OAR 123-021-0090
Loan Insurance Programs
(1)
Conventional Insurance, under which the Department may insure(a)
Up to 80 percent of a loan in which case the Department’s maximum liability for any loss under the Conventional Insurance is the lesser of $2,000,000 or an amount equal to the insured percentage times the authorized loan amount, or(b)
Up to 90 percent of a loan in which case the Department’s maximum liability for any loss under the Conventional Insurance is the lesser of $500,000 or an amount equal to the insured percentage times the authorized loan amount. Should a borrower which receives an insured loan default or otherwise be unable to make loan payments, the Department will pay the financial institution the deficiency of a loan times the insured percentage, subject to the limitation set forth above. The balance of any loss is absorbed by the financial institution. Loan payments, the proceeds of collateral (including collection of guarantees), and any recovery after payment of a deficiency are applied pro rata to the portion of a loan insured through Conventional Insurance and the uninsured portion of the loan.(2)
First Loss Insurance, under which the Department will pay 100 percent of the deficiency of a loan, but the Department’s maximum liability under the First Loss Insurance shall be the lesser of (a) the insured percentage (which shall not exceed 25 percent) times the authorized loan amount, (b) the insured percentage (which shall not exceed 25 percent) times the outstanding balance of the loan, including accrued interest and reasonable costs and expenses of collection and liquidation of collateral exclusive of costs attributable to environmental problems, but not taking into account the proceeds of collateral liquidation and payments by guarantors, or (c) $500,000. Any recovery after payment of a deficiency is applied first to the uninsured portion of the loan and then to the portion of a loan insured through First Loss Insurance.(3)
First Loss Collateral Support Insurance (aka Collateral Support Insurance), under which the Department will pay up to a maximum of 100 percent of the deficiency of a loan as follows. The Department’s maximum liability under the Collateral Support Insurance per enrolled loan shall be the lesser of:(a)
The insured percentage times the authorized and enrolled loan amount;(b)
The insured percentage times the outstanding balance of the enrolled loan, including accrued interest and reasonable costs and expenses of collection and liquidation of collateral exclusive of costs attributable to environmental problems, after taking into account payments by guarantors but not taking into account the proceeds of collateral liquidation; or,(c)
25% of the enrolled loan or $1,000,000. Collateral Support Insurance may not exceed a term of 5 years. Loan payments, the proceeds of collection of guarantees, and recovery after payment of a deficiency from any source other than liquidation of collateral are applied pro rata to the portion of a loan insured through Collateral Support Insurance and the uninsured portion of the loan; the proceeds of collateral are applied first to the uninsured portion of the loan and then to the portion of a loan insured through Collateral Support Insurance. Loans covered by Collateral Support Insurance must meet a participating Lender’s credit underwriting criteria with the exception of loan collateral adequacy. Borrowers with loans covered by Collateral Support Insurance must:(A)
Demonstrate significant current and historical cash flow coverage,(B)
Demonstrate strong credit history,(C)
Provide personal guarantees of significant owners; and,(D)
Meet other criteria as determined by the Department.(d)
In contrast to First Loss Insurance, Collateral Support Insurance is only intended to mitigate a collateral shortfall and is not intended to mitigate other or additional credit deficiencies. Collateral Support Insurance will only be provided to the extent necessary to facilitate making a qualified loan, not on a maximum allowable basis for each loan. Loan proceeds may be used to pay off an existing loan where the collateral value is no longer adequate to secure the loan due to a decline in the value of the existing collateral (not due to the loan having been less than fully secured at inception). If any proceeds of the new insured loan are used to refinance an existing loan of the lender making application for Collateral Support Insurance, in order for the new loan to be eligible for Collateral Support Insurance the existing loan must have reached its maturity date and the new loan must also include new monies advanced to the borrower. If proceeds of the new loan are applied to an existing loan which is secured by collateral that secures the new loan, enrollment of the new loan in the Collateral Support Insurance will be limited to the amount of the collateral shortfall or the decline in the collateral value from the origination date of the existing loan, whichever is less. For the Collateral Support Insurance, the maximum insured percentage for insurance up to $500,000 shall be 25% of the loan. For insurance above $500,000 and up to $1,000,000 the maximum insured percentage shall be 20% of the loan.(4)
Intentionally left blank —Ed.(a)
Evergreen Entrants Insurance, under which the Department may insure up to 75 percent of a line of credit working capital loan. Should a borrower which receives an insured loan default or otherwise be unable to make loan payments, the Department will pay the financial institution the deficiency of the line of credit working capital loan times the insured percentage; provided that the Department’s maximum liability for any deficiency under the Evergreen Entrants Insurance is the lesser of $1,500,000 or an amount equal to the insured percentage of the authorized loan amount. The balance of any loss is absorbed by the financial institution. Loan payments, the proceeds of collateral (including collection of guarantees), and any recovery after payment of a deficiency are applied pro rata to the portion of a loan insured through Evergreen Entrants Insurance and the uninsured portion of the loan.(b)
Eligible borrowers include persons or enterprises without or about to be without existing line of credit working capital loans.(c)
To obtain Evergreen Entrants Insurance, a financial institution must have the capacity to service the loan effectively, including monitoring compliance with any audit and control procedures prescribed by the Department or comparable procedures of the financial institution approved by the Department and must have in place and operating a lending program specializing in line of credit loans secured by or with advances based upon eligible accounts receivable and inventory or other assets. The Department must be satisfied that the financial institution is sufficiently experienced and capable of operating such a lending program effectively.(5)
Intentionally left blank —Ed.(a)
Evergreen Plus Insurance, under which the Department may insure up to 75 percent of a new increment of a line of credit; provided that the Department’s maximum liability under the Evergreen Plus Insurance is $1,500,000. If the insured loan is a renewal of a loan where the Department insured more than 75% of the loan, the Department may, in its sole discretion, insure the new loan up to the percentage insured on the immediately previous loan being renewed. If a financial institution makes a payment request for any deficiency, the Department will pay to the financial institution the lesser of:(A)
A ratable share of the total default charges; or(B)
The deficiency times the insured percentage. The balance of any loss is absorbed by the financial institution. Loan payments, the proceeds of collateral (including collection of guarantees), and any recovery after payment of a deficiency are applied pro rata to the portion of a loan insured through Evergreen Plus Insurance and the uninsured portion of the loan.(b)
The formula for calculating the Department’s ratable share of total default charges is:(c)
To obtain the Evergreen Plus Insurance, a financial institution must have in place and operating a lending program specializing in line of credit loans secured by or with advances based upon eligible accounts receivable and inventory or other assets. The Department must be satisfied that the financial institution is sufficiently experienced and capable of operating such a lending program effectively.(6)
The Conventional Insurance, First Loss Insurance, and Collateral Support Insurance are available for all types of non-revolving loans with regular periodic payments of principal and interest no less often than annually for eligible purposes, including working capital loans that are secured by fixed assets or other collateral determined to be sufficient by the Department.
Source:
Rule 123-021-0090 — Loan Insurance Programs, https://secure.sos.state.or.us/oard/view.action?ruleNumber=123-021-0090.