BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 291
                                                                  Page  1

          Date of Hearing:   August 19, 2009 

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                   SB 291 (Calderon) - As Amended:  July 13, 2009 

          Policy Committee:                              Insurance  
          Vote:10-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill requires mortgage guaranty insurers to notify the  
          Insurance Commissioner (IC) of the California Department of  
          Insurance (CDI) if surplus amounts fall below required amounts.  
          This bill also increases the discretion afforded the IC to issue  
          a waiver of surplus requirements, as appropriate.  Specifically,  
          this bill: 

          1)Modifies the calculation of the required surplus to exclude  
            the outstanding principal balance of a loan in default under  
            specified circumstances. 

          2)Requires an insurer to notify the IC and request a waiver 60  
            days prior to surpluses falling below required amounts. 

          3)Authorizes the IC to retain accountants, actuaries, and other  
            experts to review the waiver request and requires the insurer  
            to pay the cost of retaining analytical support.  

           FISCAL EFFECT  

          Minor fee-supported workload to CDI to the extent this bill  
          generates additional analytical workload and companies request  
          hearings based on CDI findings. The companies that request  
          waivers and hearings fund the workload. 

           COMMENTS  

           1)Rationale  . This bill is sponsored by the Mortgage Insurance  
            Companies of America to address statutory surplus requirements  
            for companies selling mortgage insurance. Mortgage insurance  








                                                                  SB 291
                                                                  Page  2

            or mortgage guaranty compensates a lender following the  
            default of a mortgage loan. This bill modifies current law  
            requirements to account for the mortgage crisis which  
            continues both nationally and in California. 

           2)Background  . As a result of widespread mortgage defaults, the  
            reserves of mortgage insurers have been drawn down close to  
            the current law minimum. According to the author and sponsor,  
            the current law reserve requirements, including a 25-to-1 risk  
            ratio, were established in the 1980s based on research from  
            the 1960s. This bill updates these reserve requirements to  
            allow the six companies selling mortgage insurance in  
            California to continue to do so following review by CDI if  
            reserves fall close to the statutory minimum.  

           3)Proposed Author's Amendments  clarify the 60-day notice  
            requirement to account for immediate enactment following the  
            addition of an urgency clause, which is also proposed for  
            adoption in this committee.  
           

           Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081