KRS 286.3-250: Operation of real estate mortgage investment fund.

(1) To provide for losses that might occur in an investment fund established by a trust

company or bank under KRS 286.3 -240, such trust company or bank may reserve

from the interest collected on the mortgages held in the fund, not over one -half of

one percent (0.5%) per annum on the principal of such mortgages. The reserved

amount shall be set aside in a separate reserved account, and used primarily for the

purpose of covering any losses that might be sustained in connection with any of the

mortgages, or in for eclosing any of the mortgages, or from actual outlays in

connection with any mortgaged property or property acquired under any foreclosure

proceedings. Such reserve account, or the balance thereof after the payment of any

such losses, shall belong entirely to the beneficial owners of the investment fund.

(2) All income earned by the investment fund, except that amount reserved in the

manner and for the purposes set out in subsection (1), shall be periodically, and at

least semiannually, distributed ratably to the holders of participation certificates

issued against the investment fund. Principal cash that accumulates in the

investment fund by reason of payments on mortgages may be used in the

redemption and cancellation of participation certificates, or may be used in making

further mortgage loans. The trust company or bank may advance cash to the

investment fund to be used in making additional desirable mortgage loans in

anticipation of trust funds becoming available for investment in participation

certificates, but in no event shall the trust company or bank be entitled to any profit

on any such transactions other than the interest earned on its advancements.

(3) If any participation certificates issued under the provisions of KRS 286.3 -240

should become dis tributable by reason of the termination or removal of a trust, the

trust company or bank may at its option either distribute such certificates in kind, or

redeem and cancel such certificates for the account of the investment fund, or

purchase such certificates for the account of other trust estates in its hands.