing body being competent persons.
(d) Is controlled by competent persons on a day to day and strategic basis, taking into account negative control rights of equity holders or members of the governing body.
(e) At least thirty per cent of all of its direct and indirect interests, including common and preferred and taking into account any preferences or other economic interests, is held by a demonstrated expert.
(f) At least seventy per cent of all of its direct and indirect equity interests, including common and preferred and taking into account any preferences or other economic interests, is held by competent persons.
(g) Any indebtedness or other debt instruments, including convertible debt, are held only by authorized debt holders, whether directly or indirectly.
26. "Sale closing date" means the date and time the department resells the residential real property back to the homeowner-borrower under section 41‑5115.
27. "Time-out deed of trust" means a deed of trust associated with a time-out mortgage loan.
28. "Time-out mortgage loan" means a loan issued by the department secured by a deed of trust in favor of the department on real property located within this state.
29. "Title clearance payment" means the price paid for the residential real property under section 41‑5114.
41-5102. Establishment of program; exemption
A. The Arizona mortgage solution program is established under the administration and supervision of the department.
B. For the purposes of the program, the department is exempt from chapter 23 of this title.
41-5103. Powers of department; eligibility for programs
A. The department:
1. May issue bonds or certificates or provide financial assistance for housing purposes as directed by the program administrator. The bonds and certificates shall be in the name of the department.
2. May issue time-out mortgage loans, with the proceeds from bond or certificate issuance, to borrowers who reside in a home within this state that shall be supported by, and subject to, a deed of trust on each property purchased through this program.
3. May make and enter into agreements, including intergovernmental agreements pursuant to title 11, chapter 7, article 3, execute all instruments, perform all acts and do all things necessary or convenient to carry out the powers granted in this article.
4. May employ or contract with housing experts, engineers, architects, attorneys, accountants, construction and financial experts and such other persons as may be necessary in its judgment and fix their compensation. Any person employed or contracted with pursuant to this paragraph shall not represent more than one party in any transaction.
5. May contract with, act as guarantor for or coinsure with any federal, state or local governmental agency and other organizations or corporations in connection with its housing activities under this article and receive monies relating to those contracts and services. The department shall not interfere with or attempt to override the local jurisdiction's planning, zoning or land use regulations. This paragraph shall not be interpreted to interfere in any way with the requirements of state or federal fair housing laws.
6. May adopt administrative rules consistent with this article.
7. May protect and enforce the interests of the department in any real property financed through the department's resources including investigating the physical condition, construction, rehabilitation maintenance and other related matters.
8. May establish fees and collect reimbursement of costs in connection with the issuance of bonds or certificates pursuant to section 41-5105.
B. The department shall engage a program administrator promptly after passage of this legislation.
C. The department may acquire title to real property by gift, grant or operation of law, or by purchase, and may hold the title until such time as the property may be sold, in the sole discretion of the department. After acquiring title to real property, the department may sell the property to the homeowner it was purchased from pursuant to section 41-5114.
D. The department, through the program administrator, may offer funding to homeowner‑borrowers under this article only if all of the following conditions are met:
1. The homeowner‑borrower is current on all pre-program loans on the subject property on the purchase closing date which is documented in accordance with program rules. A homeowner-borrower who is not current on a pre-program loan before the purchase closing date may become current on that loan by paying the principal amount and accrued interest required to become current as of the purchase closing date to the program administrator for further payment to the servicer of the applicable pre-program loan. This payment in good clean funds must be received by the program administrator no later than the purchase closing date in accordance with program rules. The amount of accrued interest which must be paid to become current on a pre‑program loan shall be documented on a payoff letter issued by the holder or servicer of the pre-program loan, through the purchase closing date or a statement issued by the holder or servicer of the pre-program loan dated within thirty days prior to the purchase closing date. The program administrator's determination of the amount of principal and interest due to bring the homeowner-borrower current as of the purchase closing on a pre‑program loan date shall be binding upon the homeowner-borrower and the applicable holder and/or servicer so long as the program administrator has used the statements and/or payoff letters issued by the holder or servicer of the pre-program loan and has made a good faith determination of these amounts.
