Virginia Code 38.2-1435: Second mortgages; wrap-around mortgages.
A domestic insurer may invest in obligations secured by second mortgages or second deeds of trust on real property encumbered only by a first mortgage or first deed of trust complying with §§ 38.2-1434 and 38.2-1437, subject to either of the following conditions:
Terms Used In Virginia Code 38.2-1435
- Deed: The legal instrument used to transfer title in real property from one person to another.
- Insurer: means a company licensed pursuant to Chapter 10 (§ Virginia Code 38.2-1401
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- 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.
- Obligation: means a bond, debenture, note or other evidence of indebtedness. See Virginia Code 38.2-1401
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- Wrap-around mortgage: means a loan made by an insurer to a borrower, secured by a mortgage or deed of trust on real property encumbered by a first mortgage or first deed of trust, where the total amount of the obligation of the borrower to the insurer under the loan is not less than the sum of (i) the principal amount initially disbursed by the insurer on account of the loan and (ii) the unpaid principal balance of the obligation secured by the preexisting mortgage or deed of trust. See Virginia Code 38.2-1401
1. The insurer also owns the obligation secured by the first mortgage or first deed of trust, and the aggregate value of both loans does not exceed the applicable loan-to-value ratio specified in § 38.2-1437; or
2. The obligation is secured by a wrap-around mortgage where:
a. Only one preexisting mortgage or deed of trust encumbers the real property;
b. The mortgage or deed of trust securing the loan is (i) recorded and (ii) insured for at least the total amount of the obligation of the borrower to the insurer by title insurance; and
c. The insurer agrees to make the payments due under the first mortgage or first deed of trust upon receipt of payments due from the borrower under the wrap-around mortgage.
1983, c. 457, § 38.1-217.38; 1986, c. 562.