(a) The authority shall establish and maintain three funds: The Housing Mortgage Capital Reserve Fund, the Housing Mortgage General Fund and the Housing Mortgage Insurance Fund.

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(1) The Housing Mortgage Capital Reserve Fund shall consist of (A) all moneys paid by the state for inclusion therein; (B) all proceeds of the sale of bonds required to be deposited therein by the terms of the resolution authorizing the sale of said bonds; and (C); any other moneys available to the authority which it determines to utilize for this purpose. All moneys held in the Housing Mortgage Capital Reserve Fund, except as hereinafter provided, shall be used for the payment of the principal and interest of any bonds or notes issued by the authority, as such payment shall become due and for the retirement of bonds upon maturity and when due. In addition, moneys from the fund may be used to retire bonds before maturity and to pay any redemption premium required to be paid, provided no moneys shall be utilized in any year to retire bonds before maturity if the consequence thereof is to reduce the fund below an amount of moneys sufficient to meet the maximum payments required in the succeeding calendar year for payment of principal and interest falling due on all other outstanding bonds and retiring all other bonds required by their terms to be retired, such amount being hereafter referred to as the “required minimum capital reserve”. Income or interest from the investment of moneys held in the fund shall be retained therein if needed to meet any deficiencies in the required minimum capital reserve but, to the extent of any excess over the aforesaid required minimum capital reserve, moneys may be transferred by the authority to any other fund or account of the authority. Notwithstanding any other provision contained in this chapter, no bonds shall be issued by the authority unless there is in the fund the required minimum capital reserve for all bonds issued and to be issued, provided nothing shall preclude the authority from satisfying the foregoing requirement by depositing so much of the proceeds of the bonds to be issued, upon their issuance as is needed for the fund to achieve the required minimum capital reserve. On or before December first of each year, there is deemed to be appropriated from the state General Fund such sums, if any, as shall be certified by the chairman of the authority, to the Secretary of the Office of Policy and Management, as necessary to restore said fund to an amount equal to the required minimum capital reserve, and such amounts shall be allotted and paid to the authority. Such amounts, if any, shall be repaid to the state and credited to the General Fund, subject to the provisions of section 8-261 and to any general resolution adopted prior to May 18, 1972, by the authority authorizing the issuance of bonds, as soon as possible, by the authority from any moneys available therefor and in excess of the amounts which the authority determines will keep it self-supporting. For purposes of valuation of the Housing Mortgage Capital Reserve Fund, securities acquired as an investment for said fund shall be valued at par, actual cost to the authority or market value, whichever value is less.

(2) The authority may also establish one or more additional capital reserve funds in connection with the issuance of any bonds pursuant to a resolution other than its general housing mortgage program bond resolution adopted October 27, 1972. Any such capital reserve fund shall be established and maintained on the same terms and conditions as the Housing Mortgage Capital Reserve Fund, and amounts shall be deposited and maintained therein, expended therefrom and are hereby appropriated thereto in the same manner and with the same force and effect as is provided in subdivision (1) of subsection (a) of this section with respect to the Housing Mortgage Capital Reserve Fund, it being hereby expressly provided that the operation of any such capital reserve fund shall be identical to the operation of the Housing Mortgage Capital Reserve Fund, except as follows: When computing the amount on deposit in any such capital reserve fund, investments therein shall be valued at par, cost, amortized value or such other method as the authority determines to be reasonable and in the best interests of the state and the holders of the bonds entitled to the benefits thereof; and in calculating the required “minimum capital reserve” with respect to such capital reserve fund there shall be taken into account only those bonds of the authority secured by such capital reserve fund and in computing the “required minimum capital reserve” pursuant to subdivision (1) of subsection (a) of this section, such bonds shall not be taken into account in determining the amount of outstanding and other bonds. The provisions of section 8-261 shall be applicable to this subdivision.