2. The homeowner‑borrower's principal residence or vacation home in this state is the subject property.
3. The homeowner's property insurance, property taxes, special tax assessments, and homeowners' association regular assessments are current and paid at the time of purchase closing date, which is documented in accordance with program rules.
4. There are no federal, state, or county tax liens on the subject property or business loans collateralized by the subject property which have not been released, paid-in-full, or subordinated to the time-out mortgage loan lien and the loss recapture certificate lien, if any.
5. The program fair market value of the subject property is seven hundred thousand dollars or less.
6. The subject property was not at any time previously purchased under section 41-5114.
41-5104. Costs of operation and administration of program by the department; taxation
A. The state is not responsible for any obligation incurred by the department under the Arizona mortgage solution program.
B. All costs and expenses of the department under the program shall be paid from bond or certificate proceeds or other monies of the department receives through the program.
C. On the purchase closing date, the program administrator shall be paid the two thousand five hundred dollars specified in section 41-5115, subsection B, paragraph 2 as an initial program fee. The program administrator may use some of the initial program fees it receives to reimburse homeowner-borrowers for appraisal fees, to pay recording fees as required under section 41-5104, subsection D, for payroll, consulting, software development, equipment purchase and rental, rent, and all other program costs. Unless the program administrator's servicing fee is waived by the program administrator under section 41-5115, subsection K for a particular time-out mortgage loan for the applicable month, each month, the program administrator shall retain the servicing fee portion of the monthly payment on each time-out mortgage loan.
D. The program administrator shall pay recording fees to the appropriate county recorder on behalf of the department to record all deeds, deeds of trust and loss recapture certificate liens issued through this program. All other homeowner-borrower direct program costs, if any, shall be borne by the homeowner-borrower.
E. The income and all bonds or certificates issued by the department and the income from the bonds or certificates are exempt from taxation in this state. To the extent federal law permits, interest income from the department's bonds and certificates shall be exempt from federal income tax under the internal revenue code.
41-5105. Issuance of bonds and certificates
A. Promptly after receipt of written request from the program administrator, the department shall offer for issuance bonds or home certificates with terms and conditions requested by the program administrator in an amount sufficient to finance or refinance single one-family or single two-family residential dwelling units located in this state owned by homeowners who have registered in accordance with program rules and qualify for participation in this program in accordance with section 41-5103, subsection D, or are currently participants in the program. Once offered, the department shall promptly issue the maximum principal amount of bonds and home certificates to satisfy purchaser demand. As the information becomes known to the program administrator but not less than once each calendar quarter, the program administrator shall report to the department the total principal amount of outstanding bond and home certificate financing grouped by interest rate and the amount and terms of financing needed for the program.
B. The department shall not interfere with or attempt to override a local jurisdiction's planning, zoning or land use regulations. This subsection shall not be interpreted to interfere in any way with the requirements of state or federal fair housing laws.
C. The bonds or home certificates and any bonds or certificates refunding those bonds or home certificates may be issued in one or more series, bear such date or dates, be in such denomination or denominations, mature at such time or times, not exceeding forty years from the respective dates thereof, mature in such amount or amounts, bear interest at fixed or variable rates payable at least annually, be in such form, carry such registration privileges, be executed in such manner, be payable in such medium of payment, at such place or places, be callable or refundable either at or in advance of maturity and be subject to such terms of redemption, with or without premium, as the department directs. The bonds and home certificates may be sold at either public or private sale or by an electronic bidding process in such manner and on such terms as may be determined by the department to be the most advantageous. Such bonds and home certificates shall be fully negotiable within the meaning and for all purposes of title 47.
D. Principal and interest on the bonds and home certificates are payable solely from the revenues derived by the department from the agreements authorized by this article including principal and interest payments received from homeowner-borrowers on time-out mortgage loans and the Arizona home insurance fund established by section 41‑5113.
E. The department in authorizing the issuance of bonds or home certificates may provide for:
1. Execution of agreements and instruments the department deems necessary, including the execution of a trust indenture and assignment to a trustee of the agreements relating to the issue of bonds and home certificates in order to protect the bondholder, bondholders, home certificate holder, or home certificate holders and facilitate the payment of the principal and interest on the bonds.
