KRS 198A.250: Loans to mortgage lenders for residential mortgage loans -- Rules and

regulations.

(1) The corporation may make loans to mortgage lenders for the purpose of furnishing

funds to such mortgage lenders to be used for making residential mortgage loans.

(2) The corporation shall from time to time adopt, modify, amend or repeal rules and

regulations governing the making of loans to mortgage lenders and the use of the

proceeds thereof, including rules and regulations as to any or all of the following:

(a) Procedures for the application or submission of requests for loans to mortgage

lenders;

(b) Standards and requirements as to allocations of loans among all or certain of

the mortgage lenders or awards of loans and determining the amounts and

interest rates thereof;

(c) Limitations or restrictions as to the number of family units, locations or other

qualifications or characteristics of residential housing to be financed by

residential mortgage loans;

(d) Restrictions as to the interest rates on residentia l mortgage loans or the return

realized therefrom by mortgage lenders;

(e) Requirements with respect to the application of the proceeds of loans to

mortgage lenders, including the time within which the proceeds of any such

loan must be committed and disbursed for residential mortgage loans;

(f) Schedules of any fees and charges necessary to provide for expenses and

reserves of the corporations; and

(g) Any other matters related to the duties and the exercise of the powers of the

corporation under this section.

Such rules and regulations shall in each case be designed to effectuate the general

purposes of this chapter and the following specific objectives: (i) the expansion of

the supply of funds in the state available for residential mortgage loans; (ii ) the

provision of the additional residential housing needed to remedy the shortage of

adequate housing in the state and to eliminate the existence of a large number of

substandard dwellings; and (iii) the effective participation by mortgage lenders in

the program authorized by this chapter and the restriction of the financial return and

benefit thereto from such program to that necessary and reasonable to induce such

participation.

(3) The obligation to repay loans to mortgage lenders shall be general obligations of the

respective mortgage lenders and shall bear such date or dates, shall mature at such

time or times, shall be evidenced by such note, bond or other certificate of

indebtedness, shall be subject to prepayment and shall contain such other provisions

consistent with this section, all as the corporation shall by resolution determine.

(4) Any other provision of this section to the contrary notwithstanding, the interest rate

or rates and other terms of the loans to mortgage lenders made from the p roceeds of

any issue of bonds of the corporation shall be at least sufficient to assure the

payment of said bonds and the interest thereon as the same become due from the

amounts received by the corporation in repayment of such loans and interest

thereon.

(5) The corporation may require that such loans to mortgage lenders be additionally

secured as to payment of both principal and interest by a pledge of and lien upon

collateral security in such amounts as the corporation by resolution shall determine

to be necessary to assure the payment of such loans and the interest thereon as the

same become due. Such collateral security shall consist of (i) direct obligations of,

or obligations guaranteed by, the United States of America; (ii) bonds, debentures,

notes or other evidences of indebtedness, satisfactory to the corporation, issued by

any of the following federal agencies: banks for cooperatives, federal intermediate

credit banks, federal home loan banks, export -import bank of the United States,

federal land banks, the federal national mortgage association or the government

national mortgage association; (iii) direct obligations of or obligations guaranteed

by the state; or (iv) mortgages insured or guaranteed by the United States of

America or an instrumenta lity thereof as to payments of principal and interest. The

corporation may require in the case of any or all mortgage lenders that such

collateral be lodged with a bank or trust company located in the state designated by

the corporation as custodian theref or. In the absence of such requirement a

mortgage lender shall upon receipt of the loan proceeds from the corporation enter

into an agreement with the corporation containing such provisions as the

corporation shall deem necessary to adequately identify an d separately maintain

such collateral and service the same and providing that such mortgage lender shall

hold such collateral as an agent for the corporation and shall be held accountable as

the trustee of an express trust for the application and disposit ion thereof and the

income therefrom solely to the uses and purposes in accordance with the provisions

of such agreement. A copy of each such agreement and any revisions or

supplements thereto shall be filed with the secretary of state, and no further filing or

other action under Article 9 of KRS Chapter 355 or any other law of the state shall

be required to perfect the security interest of the corporation in such collateral or

any additions thereto or substitutions therefor, and the lien and trust for the benefit

of the corporation so created shall be binding from and after the time made against

all parties having claims of any kind in tort, contract or otherwise against such

mortgage lender. The corporation may also establish such additional requirements

as it shall deem necessary with respect to the pledging, assigning, setting aside, or

holding of such collateral and the making of substitutions therefor or additions

thereto and the disposition of income and receipts therefrom.

(6) The corporation shall require the submission to it by each mortgage lender to which

the corporation has made a loan of evidence satisfactory to the corporation of the

making of residential mortgage loans as required by this section and prescribed by

rules and regulations of the corporation and in connection therewith may inspect the

books and records of such mortgage lender.

(7) All residential mortgage loans made as required by this section shall comply with

the applicable provisions of the laws of the state, and, where federal law or the law

of another jurisdiction governs the affairs of the mortgage lender with the applicable

provisions of such law.

(8) The corporation may require agreement by any mortgage lender as a condition of

the loan to such mortgage lender, to the payment of penalties to the corporation for

violation by the mortgage lender of any provision of this sectio n or its undertaking

to the corporation with respect to the making of residential mortgage loans, and

such penalties shall be recoverable at the demand of the corporation.

(9) If at any time the corporation shall determine that an adequate supply of funds exists

in regular banking channels for residential mortgage loans, the corporation shall

discontinue the making of loans to mortgage lenders until such time as the

corporation may subsequently determine that the supply of funds available for new

residential mortgage loans is again inadequate.

(10) For purposes of this section, the term "residential mortgage loan" means a loan

made by a mortgage lender and secured by a mortgage constituting a first lien upon

residential housing.