(1) An insurer may invest in bonds or notes secured by a first mortgage on real estate in the United States or Canada if the amount loaned by the insurer, together with any amount secured by an equal security interest, does not exceed eighty percent of the appraised value of the real estate and improvements at the time of making the investment, or if the funds are used for a construction loan, the amount does not exceed eighty percent of the market value of the real estate together with the actual costs of improvements constructed thereon at the time of final funding by the insurer. The limitation in this subsection shall not:

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Terms Used In Nebraska Statutes 44-5143

  • Amortization: Paying off a loan by regular installments.
  • Appraisal: A determination of property value.
  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Bankruptcy: Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings.
  • Company: shall include any corporation, partnership, limited liability company, joint-stock company, joint venture, or association. See Nebraska Statutes 49-801
  • Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. Source: OCC
  • Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
  • Insurer: shall include all companies, exchanges, societies, or associations whether organized on the stock, mutual, assessment, or fraternal plan of insurance and reciprocal insurance exchanges. See Nebraska Statutes 44-103
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • Lien: A claim against real or personal property in satisfaction of a debt.
  • Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
  • Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
  • Mortgagee: The person to whom property is mortgaged and who has loaned the money.
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
  • State: when applied to different states of the United States shall be construed to extend to and include the District of Columbia and the several territories organized by Congress. See Nebraska Statutes 49-801
  • Trustee: A person or institution holding and administering property in trust.
  • United States: shall include territories, outlying possessions, and the District of Columbia. See Nebraska Statutes 49-801

(a) Apply to investments authorized under section 44-5132 ;

(b) Prohibit an insurer from renewing or extending a loan for the original amount when the value of such real estate has depreciated;

(c) Prohibit an insurer from accepting, as part payment for real estate sold by it, a mortgage thereon for more than eighty percent of the purchase price of such real estate; or

(d) Prohibit an insurer from advancing additional loan funds to protect its real estate security.

(2) An insurer may invest in bonds or notes secured by a first mortgage on leasehold estates in real estate located in the United States or Canada if:

(a) Such underlying real estate is unencumbered except by (i) rentals to accrue therefrom to the owner of the real estate or (ii) a fee mortgage, if there is an agreement from the lender secured by the fee mortgage to not terminate or extinguish the leasehold interest as long as the lessee is not in default;

(b) There is no condition or right of reentry or forfeiture under which such lien can be cut off, subordinated, or otherwise disturbed so long as the lessee is not in default;

(c) The amount loaned by the insurer, together with any amount secured by an equal security interest, does not exceed eighty percent of the appraised value of such leasehold with improvements at the time of making the loan, or, if the funds are used for a construction loan, the amount loaned does not exceed eighty percent of the market value of the leasehold estate together with the actual costs of improvements constructed thereon at the time of final funding by the insurer; and

(d) Such mortgage loan will be completely amortized during the unexpired portion of the lease or leasehold estate, or, if a loan has a balloon payment, the mortgage loan amortization period plus the remaining unexpired term of the lease after the maturity date of the loan is at least thirty years, except that any lease or leasehold estate that is convertible by the borrower, as lessee, or the insurer, as lender, into a fee interest for no or minimal consideration at any time during the lease term shall be treated as a fee interest for all purposes under section 44-5143 so long as the insurer’s mortgage is secured by such fee interest following such conversion.

(3) Nothing in this section shall prevent any amount invested under this section that exceeds eighty percent of the appraised value of the real estate or leasehold and improvements, as the case may be, from being authorized under section 44-5153.

(4) All buildings and other real estate improvements which constitute a material part of the value of the mortgaged premises, whether estates in fee or leasehold estates or combination thereof, shall be (a)(i) substantially completed before the investment is made or (ii) of a value that is at all times substantial in value in relation to the amount of construction loan funds advanced by the insurer on account of the loan and (b) kept insured against loss or damage by fire or windstorm in a reasonable amount for the benefit of the mortgagee.