2. Payment of the bonds and home certificates solely from the monies paid by the obligated homeowner-borrowers and Arizona home insurance fund.
3. Capitalization of a reserve with any appropriate monies when the department deems necessary.
4. Assignment to a trustee of any or all agreements made or entered into by the department and vesting in the trustee the right to enforce any covenant made to secure or pay the bonds or home certificates.
5. Execution and delivery of trust agreements setting forth the powers, duties and remedies available to trustees, limiting liabilities, describing what occurrences constitute default and prescribing terms and conditions on which trustees or holders of bonds or home certificates of any specified amount or percentage of such bonds or home certificates may exercise and enforce any rights, covenants and remedies.
6. Vesting in a trustee or holder of any specified amount or percentage of bonds or home certificates the right to apply to any court of competent jurisdiction for, and have granted, the appointment of a receiver to act under the terms of any agreement.
7. Reclamation of the residential real property if a payment required under an agreement or any other condition required in an agreement is not timely paid or is breached.
8. The appointment of a receiver during a period of default in the regular payment or performance under an agreement.
G. Bonds and certificates bearing the signatures of officers in office on the date of the signing of the bonds and certificates are valid and binding obligations, notwithstanding that before their delivery and payment any persons whose signatures appear on the bonds and certificates have ceased to be officers of the department. The validity of the bonds and certificates is not dependent on or affected by the validity or regularity of any proceedings to acquire the property financed by the bonds and certificates or taken in connection therewith. No action may be brought questioning the legality of any agreement, proceeding or issuance of bonds and certificates under this article after two months from the date the bonds and certificates are authorized to be issued by the department.
41-5106. Department funds; transfer of excess monies to state general fund
A. When the department issues bonds or home certificates under this article, the department shall separate all proceeds from the issuance of bonds or certificates and shall utilize the proceeds solely to fund time-out mortgage loans, the Arizona home insurance fund, and fees, including program license fees.
B. Notwithstanding section 41-3102, after all bonds and home certificates, together with the interest on the bonds or home certificates are fully paid and discharged, no time-out mortgage loans remain outstanding, and all agreements are fully performed, the program shall terminate and all funds remaining after payment of all debts and liabilities of the program shall be transferred for deposit in the state general fund.
41-5107. Recording deeds, liens, satisfactions, reattachment of liens
A. All documents including, but not limited to, deeds, deeds of trust, and loss recapture certificate liens, necessary to perfect or release liens arising under this program, will be filed as required under applicable law in the ordinary course of business with the applicable jurisdiction. Each county recorder shall accept recordings from the program administrator as recordings made by the department and shall accept all such recordings at the government agency rate.
B. All liens and encumbrances in existence on residential real property purchased by the department under section 31‑5115 immediately prior to such purchase other than liens securing pre-program loans shall reattach with the same priority as immediately prior to the purchase by the department except, notwithstanding section 33‑806, no lien which secures a pre-program loan shall reattach. As long as recording fees were previously collected when the applicable lien or encumbrance was originally recorded, no recording fees shall be charged for liens or encumbrances which reattach under this subsection.
C. Liens created under title 42 or 48 shall not be affected by section 41‑5107.
D. The transactions for the purchase of property from the homeowner‑borrower under section 41-5114 and the sale of property back to the homeowner-borrower under section 41-5115 are exempt from the requirement to file an affidavit of legal value.
E. Subject to section 41-5107, subsection C, notwithstanding the reattachment of any lien as provided in section 41-5107, subsection B, the time-out deed of trust shall be the lien with highest and best priority and the lien priority of the loss recapture certificate lien, if any, maintain the same lien priority as the partial in the money loan had in comparison to other liens on that property.
41-5108. Credit enhancement
In addition to the powers granted by this article, the department may:
1. Enter into covenants and agreements with any federal agency, private agency, corporation or individual to perform all acts that may be necessary, convenient or desirable in order to secure bonds or home certificates or that, in the judgment of the department, tend to make the bonds or home certificates more marketable and to perform all acts that are not inconsistent with the constitution of this state and that may be necessary, convenient or desirable for the issuance of bonds or home certificates and for their security.
2. Provide additional security for the bonds or home certificates in the form of a line of credit, letter of credit, insurance policy or other security and:
(a) Pay the cost of the additional security from amounts produced from the bond issue or from other available sources.
