§ 36-41-7 — Purchase of mortgages or security interests or participations therein

(a) With respect to the power to purchase mortgages or security interests or participations therein from lending institutions as set forth in subsection (a) of Code Section 36-41-5 , each authority may purchase mortgages or security interests from lending institutions, which shall in turn reinvest the proceeds in new mortgage loans made as rapidly as possible on residential housing. A mortgage or security interest or participation therein shall not be acquired under this chapter unless the rate of interest on such mortgage meets the rates of interest established by the authority. The authority shall establish such rates of interest, taking into consideration all of the following: (1) The cost to the authority in obtaining funds; (2) Allowances to be made to a lending institution as a service fee in acting as a servicing agent in the administration and collection of the mortgage; (3) Administrative costs of the authority; (4) Allowances for any necessary reserves of the authority; and (5) Regulations of the Internal Revenue Service of the United States. (b) The authority may purchase participations in mortgages or security interests and shall make such rules as will adequately secure the authority and its bondholders with respect to the purchase of participations in mortgages or security interests. (c) If the authority purchases a mortgage or a security interest or a participation therein from a lending institution, the lending institution may act as servicing agent for the authority in the collection and administration of the mortgage or security interest, subject to the rules established by the authority under this chapter. (d) Subject to the rights of bondholders, the authority shall fix the amount of the fee to be paid a servicing agent, in such amount as shall reasonably compensate the servicing agent for performing such services. The amount of such fee may be deductible from any interest payable and collected under the mortgage or security interest. (e) The authority may make commitments to lending institutions to purchase a mortgage or security interest or participation therein prior to the date of its execution, and a mortgage which is made by a lending institution under a prior commitment from the authority to purchase the mortgage or security interest or a participation therein shall satisfy the requirement to reinvest the proceeds from the sale as quickly as possible in mortgage loans for residential housing. The authority shall establish such fees as are necessary to reimburse the authority for the administrative costs incurred in connection with making commitments to purchase and in purchasing mortgages or security interests or participations therein. (f) The authority may require as a condition of a purchase of any mortgage or security interest from a lending institution that the lending institution represent and warrant to the authority any or all of the following: (1) The unpaid principal balance and the interest rate thereon have been accurately stated to the authority and that the interest rate and all service charges in connection therewith are not usurious under the laws of the state; (2) The amount of the unpaid principal balance is legally and validly due and owing; (3) The lending institution has no notice of the existence of any counterclaim, offset, or defense asserted by the mortgagor or his successor in interest; (4) Necessary documents have been properly recorded in the county in which the real estate lies; (5) The mortgage or security interest constitutes a valid lien on the property described in the mortgage or security interest, subject only to such matters which do not adversely affect to a material degree the use or value of the property; (6) The loan when made was lawful under the laws of the state or under federal law or both, whichever governed the making of the loan, and would be lawful on the date of purchase by the authority if made by the lending institution on that date in the amount of the unpaid principal balance; (7) The mortgagor is not now in default in the payment of any installment of principal or interest, escrow funds, real property taxes, or otherwise in the performance of the mortgagor's obligations under the mortgage or security interest and has not, to the knowledge of the lending institution, been in default in the performance of any such obligation for a period of longer than 60 days; (8) The mortgage or security interest requires that the property described therein be covered by a valid and subsisting policy of insurance issued by a responsible insurance company legally licensed and authorized to conduct and transact business in the state and providing fire and extended coverage to an amount not less than 80 percent of the insurable value of the property or in the amount of the mortgage or security interest, whichever the authority may determine; (9) The insurance coverage referred to in paragraph (8) of this subsection is in full force and effect; and (10) Subject to subsection (e) of this Code section, moneys received from the authority will be utilized for the financing, acquisition, or rehabilitation of residential housing within the geographic boundaries of the municipality activating the authority, and that certification by the lending institution to the effect that moneys have been reloaned as set forth in this chapter will be filed with the authority pursuant to the rules of the authority and will be available to the members of the public and to members of the General Assembly. (g) Each lending institution shall be liable to the authority for any damages suffered by the authority by reason of the untruth of any representation or the breach of any warranty and, in the event that any representation shall prove to be untrue when made or in the event of any breach of warranty, the lending institution shall, at the option of the authority, repurchase the mortgage or security interest or participation for the original purchase price adjusted for amounts subsequently paid thereon, as the authority may determine. (h) The authority may require the recording of an assignment of any mortgage purchased by it from a lending institution.