Cal. Code Regs. tit. 4 § 8073

Current through Register 2025 Notice Reg. No. 2, January 10, 2025

Section 8073 - Loss Reserve Accounts

(a) Upon the Executive Director's acceptance of an application under Section 8071, the Authority shall establish a Loss Reserve Account for that Participating Financial Institution for the following purposes:

(1) to receive all Fees deposited by the Participating Financial Institution, Borrowers and/or Independent Contributors;

(2) to receive Contributions deposited by the Authority and/or Independent Contributors; and

(3) to pay claims in accordance with Section 8074.

(b) The Loss Reserve Account shall, in the Authority's sole determination, be held by the Participating Financial Institution or by the Program Trustee. For each Loss Reserve Account held by a Participating Financial Institution, the Participation Financial Institution shall submit to the Authority a monthly statement of the account activities and balance, no later than the 15th of the following month.

(c) Any Loss Reserve Account held in a Participating Financial Institution shall be an interest-bearing demand account or deposit account at a banking institution, or a Money Market Fund if approved in writing by the Executive Director, or a combination thereof, and earning a rate of interest that would be expected of accounts of similar type and size. The Loss Reserve Account shall be insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or the Securities Investor Protection Corporation, as appropriate, to the extent permitted by law. The Authority shall not deposit any Loss Reserve Account with a Participating Financial Institution if:

(1) there are any charges by the Participating Financial Institution for the establishment or maintenance of the Loss Reserve Account at such Financial Institution; or

(2) at the time the Loss Reserve Account is established with the Participating Financial Institution, it has a rating below "75" from IDC Financial Publishing Inc.'s Bank Financial Quarterly, S&L-Savings Bank Financial Quarterly, or Credit Union Financial Profiles; or it has a rating of "C" or below from LACE Financial Corp; or it has a rating below "11" from Highline Inc.'s Bank Quarterly or S&L Quarterly or successor publication approved by the Executive Director.

(3) the Participating Financial Institution has not timely submitted its Quarterly Report described in Section 8073, and, for accounts held at the Participating Financial Institution, the monthly statements described in Section 8078.

(d) All moneys in a Loss Reserve Account are property of the Authority (subject to the Participating Financial Institution's right to receive a portion of the remaining balance in the Loss Reserve Account upon its withdrawal from the Program pursuant to Section 8076 and subject to subsection (e) below). Interest or income earned on moneys credited to the Loss Reserve Account shall be deemed to be part of the Loss Reserve Account. The Executive Director shall be authorized to withdraw from the loss reserve all interest and income that has been credited to the Loss Reserve Account as set forth in Health and Safety Code Section 44559.3(d). The Executive Director shall be authorized to return to a Participating Financial Institution any Fees improperly deposited in a Loss Reserve Account. No Participating Financial Institution holding its Loss Reserve Account shall make any withdrawal from the account without written instruction from the Authority.

(e) Notwithstanding any other provision of this article, the Executive Director shall be authorized, with the approval of the applicable Participating Financial Institution, to assign, transfer, pledge or create security interests in all or a portion of any Loss Reserve Account to any other entity or entities (including a trustee of a securitization trust or trusts) in connection with the securitization of all or a portion of the Participating Financial Institution's loans enrolled in the Program. Any loan enrolled in the program or portion thereof which is subsequently assigned, transferred, pledged sold, or securitized without the advance written approval of the Executive Director shall no longer be deemed a Qualified Loan or covered by the Loss Reserve Account. If a Participating Financial Institution chooses to service the loans after they are sold, those loans shall no longer be deemed a Qualified Loan or covered by the Loss Reserve Account, and must be reported on the Quarterly Report. desires. Contributions of loans sold, assigned, transferred or pledged to another Participating Financial Institution is allowable only if the Participating Financial Institution submits a written request to the Authority no less than thirty (30) calendar days in advance of such action, together with the list of loans and the amount of the Loss Reserve Account subjects to the request, and a draft of the legal document specifying the assignment, transfer, pledge, or securitization.