(b) Enter into reimbursement obligations in connection with the additional security.
41-5109. No abrogation of rights
This state pledges to and agrees with the holders of any bonds and home certificates issued under this article, and with those parties who may enter into agreements with the department pursuant to this article, that the state will not limit or alter the rights vested in the department or successor agency until all bonds and home certificates, together with the interest on the bonds or home certificates, are fully paid and discharged and all agreements are fully performed, provided that nothing contained in this article precludes such limitation or alteration if and when adequate provision is made by law for the protection of the holders of such obligations of the department or those entering into such agreements with the department.
41-5110. Bonds and home certificates as legal investments
A. Bonds and home certificates issued by the department are securities in which all public officers and bodies of this state and all political subdivisions of this state, all financial institutions, investment companies, insurance companies and associations and all executors, administrators, guardians, trustees and other fiduciaries may legally invest any sinking funds, monies or other funds belonging to them or under their control.
B. Any securities issued by the department under this article are exempt from registration as prescribed in section 44‑1843.
41-5111. Bond and certificates obligations
A. All bonds and home certificates issued pursuant to this article are obligations of the department to be paid solely from the interest and principal proceeds of time-out mortgage payments, and the Arizona home insurance fund established by section 41‑5113, are payable only in accordance with the terms of the bonds or home certificates and shall not be obligations general, special or otherwise of this state. Such bonds and home certificates do not constitute a legal debt of this state and are not enforceable against this state, nor shall payment of the bonds or home certificates be enforceable out of any funds of the department other than the income and revenue pledged and assigned to, or in trust for the benefit of, the holder or holders of such bonds and home certificates, and the assets of the Arizona home insurance fund.
B. All bonds and home certificates shall be fully insured against default as to principal and interest through the Arizona home insurance fund.
C. All loss recapture certificates issued pursuant to this article are obligations of the borrower and are payable only in accordance with the terms of the loss recapture certificates, shall not be insured and shall not be obligations general, special or otherwise of this state or the department. The program administrator shall record the loss recapture certificate lien in an amount equal to the principal amount of the loss recapture certificate with the applicable county recorder on behalf of the department.
41-5112. Supplemental law
The powers conferred by this article are in addition and supplemental to the powers conferred by any other law, general or special, and shall be deemed full authority for the issuance of bonds and certificates, time-out mortgage loans, and loss recapture certificates, for recording and holding the loss recapture certificate liens, for entering into agreements in connection therewith and for the authorization, issuance and sale of the bonds and certificates and the issuance of time-out mortgage loans and the filing of a deed of trust related to any such time-out mortgage loan pursuant to this article and without regard to the procedure required by any other such law.
41-5113. Arizona home insurance fund; report; termination
A. The Arizona home insurance fund is established. The program administrator shall administer the fund. The fund consists of monies from:
1. One‑time insurance premiums paid on issuance of time-out mortgage loans.
2. Monthly insurance payments received from homeowner-borrowers.
3. Amounts offered to be transferred to the fund by the attorney general from settlements with financial institutions relating to housing matters.
4. Amounts offered to be transferred from the Arizona housing department which were originally received from the federal government's troubled assets relief program.
5. Investment earnings.
6. Gifts, grants and donations.
B. The annual insurance premium is an amount determined by the director by rule.
C. The state treasurer shall invest and divest monies in the fund as provided by section 35-313, and monies earned from investment shall be credited to the fund and reported to the program administrator.
D. Fund monies shall be used to pay insurance claims from holders of insured bonds or insured home certificates. Fund monies may be used, in the discretion of the program administrator, to pay interest charges on insured bonds or insured home certificates, solely to the extent that the time-out mortgage loan associated with insured home certificate, or an insured bond, has not been timely paid by the homeowner-borrower. Care and preservation costs, real estate taxes, and homeowners' insurance if unpaid by the homeowner and for delinquent or foreclosed properties, may be paid, in the discretion of the program administrator, from the fund.
E. The program administrator shall report to the legislature bi‑annually on the status of the fund. Each bi-annual report shall include the balance of the fund and a summary of premiums received, investment earnings, claims received and amounts paid on claims for the applicable period. Each report shall be submitted to the president of the senate and the speaker of the house of representatives within ninety days after the applicable period ends.
