provisions of this chapter, including securities guaranteed and mortgage participation certificates issued by the investing company. 1915 —1541.

453ff. Mortgage participation certificates, also securities guaranteed by policies of mortgage insurance issued in conformity with the provisions of this chapter shall be legal investments for all trust funds held by any executor, administrator, guardian, trustee or other person holding trust funds, also for the funds of insurance companies, banks, banking institutions and trust companies, and shall be accepted by the state of California, its officers and officials as securities comprising any part of any fund or deposit required by law to be made witn the state of California, or any officer or official thereof, by any trust company or insurance company doing business in the state of California, and all premiums required to be paid according to the terms of any such mortgage participation certificate, or other policy of mortgage insurance, may be charged to or paid out of the income from the note or notes, or bond or bonds covered thereby; provided that the foregoing provisions of this section, in so far as they refer to mortgage participation certificates, shall apply only to such mortgage participation certificates as evidence the ownership of shares or interests in, or participation in, securities which shall have been assigned to a trust company organized and doing business under the laws of and within this state and shall be held by such trust company for the common and equal benefit of the holders of all mortgage participation certificates issued or to be issued evidencing the ownership of shares or interests in, or participation in, any particular security or group of securities so assigned and such trust, and the administration thereof, shall at all times be and hereby is expressly made subject to the inspection, supervision and control of the superintendent of banks as fully and completely as if the same constituted a court trust under the provisions of the bank act; provided, also, that each such mortgage participation certificate must bear the certificate of such trust company to the effect that the aggregate amount of mortgage participation certificates then outstanding, including both the one being certified and all others based on the same security or group of securities, does not exceed the amount of the unpaid principal of the debt or debts evidenced by such particular security or group of securities; provided, also, that each security so assigned shall be accompanied by a copy of the appraisement and of the certificate of the directors filed or to be filed with the insurance commissioner as required by the provisions of this chapter; provided, also, that a copy of each such appraisement and accompanying certificate of the directors shall be promptly, upon the assignment of each such security, transmitted to the superintendent of banks, and that each such copy of appraisement so transmitted shall bear an indorsement or certificate executed by the trust company to which each such security is so assigned reciting and setting forth the amount of the unpaid principal named in the security which covers the property described in such appraisement; provided, also, that if any such mortgage participation certificates, or securities guaranteed by policies of mortgage insurance issued in conformity with the provisions of this chapter, are used as securities comprising any part of any fund or deposit required by law to be made with the state treasurer by a trust company, the securities so guaranteed or the ownership of, or participation in, which is evidenced by such participation certificates must constitute a first lien on improved and productive real estate in the state of California, such improved real estate being worth at least double the amount of such lien; and also that the real estate and improvements which are covered by the lien of any security so guaranteed or the ownership of, or participation in, which is evidenced by mortgage participation certificates which are so used shall be reappraised at

least once every two years and in the manner in this chapter provided for appraisements, and a copy of each such reappraisement shall be filed with the trust company to which such security shall have been assigned and the original of each such reappraisement bearing the indorsement or certificate of such trust company as to the amount of the unpaid principal named in such security shall be filed with the superintendent of banks; provided, further, that the legality or validity of entire mortgage guaranties and mortgage participation certificates heretofore issued which fully conform to and comply with the law in force at date of issuance shall not be affected or impaired by the provisions of this chapter and such entire mortgage guaranties and mortgage participation certificates shall continue to be legal investments and recognized for all purposes to the extent and in the manner provided by the law in force at date of such issuance.

A mortgage insurance company which issues mortgage participation certificates in accordance with the provisions of this section may at any time and from time to time substitute for any security or securities comprising or constituting a part or parts of a group of securities, the ownership of, or participation in, which is evidenced in whole or in part by any such participation certificates, other securities similarly guaranteed by it and withdraw from the trust company the security or securities for which such substitution shall be made; provided, however, that at all times the amount of the unpaid principal of the debts evidenced by the particular group of securities held by such trust company and affected by any such substitution shall not be less than the aggregate amount of the participation certificates theretofore issued then outstanding and evidencing the ownership of undivided or other partial shares or interests, or participation, in such group of securities; and provided, further, that the right of substitution hereinbefore provided and the exercise thereof shall not alter or affect the status of such participation certificates as legal investments for trust funds, insurance companies, banks, banking institutions and trust companies as hereinbefore provided, or as securities acceptable by the state of California, its officers and officials, as comprising or constituting any fund or deposit, or any part thereof, required by law to be made with the state of California, or any officer or official thereof, by any trust company or insurance company doing business in the state of California. 1915-1542.