(f) The Participating Financial Institution shall provide information to the Authority regarding the status of accounts, enrolled loans, claims and recoveries upon request, including timely Quarterly Reports of the data regarding: Outstanding Principal Balance of all enrolled loans; all loans in default and charged off, and claim amounts; and deposits made to replenish the Loss Reserve Account pursuant to Section 8074, in the form provided by the Authority. Failure to submit timely and complete Quarterly Reports will result in the suspension of any pending loan enrollments or claim applications from that Participating Financial Institution, and transfer of any Loss Reserve Accounts held by the Participating Financial Institution to the Program Trustee.

(g) The Authority may suspend enrollment of Qualified Loans upon written notice to the Participating Financial Institution at least ten (10) business days prior to the effective date of the suspension. Causes for suspension shall be for violations of applicable statutes or regulations. If the violations are not corrected within thirty (30) business days from the effective date of the suspension the Executive Director is authorized to terminate participation of a Participating Financial Institution in the Program. In the event of such termination, the Participating Financial Institution shall not be authorized to enroll any further Qualified Loans.

Cal. Code Regs. Tit. 4, § 8073

Note: Authority cited: Sections 44520 and 44559.5, Health and Safety Code. Reference: Sections 44559.3 and 44559.8, Health and Safety Code.

1. New section filed 3-21-94 as an emergency; operative 3-21-94 (Register 94, No. 12). This filing was deemed an emergency by Health and Safety Code section 44520(b). A Certificate of Compliance must be transmitted to OAL by 9-19-94 or the emergency regulation will be repealed by operation of law on the following day.
2. Certificate of Compliance as to 3-21-94 order including amendment of subsections (a) and (d) and Note transmitted to OAL 9-16-94 and filed 10-31-94 (Register 94, No. 44).
3. Amendment of subsections (a)(1) and (2), (b) and (d) filed 2-6-96 as an emergency pursuant to Health and Safety Code section 44520(b); operative 2-6-96 (Register 96, No. 6). Pursuant to Health and Safety Code section 44520(b), a Certificate of Compliance must be transmitted to OAL by 8-5-96 or emergency language will be repealed by operation of law on the following day.
4. Certificate of Compliance as to 2-6-96 order, including amendment of subsections (c)-(c)(1), transmitted to OAL 8-2-96 and filed 9-10-96 (Register 96, No. 37).
5. Amendment of subsections (c) and (d) filed 12-23-98; operative 12-23-98 pursuant to Government Code section 11343.4(d) (Register 98, No. 52).
6. Amendment of subsection (d), new subsection (e) and amendment of Note filed 2-24-2000 as an emergency pursuant to Health and Safety Code section 44520; operative 2-24-2000 (Register 2000, No. 8). A Certificate of Compliance must be transmitted to OAL by 8-22-2000 or emergency language will be repealed by operation of law on the following day.
7. Certificate of Compliance as to 2-24-2000 order transmitted to OAL 8-21-2000 and filed 10-2-2000 (Register 2000, No. 40).
8. Amendment of subsection (c) filed 12-29-2005 as an emergency pursuant to Health and Safety Code section 44520(b); operative 12-29-2005 (Register 2005, No. 52). Pursuant to Health and Safety Code section 44520(b), a Certificate of Compliance must be transmitted to OAL by 6-27-2006 or emergency language will be repealed by operation of law on the following day.
9. Certificate of Compliance as to 12-29-2005 order transmitted to OAL 4-21-2006 and filed 6-1-2006 (Register 2006, No. 22).
10. Amendment of subsections (c) and (c)(2) filed 1-22-2008 as an emergency; operative 1-22-2008 (Register 2008, No. 4). A Certificate of Compliance must be transmitted to OAL by 7-21-2008 or emergency language will be repealed by operation of law on the following day.
11. Certificate of Compliance as to 1-22-2008 order transmitted to OAL 5-30-2008 and filed 7-14-2008 (Register 2008, No. 29).