F. The income of the fund shall be exempt from taxation.
G. This state and any of its agencies shall not have a claim on the assets or proceeds of the fund for the duration of the program.
H. Funds remaining in the insurance fund after the program terminates shall be transferred to the state general fund, as specified in section 41‑5106, subsection B.
41-5114. Title clearance; legislative intent
A. It is the public policy of this state to maintain a clear chain of title to residential real property located in this state. It is disruptive to the functioning of this state to not have a clear chain of title to residential real property located within this state, notwithstanding the need for transferability of loans secured by residential real property. To resolve any question as to chain of title to residential real property in this state for the residential real properties owned by qualified homeowner program applicants, the department may purchase the improved residential real property of each program participant. If there is a partial in the money loan on the residential real property being purchased, then the purchase price shall be one hundred one per cent of program fair market value. If there is no partial in the money loan on the residential real property being purchased, then the purchase price shall be the sum of the principal amounts of all in the money loans on the residential real property being purchased.
B. To determine program fair market value of the real property, each program participant shall conduct two property appraisals at their cost through appraisers selected by the department on a reasonably random basis. If the two appraisals are more than five per cent different from each other, a third appraisal shall be performed by an appraiser selected by the department on a reasonably random basis. The program administrator may reject an appraisal which the program administrator believes to be unreasonable, in which case another appraisal will be ordered, the results of which shall replace the results of the rejected appraisal. The highest appraisal shall be used to determine the fair market value of the property for purposes of this program. If a time-out mortgage loan is issued on the subject property, the homeowner shall be reimbursed the costs of appraisals as provided in section 41-5115, subsection I.
C. Prior to the title clearance transaction, the program administrator shall give notice to the homeowner-borrower, the servicer of all known pre‑program loans for which the servicer may be determined by the program administrator, and any pre-program loan lienholders holding unsatisfied recorded liens with the applicable county recorder which will not reattach under section 41-5107, subsection B. Notice to servicer of the partial in the money loan, if any, shall include notice that the servicer is required to communicate whether the servicer, on behalf of the holder of the partial in the money loan, is to receive a loss recapture certificate or a cash payment in accordance with section 41-5116. Notice shall be provided in accordance with program rules which may include any method through which such a notice may be received including through digital or electronic means. In order to facilitate the program administrator giving notice to pre-program loan lienholders on behalf of the department, each county recorder shall provide property identification information, the name and address of each pre-program lienholder, the most current email and mailing address on file, if any, and the amount of the lien in form and format reasonable acceptable to the program administrator within thirty days of the program administrators request without cost to the department or program administrator, which files shall include all unsatisfied liens recorded on each residential real property located within the county and, thereafter upon request of the program administrator, shall provide updated files, without cost to the department or program administrator.
D. The program administrator, on behalf of the department, shall make payment of applicable amounts to the servicer for the benefit of its holder on any pre-program loan secured by residential real property for which a payment is to be made in accordance with this article and program rules.
E. The anti-deficiency protections of section 33-814 apply on any property that is acquired by the department pursuant to this section and no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest costs and expenses.
F. Notwithstanding any other law, the state and the department are immune from (i) all obligations in respect of the subject property including homeowner association dues and assessments, taxes, or the like, and (ii) any liability due to ownership of the subject real property, including any liability based on strict liability, if the department has sold the real property to the former homeowner.
G. If, for any reason, an improper payment is made under section 41‑5114, the recipient of such improper payment shall within ten days of receipt of notice of improper payment from the program administrator, repay such amount in full to the department.
41-5115. Mortgage loan and security interest
A. The department shall promptly sell the real property purchased under section 41‑5114 to the former homeowner and issue an interest-only time-out mortgage loan secured by a deed of trust in favor of the department on the same residential real property.
B. The purchase price that the former homeowner shall pay to the department to repurchase the real property from the department equals the principal amount of the time-out mortgage loan, which shall be the sum of the following:
1. The amount of the title clearance payment.
2. Two thousand five hundred dollars.
3. The amount of any cash payments made under section 41‑5116.
4. An amount that equals ten per cent of the principal amount of the time-out mortgage loan that is computed by calculating the sum of the amounts in paragraphs 1, 2 and 3 of this subsection and multiplying that sum by eleven and one-ninth per cent.