453gg. Every mortgage insurance company shall make a report in writing to the insurance commissioner, which report shall be made quarterly, and shall be verified by the oath of its president or vicepresident, and its secretary or treasurer or of any two of its principal officers. Such report shall contain a statement of each new policy of mortgage insurance issued by such company since the last preceding report, stating specifically whether such policy constitutes an entire mortgage guaranty or a mortgage participation certificate.

When such policy constitutes an entire mortgage guaranty, such report shall set forth separately the following facts regarding the security on which the policy is based, namely:

1. The aggregate amount of the unpaid principal indebtedness evidenced by such security.

2. A description of the property covered by such security.

3. Separately, the market value of the land and the market value of the improvements thereon, if any, as shown by an appraisement as provided for by the terms of this section, also the aggregate value of such land and improvements.

4. The book and page of the record of the mortgage or deed of trust which is a part of such security.

When such policy constitutes a mortgage participation certificate

such report shall set forth, directly or by reference to a previous report, separately the following facts regarding the security or securities on which such participation certificate is based, namely:

1. The aggregate amount of unpaid principal indebtedness evidenced and secured by such security or securities, and, separately, the amount of the unpaid principal indebtedness evidenced and secured by each such security.

2. A description of the property covered by each such security. 3. Separately, the market value of the land and the market value of the improvements thereon, if any, as shown by an appraisement as provided for by the terms of this section, also the aggregate value of such land and improvements.

4. The book and page of the record of each mortgage and deed of trust which is part of such security or securities.

5. The aggregate amount of participation certificates issued, outstanding and based upon the particular security or group of securities on which the certificate so reported is based.

There shall be filed with such report an appraisement of each separate parcel of property mentioned in the report, an appraisement of which has not theretofore been made and filed in accordance with the provisions of this section, which appraisement shall be made by a person or corporation approved by the insurance commissioner and by the superintendent of banks. In such appraisement the market value of each parcel of land and of the improvements thereon, if any, also the aggregate value of such parcel of land and improvements shall be stated, together with a general statement of the character of such land and of the kind and condition of such improvements, if any.

Such appraisement shall be signed and verified by such appraiser, or by an officer of the corporation, making such appraisement, and shall be accompanied by a certificate signed and verified by at least three directors of such mortgage insurance company to the effect that in the opinion of the affiants and each of them such appraisement is correct, and that in their opinion the amount thereof does not exceed the market value of the property, and that the principal amount lent on the security of such property does not in their opinion exceed fifty percentum of the market value of such property, also to the effect that said company has in its possession or control evidences of title consisting of a full abstract of title, a full certificate or guaranty of title, or a policy of title insurance, showing that the mortgage or deed of trust securing such loan is a first lien upon a marketable title in fee to the property covered thereby.

In case of the neglect or failure of any such mortgage insurance company to make any such quarterly report as herein provided, such company shall forfeit to the state of California ten dollars per day for every day during which such neglect or failure continues; provided, however, that the insurance commissioner shall have authority to extend the time within which any such report may be filed for not exceeding a period of ten days. 1915-1544.

453hh. Any corporation formed for the purpose of insuring or guaranteeing land values by policies of insurance, or otherwise, shall be deemed to be land value insurance corporations. Every land value insurance corporation shall be subject to and shall comply with all the requirements of the insurance laws and the rules and regulations of the insurance department of this state, and the insurance commissioner shall have the same power and authority regarding any such corporation that he may exercise in relation to other insurance corporations organized under the laws of this state, including the right to examine and inspect the financial condition and affairs of