(3) The Housing Mortgage General Fund shall consist of (A) all proceeds of the sale of bonds issued by the authority not required to be deposited in the Housing Mortgage Capital Reserve Fund by the terms of the resolution authorizing the sale of said bonds; (B) all moneys paid by the state of Connecticut for inclusion therein; (C) any moneys not allocated to any fund; (D) any moneys which the authority shall transfer from the Housing Mortgage Capital Reserve Fund pursuant to subdivision (1) of subsection (a) of this section; and (E) any other moneys available to the authority which it determines to utilize for this purpose. To the extent available, after paying all operating costs of the authority except moneys required for the Housing Mortgage Capital Reserve Fund and the Housing Mortgage Insurance Fund, the moneys remaining in the General Fund may be used for the payment of the principal of and interest on the bonds issued by the authority or for such other corporate purposes of the authority as are authorized by this chapter.

(4) The Housing Mortgage Insurance Fund shall consist of (A) all receipts of mortgage insurance premiums, (B) all money or other assets of whatever nature received by the authority as a result of loan defaults or delinquencies, including proceeds from the sale, lease or rental of real property, (C) all moneys lent or paid by the state for inclusion therein and (D) any other moneys available to the authority which it determines to include therein. From said funds shall be paid all payments required by loan defaults and all direct expenses and payments for the protection of the interest of the authority in connection with delinquent or defaulted insured mortgages or property acquired as a result thereof. Loans and advances may be made from said funds as provided by section 8-250.

(b) Notwithstanding the provisions of subdivisions (1) to (3), inclusive, of subsection (a) of this section, the authority may establish accounts in the funds established under said subdivisions or such additional alternative or further funds and accounts thereof, which may include the proceeds of bonds, and may establish other capital reserve funds on the same terms and conditions and with the same force and effect resulting from the provisions of subdivision (1) of subsection (a) of this section, except that securities acquired as an investment of any such fund shall be valued in such reasonable manner as the authority shall determine, all as may be, in its discretion, necessary and desirable to accomplish any purpose of the authority or to comply with the provisions of any agreement made by the authority or any resolution approved by the authority. The resolution establishing such a fund and accounts shall specify the source of moneys from which such funds or accounts shall be funded and the purposes for which moneys held in the funds and accounts shall be disbursed.

(c) Moneys in any of the funds referred to in this section not needed to meet expenses may be invested in the manner provided in subsection (18) of section 8-250.

(d) Subject to any agreement or agreements with holders of outstanding bonds, notes or other obligations, the authority may apply moneys in the Housing Mortgage Capital Reserve Fund, any additional capital reserve fund or the Housing Mortgage General Fund to purchase a financial guaranty or financial guaranties secured or unsecured as the authority may determine. For purposes of this section, financial guaranty means any letter of credit, surety bonds, insurance policy, guaranty or similar instrument issued by a bond or insurance company or other financial institution which provides for moneys to be available for the purposes to which and at the times by which moneys in each such fund may be required.

(e) Secure instruments or contracts authorized under subsection (38) of section 8-250 in any manner in which the authority may secure its bonds, notes or other obligations under section 8-252, subject to any agreement or agreements with holders of outstanding bonds, notes or other obligations of the authority.

(f) The State Treasurer is hereby authorized to issue a collateralized direct guarantee of the state of punctual payment thereof from the General Fund and carrying the full faith and credit pledge of the state for any investment of the authority or financial guarantee purchased by the authority to the extent such investment or financial guarantee has a rating equal to or better than that of the state provided the state is fully secured by a collateral assignment of such investment or financial guarantee and such investment or financial guarantee qualifies as an investment by the Short-Term Investment Fund under section 3-27a. The amount necessary to honor such state collateralized guarantee is hereby deemed appropriated from the General Fund and the Treasurer is authorized and directed to sell and collect on the security of the collateral so assigned and to pay such amount to the authority. Such state collateralized guarantee shall not constitute indebtedness of the state for the purposes of any debt limit of other statutory purpose and shall be only placed on any such investment or financial guarantee to permit the authority to maximize its investment opportunities and to meet its responsibilities under the requirements of its general housing mortgage finance program bond resolution adopted September 27, 1972, as amended, provided the State Treasurer determines that the collateral is at least sufficient to offset the full amount of the state guarantee. The State Treasurer shall be entitled to such supporting documents as necessary or appropriate from the authority prior to placing such collateralized guarantee on any such investment.