C. The term of the time-out mortgage loan shall be ten years, unless a different term is applicable under section 41-5115, subsection K, subject to program rules.
D. If a particular time-out mortgage loan is financed by bonds, then the interest rate for that time-out mortgage loan shall be (i) the effective interest rate on bonds as calculated by the program administrator, plus (ii) the annual Arizona home insurance fund premium plus (iii) the twenty‑five basis point annual fee paid to the program administrator which includes program servicing fees and licensing fees.
E. If a particular time-out mortgage loan is financed by home certificate(s), then the interest rate for that time-out mortgage loan shall be (i) the stated interest rate for the applicable home certificate plus (ii) the annual Arizona home insurance fund premium plus (iii) the twenty‑five basis point annual fee paid to the program administrator which includes program servicing fees and licensing fees. If a time-out mortgage loan is financed by more than one home certificate and those home certificates have different interest rates, the "stated interest rate for the applicable home certificate" shall equal the weighted average of the interest rates on those home certificates, as determined by the program administrator.
F. The term and interest rate of the time-out mortgage loan shall be communicated to the owner of the residential real property promptly after such information is determined but in all cases prior to the purchase closing date.
G. The ten per cent amount, prescribed in subsection a, paragraph 4, shall be deposited into the Arizona home insurance fund.
H. The time‑out mortgage loan shall be serviced by the program administrator, who shall accept payments on behalf of the department. For each time-out mortgage loan, the program administrator shall record a time‑out deed of trust in favor of the department in an amount equal to the principal amount of the time‑out mortgage loan. There is no prepayment penalty on either the time-out mortgage loan or the loss recapture certificate but for ten years from the sale closing date principal payments shall be applied first to the loss recapture certificate and once the loss recapture certificate is paid in full, then to reduce the principal amount of the time-out mortgage loan. After a time-out mortgage loan has been repaid in full, the department shall release the applicable time-out deed of trust in accordance with program rules. If a mortgagor or a trustor on a deed of trust has committed fraud, the anti‑deficiency protections of sections 33‑729 and 33‑814 shall not apply to that mortgagor or trustor.
I. Appraisal fees paid by the homeowner-borrower to determine the program fair market value shall be reimbursed to the homeowner-borrower within sixty days after purchase closing date, subject to program rules.
J. The program administrator on behalf of the department shall create a standard form for time-out mortgage loans and time-out deeds of trust and other documents that shall be utilized for all loans issued by the department under this program. The time-out mortgage loan standard form shall include a provision that requires the homeowner-borrower to repay the time‑out mortgage loan or refinance the time-out mortgage loan with another lender within eighteen months after the average home value in the state is one hundred fifty per cent of the average home value in the state six months from the date the first time-out mortgage loan is issued so long as the thirty‑year united states treasury bond interest rate is not more than four per cent during the twelve-month period that begins with the month during which the required increase in average home value is met. Within one hundred eighty days of the date the first time-out mortgage loan is issued and, thereafter, on the three month anniversary until the earlier of the ten year anniversary or no time-out mortgage loans are outstanding, the program administrator shall determine the average home value in the state and shall promptly provide this information to the department.
K. If a time-out mortgage loan borrower experiences a change in circumstances that makes timely payment difficult, the borrower shall promptly communicate the specific circumstances and provide documentary proof of such difficulty to the program administrator in accordance program rules. If such circumstances meet the threshold for an allowable change of circumstances as prescribed in program rules, the program administrator shall attempt to utilize the program's finance modification tools to reduce that borrower's interest rate so that the monthly payment required can be more affordable to that borrower. To the extent that the program administrator substitutes alternative financing to reduce the borrower's annual interest rate that has a different term than the original financing, the department shall issue a replacement time-out mortgage loan with an interest rate and term specified by the program administrator; the term shall be coterminous with the term of the substitute financing. The program administrator may, but shall not be required to, request the department to modify the terms of the time-out mortgage loan. If a time-out mortgage loan modification is permitted under program rules and the program administrator requests the department to modify a time-out mortgage loan's terms, the department shall modify the terms of the applicable time-out mortgage loan as provided in such request. Payment of some or all of either or both of the annual Arizona home insurance fund insurance premium or the additional twenty‑five basis points may be waived by the program administrator solely in the event of an allowable change of circumstances as prescribed in the program rules.