such corporation, and to compel compliance with the provisions of law governing any such corporation. Such corporations shall have a capital stock of not less than one hundred thousand dollars. Such capital stock of one hundred thousand dollars, or more, shall be deposited with the treasurer of the State of California before the corporation shall commence actual business operation. Any such deposit may be made in lawful money of the United States or any of the securities specified in subdivision one of section four hundred twenty-one, of the Civil Code of the state of California. Said money or securities shall be first approved by the insurance commissioner, and upon his written order, deposited with the state treasurer as a guarantee fund for the security of any contracts, agreements or policies insuring land values and said treasurer shall give his receipt therefor, and thereafter shall hold such deposits of money or securities for the security and protection of the holders of, or beneficiaries under, any policy of insurance issued by said corporation, and the state shall be responsible for the custody and safe return of any money or securities so deposited. Said securities or money so deposited may, with the approval of the insurance commissioner, be withdrawn or exchanged from time to time for other like securities or lawful money, receivable as aforesaid. So long as the company so depositing said money or securities shall continue solvent, it shall have the right and shall be permitted by the state treasurer to receive the interest and dividends on any securities so deposited. Said securities and money shall be subject to sale and transfer, and to the disposal of the proceeds thereof by said state treasurer only on the order of a court of competent jurisdiction and for the security and protection of the holders of such policies of insurance. Before any license to do business in this state is issued to any land value insurance corporation, there shall be filed in the offices of the insurance commissioner the certificate of an actuary or statistician that he has examined the actuarial tables of the corporation making application for such license and that in his opinion the premiums to be charged are adequate to meet the proper reserve. Such premiums shall not be decreased without the permission of the insurance commissioner. Every land value insurance corporation operating within the State of California shall create and maintain a reserve fund of at least thirty-three and one-third per cent (33%) of all premiums collected by the corporation which shall be invested in such securities as are specified in section four hundred and twenty-one of the Civil Code of the State of California, which shall be held intact during the time the policy of insurance, from which such premiums are collected, shall remain in force. The insurance commissioner may in his discretion require the above reserve fund to be deposited with the state treasurer as part of the guarantee fund above provided. During the first three years of operation of the corporation, there shall be maintained a supplemental reserve amounting to sixteen and two-thirds per cent (16%) of all premiums collected. Said supplemental reserve shall be invested in such securities as are specified in subdivisions one, two, three, four and five of section four hundred and twenty-one of the Civil Code of the State of California. After the said three-year period shall have elapsed, upon proper showing by the company that the thirty-three and one-third per cent (33%) reserve fund is sufficient to amply protect all policy holders of the corporation, the insurance commissioner may in his discretion release any or all of the supplemental reserve as herein provided. No corporation shall make any contract or policy of insurance affecting values of real estate or engage in the business of land value insurance until it has obtained from the insurance commissioner his certificate that such company has complied with the provisions

Sec. 453hh. of this chapter and is duly authorized to do business as such land value insurance company. All policies of land insurance shall be limited to the insuring of the value of lots and parcels of land, exclusive of any improvement thereon other than grading, street work, sidewalks and sewers, and no such policy of insurance shall provide for any liability in excess of the actual purchase price, paid or agreed to be paid in any bona fide sale or agreement of sale of such lots or parcels next immediately preceding the issuance of said policy, and in no event shall the liability provided in any such policy exceed the sum of five thousand dollars. The forms of all agreements for, or policies of, land value insurance must first be submitted to and approved by the insurance commissioner. No such agreement or policy shall be issued until the land to be insured has first been appraised by some appraiser or appraisers designated, appointed or approved by said commissioner, and a duplicate original of such appraisement together with the certificate of appraiser or appraisers, certifying that in his or their opinion the amount of land value insurance to be placed thereon is safe and proper, shall have been filed with said commissioner. No loans shall be made by any land value insurance company directly or indirectly to any of its officers or directors or employees or to any member of the family of any officer or directors. Any officer, director, agent or employee of any such company who knowingly consents to any violation of the terms or provisions of this section shall be guilty of a misdemeanor. No officer or director of this company shall be interested in any policy of insurance whereby the value of any land or property is insured in which such officer or director is or may hereafter become interested. Twenty-five per cent of the net earnings shall be set aside annually as a capital surplus fund until the capital stock, together with such capital surplus fund shall amount in the aggregate to the sum of five hundred thousand dollars. After said sum of five hundred thousand dollars as capital and capital surplus shall have been reached, then ten (10) per cent of the net earnings shall be set aside annually until the capital and capital surplus account of said company_shall amount in the aggregate to the sum of one million dollars. Every land value insurance company shall make a report in writing to the insurance commissioner, which report shall be made semiannually and shall be verified by the oath of its president or vice president and its secretary or treasurer, or any two of its principal officers. Such report shall contain a statement of each new contract or policy of insurance issued since the last report, setting forth in detail a description of the property covered by such contract, the appraised value of the property and the amount of insurance, and the rate charged. Any person or corporation violating any of the terms and conditions of this act shall be deemed to have committed a felony under the laws of the State of California and shall be punishable by a fine of not more than five thousand dollars, or imprisonment for not more than five years, or both. 1925.