1. The Primary Lender must be adequately capitalized and possess sufficient Capital, to allow for prudential levels of leverage in its operations. Capital adequacy shall be determined both in terms of an absolute amount of $3 m and a Capital to Asset Ratio of not less than 8% or leverage of 12.5 to 1. However, the Company’s Board may direct otherwise based on the strength, sound performance and prospects of a Primary Lender, which does not meet this criteria.
2. The Primary Lender must also be subject to regulation by an approved regulatory body such as a Central Bank, Registrar of Insurance or Registrar of Co-operatives. In this regard, the Primary Lender shall be subject to regular off-site surveillance or review and periodic on-site examination/inspection or audit.
3. The Primary Lender should have at least three years of satisfactory experience in mortgage origination, property appraisal, administration of mortgage loans, and general mortgage underwriting or, alternatively demonstrate its ability to make sound underwriting judgements and service mortgage loans to the satisfaction of the Company.
This experience must be reflected in the specific quality, qualification and experience of the staff of the Primary Lender and related professionals involved in the mortgage underwriting process. The Company will, if it deems necessary, check the qualifications of the Primary Lender’s underwriters, real estate appraisers and other professionals. Minimum information on the Primary Lender and staff to assist in this assessment will be required. For instance, three (3) years audited financial statements, information on the size and nature of mortgage portfolio, mortgage underwriting polices and guidelines must be available. A Primary Lender must undertake a commitment to improve and maintain mortgage-underwriting standards via training such as the Company’s Mortgage Underwriting Seminars.
4. The Primary Lender must agree to be submitted to periodic audits or reviews of its mortgage portfolio and mortgage underwriting process by the Company or its designate, to ensure that proper mortgage underwriting standards are being maintained.
5. The Primary Lender must maintain certain minimum standards regarding revenue recognition, provisioning and effecting security, as well as maintenance of a minimum default record or history. However, these criteria might be considered as part of the assessment in relation to paragraph 3 above rather than explicitly as a separate criterion.
6. There shall be a limit on the exposure of the Company to the value of mortgages held in its portfolio originating from any one Primary Lender. Not more than 20% of the assets of the Company shall be so held unless otherwise determined by the Company’s Board.
7. The Primary Lender must also be further responsible for compliance with all applicable legal requirements.
8. The Primary Lender must maintain a blanket fidelity bank insurance policy as well as an error and insurance policy that adequately covers all employees acting with regard to mortgages purchased by the Company.