L. Program rules may require homeowner‑borrowers to make monthly escrow payments to the program administrator for state, county and local real estate taxes, homeowner association dues, and/or homeowner's insurance premiums. If the program administrator receives escrow payments for taxes, the program administrator shall forward the amount received for taxes to the appropriate taxing authority within sixty days of its receipt. If a homeowner-borrower allows homeowner's insurance on a property secured by a time-out deed of trust to lapse, the program administrator may, but shall not be required to, obtain insurance coverage up to the amount of the time-out deed of trust lien with the Arizona home insurance fund named as loss payee and mortgagee. Proceeds from any such insurance policy shall not be paid to the homeowner. The program administrator shall invoice the homeowner‑borrower for the cost of the insurance coverage plus a fee in an amount specified in program rules. Any insurance coverage purchased under this section must be purchased from an entity unaffiliated and unrelated to the program administrator or any of its officers, directors, members or employees. In the event a homeowner-borrower does not pay applicable real estate taxes and/or homeowner association fees on a timely basis, the program administrator may, but shall not be required to, pay any balance due from the Arizona home insurance fund and, thereafter, shall invoice the homeowner‑borrower for the cost of these payments plus a fee in an amount determined by the program administrator by rule. Interest shall accrue of any amount invoiced by the program administrator for homeowner's insurance or real estate taxes which are not timely paid at the same interest rate as the time-out mortgage loan. If any such amount is not paid within ninety days, the program administrator may declare the time-out mortgage loan to be in default.
M. The program administrator shall process foreclosures on a time‑out deed of trust on behalf of the department in accordance with program rules. The net proceeds of all foreclosure sales, including all amounts due to the department, shall be deposited in the Arizona home insurance fund.
N. All payments to be made to the program administrator shall be made in accordance with program rules.
O. All persons or entities that are required to report to the department in accordance program rules shall report in the substance and in the manner prescribed by those program rules.
P. All homeowner's insurance required in accordance with the terms of a time-out mortgage loan shall meet the minimum standards and coverage amount requirements specified in program rules until the department has released its lien. All such homeowner's insurance shall name the department as loss payee and mortgagee. All amounts received by the department from any such insurance policy shall be transferred to the Arizona home insurance fund.
Q. The program administrator shall adopt program and administrative rules consistent with this article.
41-5116. Loss recapture certificates; payments on partial in the money loans and not in the money loans
A. The program administrator, on behalf of the department, shall create a standard form for loss recapture certificates and loss recapture certificate liens to be used under this program.
B. Unless a cash payment was made on the partial in the money loan under subsection h of this section, the program administrator shall issue a loss recapture certificate to the servicer of the partial in the money loan. It shall be the servicer's responsibility to provide the loss recapture certificate to the holder of that partial in the money loan. The loss recapture certificate shall have a principal amount only which shall be equal to the deferred recapture amount, and no interest shall be due on the principal balance of the loss recapture certificate. Other attributes of the loss recapture certificate shall be specified in program rules. The loss recapture certificate lien shall be recorded as provided under section 41‑5107 and shall have priority immediately behind the time-out deed of trust on the same property.
C. If there is a balance due on a loss recapture certificate, and if the time-out mortgage loan for the same property has a required monthly interest payment which is less than two-thirds of the pre-program monthly payment, there shall be a required monthly principal payment on the loss recapture certificate equal to two-thirds of the pre-program monthly payment less the monthly interest payment amount on the time-out mortgage loan for the same property. On behalf of the department, the program administrator shall determine the amount of the required monthly loss recapture certificate principal payment, if any, and shall communicate that amount to the homeowner‑borrower prior to the purchase closing date, in accordance with program rules. Such payment shall be paid to the program administrator and forwarded to the servicer per program rules.
