§1711 General Surplus and Participating Reserve Accounts

Summary

The Secretary must create two accounts in the Mutual Mortgage Insurance Fund on July 1, 1954: a General Surplus Account and a Participating Reserve Account. All assets from the old General Reinsurance Account went into the General Surplus Account and that old account was ended. On July 1, 1954, money from the group accounts was moved so the Participating Reserve got the amount that would have been paid out if all mortgages had been paid in full on June 30, 1954, and the rest of those group balances went to the General Surplus and the group accounts were ended. From then on, any net profit or loss for each six-month period is put into or taken from those two accounts as the Secretary decides using sound actuarial and accounting practice. When an insured mortgage is paid off, the Secretary may give the mortgagor a share from the Participating Reserve, but never more than the total scheduled annual premiums the mortgagor paid up to the year the insurance ended. The mortgagor must apply for that share within six years after the Secretary first mailed a written notice of eligibility to the mortgagor’s last known address, or the money moves from the Participating Reserve to the General Surplus. Mortgagors and mortgagees have no guaranteed claim to these accounts, and the Secretary’s payment decisions are final. The Secretary must look at the Fund’s overall actuarial condition when deciding if there is money to distribute. The Secretary must make sure the Fund’s capital ratio reaches at least 1.25 percent within 24 months after November 5, 1990, and stays at or above that level, and must try to reach and then keep a 2.0 percent capital ratio within 10 years after November 5, 1990. After the 24-month period ends, the Secretary must report to Congress how the Fund will reach the 2.0 percent goal. Definitions used: capital = the Fund’s economic net worth as found in the Secretary’s annual audit; capital ratio = capital divided by unamortized insurance‑in‑force; economic net worth = cash available now plus the current value of expected future cash in and out from the Fund’s outstanding mortgages; unamortized insurance‑in‑force = the remaining obligation on outstanding mortgages as estimated by the Secretary.