(5) Other than investments subject to section 44-5132, if there are more than four holders of the issue of such bonds or notes described in subsection (1) or (2) of this section, (a) the security of such bonds or notes, as well as all collateral papers including insurance policies executed in connection therewith, shall be made to and held by a trustee, which trustee shall be a solvent bank or trust company having a paid-in capital of not less than two hundred fifty thousand dollars, except in case of a bank or trust company incorporated under the laws of this state, in which case a paid-in capital of not less than one hundred thousand dollars shall be required, and (b) it shall be agreed that, in case of proper notification of default, such trustee, upon request of at least twenty-five percent of the holders of the par amount of the bonds outstanding and proper indemnification, shall proceed to protect the rights of such bondholders under the provisions of the trust indenture. Nothing in this subsection shall be deemed to inhibit the ability of an insurer to rely on the provisions of section 44-5110 with regard to loan participations for loans that meet the requirements of this section.

(6)(a) An insurer may invest in notes or bonds secured by second mortgages or other second liens, including all inclusive or wraparound mortgages or liens, upon real property encumbered only by a first mortgage or lien which meets the requirements set forth in this section, subject to either of the following conditions:

(i) The insurer also owns the note or bond secured by the prior first mortgage or lien and the aggregate value of both loans does not exceed the loan to market value ratio requirements of this section; or

(ii) The note or bond is secured by an all-inclusive or wraparound lien or mortgage which conforms to the requirements set forth in subdivision (b) of this subsection, if the aggregate value of the resulting loan does not exceed the loan to market value ratio requirements of this section.

(b) For purposes of this subsection, the terms wraparound and all-inclusive lien or mortgage refer to a loan made by an insurer to a borrower on the security of a mortgage or lien on real property other than property containing a residence of one to four units or on which a residence of one to four units is to be constructed, where such real property is encumbered by a first mortgage or lien and which loan is subject to all of the following requirements:

(i) The total amount of the obligation of the borrower to the insurer under the loan is not less than the sum of the amount disbursed by the insurer on account of the loan and the outstanding balance of the obligation secured by the preexisting lien or mortgage;

(ii) The instrument evidencing the lien or mortgage by which the obligation of the borrower to the insurer under the loan is secured, is recorded, and the lien is insured under a policy of title insurance in an amount not less than the total amount of the obligation of the borrower to the insurer under the loan; and

(iii) The insurer either (A) files for record in the office of the recorder of the county in which the real property is located a duly acknowledged request for a copy of any notice of default or of sale under the preexisting lien or (B) is entitled under applicable law to receive notice of default, sale, or foreclosure of the preexisting lien.

(7)(a) An insurer may invest in mezzanine real estate loans subject to the following conditions:

(i) The terms of the mezzanine loan agreement:

(A) Require that each pledgor abstain from granting additional security interests in the equity interest pledged;

(B) Employ techniques to minimize the likelihood or impact of a bankruptcy filing on the part of the real estate owner or the mezzanine real estate loan borrower; and

(C) Require the real estate owner, or mezzanine real estate loan borrower, to: (I) Hold no assets other than, in the case of the real estate owner, the real property, and in the case of the mezzanine borrower, the equity interest in the real estate owner; (II) not engage in any business other than, in the case of the real estate owner, the ownership and operation of the real estate, and in the case of the mezzanine real estate borrower, holding an ownership interest in the real estate owner; and (III) not incur additional debt, other than limited trade payables, a first mortgage loan, and the mezzanine real estate loan; and

(ii) At the time of the initial investment, the mezzanine real estate loan lender shall corroborate that the sum of the first mortgage and the mezzanine real estate loan does not exceed one hundred percent of the value of the real estate as evidenced by a current appraisal.

(b) The value of an insurer’s investments authorized under this subsection shall not exceed three percent of its admitted assets.

(c) For purposes of this subsection, mezzanine real estate loan refers to a loan made by an insurer to a borrower on the security of debt obligation which is secured by a pledge of a direct or indirect equity interest in an entity that owns real estate.

(8) An insurer’s investments authorized under this section shall not exceed forty percent of its admitted assets, and an insurer’s investments authorized under this section and section 44-5144, in the aggregate, shall not exceed fifty percent of its admitted assets.

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