12. Amendment of subsection (d) filed 12-17-2009 as an emergency; operative 12-17-2009 (Register 2009, No. 51). A Certificate of Compliance must be transmitted to OAL by 6-15-2010 or emergency language will be repealed by operation of law on the following day.
13. Amendment of subsection (d) refiled 6-21-2010 as an emergency; operative 6-21-2010 (Register 2010, No. 26). A Certificate of Compliance must be transmitted to OAL by 9-20-2010 or emergency language will be repealed by operation of law on the following day.
14. Repealer of 6-21-2010 operative amendment of subsection (d) by operation of law; operative 9-21-2010 (Register 2010, No. 40).
15. Amendment of subsection (d) refiled 9-29-2010 as an emergency; operative 9-29-2010 (Register 2010, No. 40). A Certificate of Compliance must be transmitted to OAL by 12-28-2010 or emergency language will be repealed by operation of law on the following day.
16. Amendment of subsection (c)(2) filed 11-29-2010 as an emergency; operative 11-29-2010 (Register 2010, No. 49). A Certificate of Compliance must be transmitted to OAL by 5-31-2011 or emergency language will be repealed by operation of law on the following day.
17. Certificate of Compliance as to 9-29-2010 order transmitted to OAL 11-24-2010 and filed 1-6-2011 (Register 2011, No. 1).
18. Notice of repeal and deletion of 11-29-2010 emergency amendment by operation of Government Code section 11346.1(f) (Register 2011, No. 33).
19. Amendment of subsection (c)(2) filed 8-16-2011; operative 8-16-2011 pursuant to Government Code section 11343.4(c) (Register 2011, No. 33).
20. New subsection (f) filed 11-7-2011 as an emergency; operative 11-7-2011 (Register 2011, No. 45). A Certificate of Compliance must be transmitted to OAL by 5-7-2012 or emergency language will be repealed by operation of law on the following day.
21. Certificate of Compliance as to 11-7-2011 order transmitted to OAL 2-22-2012 and filed 2-29-2012 (Register 2012, No. 9).
22. Amendment filed 8-7-2017 as an emergency; operative 8-7-2017 pursuant to Health and Safety Code section 44520(b) (Register 2017, No. 32). A Certificate of Compliance must be transmitted to OAL by 2-5-2018 or emergency language will be repealed by operation of law on the following day, pursuant to Health and Safety Code section 44520(b).
23. Certificate of Compliance as to 8-7-2017 order transmitted to OAL 1-31-2018 and filed 3-15-2018 (Register 2018, No. 11).
24. Amendment of subsection (g)(3) filed 7-31-2020 as an emergency; operative 7-31-2020 (Register 2020, No. 31). Emergency expiration extended 60 calendar days (Executive Order N-40-20) plus an additional 60 days (Executive Order N-66-20). A Certificate of Compliance must be transmitted to OAL by 5-28-2021 or emergency language will be repealed by operation of law on the following day.
25. Certificate of Compliance as to 7-31-2020 order, including amendment of Note, transmitted to OAL 11-24-2020 and filed 1-11-2021; amendments operative 1/11/2021 pursuant to Government Code section 11343.4(b)(3) (Register 2021, No. 3).
26. Amendment of subsection (d), repealer of subsections (g)-(g)(6) and subsection relettering filed 8-4-2022 as an emergency; operative 8/4/2022 (Register 2022, No. 31). A Certificate of Compliance must be transmitted to OAL by 1-31-2023 or emergency language will be repealed by operation of law on the following day.
27. Reinstatement of section as it existed prior to 8-4-2022 emergency amendment by operation of Government Code section 11346.1(f) (Register 2023, No. 5).
28. Amendment of subsection (d), repealer of subsections (g)-(g)(6) and subsection relettering refiled 3-3-2023 as an emergency; operative 3/3/2023 (Register 2023, No. 9). A Certificate of Compliance must be transmitted to OAL by 6-1-2023 or emergency language will be repealed by operation of law on the following day.
29. Certificate of Compliance as to 3-3-2023 order transmitted to OAL 5-30-2023 and filed 7/10/2023 (Register 2023, No. 28).
30. Amendment of subsection (e) filed 7-29-2024 as an emergency; operative 7/29/2024 (Register 2024, No. 31). A Certificate of Compliance must be transmitted to OAL by 1-27-2025 or emergency language will be repealed by operation of law on the following day.