2023 Laws of Puerto Rico › TITLE TWENTY-SIX - Insurance (§§ 101 — 10377) › Subtitle 1 - Insurance Generally (§§ 101 — 4513) › Chapter 6B - Investments (§§ 648 — 662) › § 657 - Mortgage loans and real estate

(1) Mortgage loans.—
(a) Subject to the limitations indicated in § 653 of this title, an insurer may acquire, whether directly, or indirectly through interests in limited liability partnerships, interests in partnerships not prohibited under § 651(4) of this title, limited liability companies, joint ventures, or shares in investment trusts evidenced by a participation certificate or other instrument, obligations secured by mortgage loans on real estate located within Puerto Rico, or the United States. Mortgage loans that are not first liens, may only be acquired when the insurer is the holder of the first lien. Said obligations, together with all the obligations secured by mortgages or other real estate liens of equal priority, may not exceed the following at the time of acquisition exceed:
(i) Ninety percent (90%) of the fair market value of real property at the time of acquisition, if the obligation is secured by a deferred payment mortgage loan or similar guaranty;
(ii) eighty percent (80%) of the fair market value of the real estate property, if the mortgage loan requires immediate periodic and preestablished payments of principal and interest, if it has an amortization period that does not exceed thirty (30) years and requires periodic payments at least once a year. Each periodic payment shall be sufficient to ensure that the balance of the principal owed in the mortgage loan at all times shall not exceed the outstanding balance in a mortgage loan for the same amount, the same rate of interest and requires equal payments of principal and interest, with the same frequency and amortization terms. Mortgage loans subject to this paragraph shall be allowed notwithstanding that said loans provide for the payment of the principal balance before the amortization term. In the case of home mortgage loans, the eighty percent (80%) limit may be increased to ninety-seven percent (97%) if a mortgage loan insurance policy has been obtained, or
(iii) seventy-five percent (75%) of the fair market value if the real property in all other cases in which the requirements of paragraphs (i) and (ii) of this clause are not met.
(b) For purposes of clause (a) of this subsection, the amount of an obligation required to be included in computing the debt-value ratio may be reduced if said obligation is secured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs, or their respective successors.
(c) An insurer shall not acquire under this subsection any security guaranteed with assets that said insurer could otherwise acquire under § 654 of this title.
(d) A mortgage loan rated under § 649(6) of this title or under this clause, and which is restructured in such way that it complies with the requirements of a restructured mortgage loan pursuant to the NAIC Accounting Practices Procedures Manual or a successor publication, shall continue being a rated mortgage under §§ 648–662 of this title.
[e] [In order to determine compliance with the limits established in clause (a) of this subsection, the obligations issued, assumed, insured or guaranteed by an agency, dependency, instrumentality or public corporation of the United States that are collaterized with mortgages will not be considered investments in mortgage loans and real estate.]
(2) Income generating real property.— An insurer may invest in real property located within the United States or Puerto Rico through interests in special partnerships, limited liability partnerships, joint ventures, corporate stock, certified shares in an investment trust, or other similar instruments. Real property acquired under this subsection shall be acquired or managed for income generating purposes or to be improved or developed for investment purposes according to an existing program (in which case the property shall be deemed as income generating).
(3) Real property for business location.— An insurer may acquire, manage and dispose of real property for the convenient location of its business operations, including its main office, branches and field operations (and of those of its affiliated companies) subject to the following:
(a) Real property may be subject to mortgages, liens or other encumbrances, the amount of which shall be deductible from the invested amount to the extent that the obligations secured by said mortgages, liens or other encumbrances are of no recourse against the insurer, shall be reduced from the amount invested by the insurer in the real property for the purpose of determining compliance with subsection (4)(d) of this section.
(b) For purposes of this subsection, the business operations of an insurer shall not include the portion of the real property used directly to provide medical health services to the insured of a health and accident insurer. Real property used for such purposes may be acquired under subsection (2) of this section.
(4) Quantitative limitation.—
(a) An insurer may not acquire an investment under subsection (1) of this section if as a result of and after making the investment, the amount of all the investments owned by the insurer under subsection (1) of this section would exceed one percent (1%) of its allowed assets in mortgage loans securing a real property in particular.
(b) An insurer may not acquire an investment under subsection (2) of this section if, as a result of and after making the investment, the amount of the investment in a single property or contiguous properties including the guaranties granted at that moment by the insurer under subsection (2) of this ection would exceed one percent (1%) of its allowed assets.
(c) An insurer may not acquire an investment under subsection (1) or (2) of this section if as a result of, and after making said investment, and considering any guaranty granted by the insurer regarding said investment, the amount of all the investments owned by the insurer under subsections (1) and (2) of this section and the guaranties that have been granted and are in effect, would exceed ten percent (10%) of its allowed assets.
(d) The acquisition of real property by an insurer under subsection (3) of this section shall not be included in the calculations to determine compliance with the limitations established by § 653 of this title. An insurer may not acquire real properties under subsection (3) of this section if, as result of and after making the acquisition, the amount of the real property owned at that moment by the insurer under subsection (3) of this section would exceed ten percent (10%) of its allowed assets. Additional real property may be acquired under subsection (3) of this section with the authorization of the Commissioner.
History —Ins. Code, added as § 6.110 on May 16, 2003, No. 130, § 1.