D. Notwithstanding subsection C of this section, if the homeowner‑borrower has experienced an allowable change of circumstances, as defined in program rules, no principal payment shall be due from that homeowner‑borrower on the loss recapture certificate unless and until the allowable change of circumstances has been resolved as provided in program rules.
E. Notwithstanding the lien priority of the loss recapture certificate or any other law or rule, the loss recapture certificate shall include a provision that in the case of any transfer of the subject property, in full satisfaction of the homeowner's obligation, the homeowner shall pay to the program administrator for further payment to the holder of the loss recapture certificate in accordance with program rules, one-half of (x) the greater of (i) the sale price of the subject property or (ii) all amounts received for such transfer, less (y) the amount of the time-out mortgage loan on the subject property on the sale closing date; the maximum payment shall equal the principal balance of the loss recapture certificate on the date of the sale or transfer.
F. The program administrator shall not receive a fee for servicing the loss recapture certificate.
G. The program administrator shall release the applicable loss recapture certificate lien on behalf of the department in accordance with program rules.
H. A loss recapture certificate shall be presumed to be non-recourse debt and shall be issued as such. If the program administrator determines that the debt is recourse debt in accordance with section 41-5115, subsection H, the loss recapture certificate shall be reissued indicating that the debt is recourse debt.
I. A partial in the money loan holder shall have the option to receive a cash payment instead of receiving a loss recapture certificate. If a partial in the money loan holder or servicer opts for a cash payment instead of receiving a loss recapture certificate, the amount of the cash payment shall be determined as follows:
1. If there are no not in the money loans on the same residential real property securing the partial in the money loan, the cash payment shall be six thousand dollars or its principal amount, whichever is less.
2. If there is one not in the money loan on the same residential real property securing the partial in the money loan, the cash payment on the partial in the money loan shall be five thousand two hundred fifty dollars or its principal amount, whichever is less.
3. If there are two not in the money loans on the same residential real property securing the partial in the money loan, the cash payment on the partial in the money loan shall be four thousand seven hundred fifty dollars or its principal amount, whichever is less.
J. If the servicer of a partial in the money loan does not communicate its decision to accept either a loss recapture certificate of a cash payment on behalf of its holder within thirty days from receipt of notice of the title clearing procedure, the partial in the money loan holder and servicer shall be deemed to have elected to receive a cash payment. Notice given to a servicer of a partial in the money loan holder in accordance with section 41‑5114, subsection C shall be considered notice given to the partial in the money loan holder.
K. If there is only one not in the money loan on a residential real property, the cash payment on that not in the money loan shall be seven hundred fifty dollars or its principal amount, whichever is less, and if there are two not in the money loans, the cash payments shall be seven hundred fifty dollars or its principal amount, whichever is less, to the higher priority not in the money loan and five hundred dollars or its principal amount, whichever is less, to the lower priority not in the money loan.
L. All cash payments under this subsection shall be paid to the servicer of the applicable pre-program loan for the benefit of the holder of the applicable pre-program loan.
M. If there are more than two not in the money loans on the same residential real property securing the partial in the money loan, no payment shall be made on those not in the money loans.
41-5117. No negative credit filings; civil penalty
A. It is the public policy of this state that participants in this program shall not be threatened with, or experience, retaliatory consequences after entering this program. therefore, as of the purchase closing date, no party shall file with any credit reporting company a negative credit filing on the borrower of a partial in the money loan or a not in the money loan secured by a property purchased by the department under section 41-5114, notwithstanding the accuracy or inaccuracy of any such filing. No credit reporting company shall accept a negative filing from any person or entity with respect to a pre-program loan secured by residential real property on which a time-out mortgage loan and time‑out deed of trust has been issued pursuant to this article. This provision does not apply to the department or program administrator.
B. Each negative credit report in violation of this section is punishable by a civil penalty of twenty‑five thousand dollars payable to the state treasurer. Proceeds of civil penalties shall be first applied to program expenses and all remaining amounts shall be transferred for deposit into the Arizona home insurance fund established by section 41‑5113.
Sec. 3. Severability
If any provision of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or application of this act that can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.
Sec. 4. Emergency
This act is an emergency measure that is necessary to preserve the public peace, health or safety and is operative immediately as provided by law."
Amend title to conform
JAMES P. WEIERS |