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§ 8078.25. Loss Reserve Accounts.

4 CA ADC § 8078.25Barclays Official California Code of Regulations

Barclays California Code of Regulations
Title 4. Business Regulations
Division 11. California Pollution Control Financing Authority (Refs & Annos)
Article 7. Capital Access Program for Small Businesses
4 CCR § 8078.25
§ 8078.25. Loss Reserve Accounts.
(a) Upon the Executive Director's acceptance of an application by a Participating Financial Institution, the Authority shall establish a Loss Reserve Account for that Participating Financial Institution under the CalCAP ARB Financing Program for the following purposes:
(1) To receive all Contributions deposited by the Authority from funds provided by ARB based on the Contribution rates authorized by ARB in the Interagency Agreement as follows:
(A) for each new and existing Participating Financial Institution whose total Contributions in the Loss Reserve Account has not yet reached $500,000, the Contribution for each Qualified Loan is equal to 14 percent of the enrolled loan amount.
(B) for each Participating Financial Institution whose total Contributions in the Loss Reserve Account exceeds $500,000, the Contribution for each Qualified Loan is equal to 10 percent of the enrolled amount;
(2) To pay claims in accordance with Section 8078.26.
(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 Institute 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;
(2) at the time the Loss Reserve Account is established with the Participating Financial Institution, the Participating Financial Institution 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 the Participating Financial Institution has a rating of “C” or below from LACE Financial Corp; or the Participating Financial Institution has a rating below “11” from Highline Inc.'s Bank Quarterly or S&L Quarterly or successor publication approved by the Executive Director; or
(3) the Participating Financial Institution has not timely submitted a Quarterly Report described in Section 8078.25(f), and, for accounts held at the Participating Financial Institution, the monthly statements described in Section 8078.25(b).
(d) All moneys in a Loss Reserve Account are property of the ARB held in trust to be administered by the Authority and used only for the valid and lawful purposes of the Program as provided by these Regulations. Interest or income earned on moneys credited to the Loss Reserve Account shall be deemed to be part of the Loss Reserve Account. Contributions to the Loss Reserve Account shall be subject to Recapture as provided in Section 8078.25(g). The Executive Director shall be authorized to withdraw from the Loss Reserve Account all interest and income that has been credited to the Loss Reserve Account. The Executive Director shall be authorized to withdraw Contributions improperly deposited in a Loss Reserve Account.
(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, 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 desires to assign, transfer, pledge, or securitize all or a portion of any enrolled loan or Loss Reserve Account, the Participating Financial Institution shall submit 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 subject to the request, and a draft of the legal document describing 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(h), 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 Executive Director is authorized to Recapture from each Loss Reserve Account the Contribution for each enrolled loan when the corresponding Qualified Loan matures or upon five (5) years from the date of enrollment, whichever occurs first, and subject to each of the following conditions:
(1) Recapture shall be conducted on an annual basis following the end of each fiscal year based on the data reported in the Quarterly Reports submitted for the term ending June 30th.
(2) The Executive Director shall limit the amount of the annual Recapture of Contributions from each Loss Reserve Account, if necessary, to ensure that the balance remaining in that Loss Reserve Account immediately following Recapture is greater than a minimum threshold set as a percentage of the Outstanding Principal Balance of loans enrolled in the 60 months prior to each annual Recapture. Beginning in 2020, the minimum threshold shall be fifteen percent (15%).
(3) Recapture shall apply to each new Loss Reserve Account established on or after August 15, 2017.
(4) For Loss Reserve Accounts existing before August 15, 2017, each corresponding Participating Financial Institution shall affirm in writing its election to continue enrolling loans in the Program subject to Recapture being applied to the Contributions for all past and future Qualified Loans. This election may not later be withdrawn by the Participating Financial Institution. Loans enrolled on or after August 15, 2017 will be deemed ineligible if the Participating Financial Institution has not first submitted its election in writing. For any Participating Financial Institution that submits its election in writing after August 15, 2017, the Authority shall thereupon conduct Recapture for its Loss Reserve Account according to this subsection (g), and the Participating Financial Institution may thereupon submit new loan enrollments on or after the date of its written election. Nevertheless, Qualified Loans enrolled before August 15, 2017 will be supported by the Loss Reserve Account and the Participating Financial Institution will be eligible for claim reimbursement pursuant to Section 8074 for the previously enrolled Qualified Loans until maturity.
(5) The Authority shall deposit all Recaptured funds in the CalCAP ARB Financing Program Fund dedicated solely for future program and administrative expenditures of the CalCAP ARB Financing Program. The Authority may set aside up to 7 percent of all Recaptured funds for reasonable direct and indirect administrative costs of the Program.
(h) The Authority may suspend enrollment of Qualified Loans upon written notice to the Participating Financial Institution providing the specific reasons at least ten (10) business days prior to the effective date of the suspension. Reasons for suspension shall be for violations of applicable statutes, regulations or Authority policies and procedures. If the violations are not corrected within thirty (30) business days from the effective date of the suspension the Executive Director shall be 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, but all previously enrolled Qualified Loans shall continue to be covered by the Loss Reserve Account until they are paid, claims are filed, or the Participating Financial Institution withdraws from the Program pursuant to Section 8076(a)(1).

Credits

Note: Authority cited: Sections 44520, 44559.5 and 44559.11, Health and Safety Code. Reference: Section 44559.2, Health and Safety Code.
History
1. New section 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).
2. Certificate of Compliance as to 8-7-2017 order transmitted to OAL 1-31-2018 and filed 3-15-2018 (Register 2018, No. 11).
3. Amendment of subsection (a)(1)(B), repealer of subsection (a)(1)(C) and amendment of subsection (g)(2) 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.
4. 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).
This database is current through 6/14/24 Register 2024, No. 24.
Cal. Admin. Code tit. 4, § 8078.25, 4 CA ADC § 8078.25
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