Government of the Republic of Lithuania

Government of the Republic of Lithuania official translation GOVERNMENT OF THE REPUBLIC OF LITHUANIA RESOLUTION NO 739 ON HOME LOANS INSURANCE COMPANY 18 June 1998 Vilnius The Government of the Republic of Lithuania h a s r e s o l v e d:

1. To establish private insurance company -Home Loans Insurance Company (hereinafter referred to as the Company) , operating under the Republic of Lithuania Law on Insurance, Company Law, Law on Public Debt, its Statutes, other legal acts and this Resolution. The Company shall conclude insurance contracts of loans for building, acquisition and renovation of dwellings (hereinafter referred to as insurance contracts) with the banks which make loans to individuals who are on the waiting lists of municipalities for receiving soft loans for the acquisition of a dwelling under the Republic of Lithuania Law on Housing, which shall provide that the beneficiary of the insurance benefit shall be the bank which made the loan to such an individual.
2. To approve the Statutes of the private insurance company Home Loans Insurance Company (attached thereto).
3. To establish that: 3.1 (until 16 November 1998 - version of Government Resolution No 739 of 18 June 1998, Official Gazette No 57-1603) (after 17 November 1998 - version of the Government Resolution No. 1221 of 13 October 1998, Official Gazette No 91-2522) the functions of the founder of the Company shall be performed by the Ministry of Finance; 3.2 the shareholding of the Company acquired in the name of the state in any event must account for at least 75 per cent of the Company's authorised capital; 3.3 the person representing state-owned shares shall be authorised to vote that at least 50 per cent of the net profit of the Company should be used for the reinvestment in the principal activities of the Company (formation of mandatory reserves, etc); 3.4 the Statutes of the Company shall provide that the losses of the Company upon the decision of the shareholders shall be covered from the reserves and shareholders' contributions, or the losses will be carried forward to the succeeding tax year, but not more than three years. The Company shall have to establish the procedure for giving advance notice, approved by the founder. If the reserves of the Company are insufficient for covering losses, and subsequent losses reach 25 per cent of the Company's authorised capital, the holder of shares belonging to the state by the right of ownership shall initiate and call the general meeting of shareholders at which he shall vote for the suspension of the conclusion of new insurance contracts. The banks and the Ministry of Finance shall be notified thereof, the reasons of losses shall be discussed, and not later than within 20 days, conclusions and recommendations shall be submitted to the Government of the Republic of Lithuania; 3.5 The total insurance premium or part thereof shall be paid, in the cases and in accordance with the procedure established by the Ministry of Finance and the Ministry Social Security and Labour, out of the General Support Fund for the Building or Acquisition of Residential Houses or Flats; 3.6 (until 16 November 1998 - version of Government Resolution No 739 of 18 June 1998, Official Gazette No 57-1603) (after 17 November 1998 - version of the Government Resolution No. 1221 of 13 October 1998, Official Gazette No 91-2522) The rate of insurance premium shall be established in accordance with the procedure for the calculation of the premium rates, prepared by the Ministry of Finance, which, inter alia, must provide for the maximum rates of insurance premiums; For covering administrative expenses of the Company not more than 10 per cent of the gross insurance premiums may be allocated; 3.7 The Company shall guarantee under insurance contract not more than 90 per cent of the outstanding portion of the loan of the bank, whereas the remaining risk shall be assumed by the bank which extended the loan; 3.8 Upon paying the insurance benefit to the bank, the bank shall transfer to the company all its claims over the property of the borrower; 3.9 Insurance contract shall be concluded, provided the amount of the loan does not exceed one and a half times the amount of the index of the area of residential premises under the Law on Housing, multiplied by the price of one square metre, approved in that year by the Government of the Republic of Lithuania; 3.10 The Company shall provide guarantee under insurance contracts only for the loans extended by those banks which won the tenders held by the Ministry of Finance; 3.11 (until 16 November 1998 - version of Government Resolution No 739 of 18 June 1998, Official Gazette No 57-1603) (after 17 November 1998 - version of the Government Resolution No. 1221 of 13 October 1998, Official Gazette No 91-2522) the Company shall keep the records of its insurance contracts and not later than on the 20th day of each month shall submit the accounts on insurance contracts to the Ministry of Finance and shall inform the Ministry of Finance about the fulfilment of its other liabilities; 3.12 (until 16 November 1998 - version of Government Resolution No 739 of 18 June 1998, Official Gazette No 57-1603) (after 17 November 1998 - version of the Government Resolution No. 1221 of 13 October 1998, Official Gazette No 91-2522) the Chairperson of the Board of the Company and the head of its Administration shall report to the Ministry of Finance on quarterly basis (by the 25th day of the succeeding month); 3.13 Financial statements of the Company shall be audited by an independent auditor not less frequently than once in every six months. The Chairperson of the Company's Board shall submit annual financial statements together with the auditor's findings to the Government of the Republic of Lithuania not later than within three months after the expiry of the financial year; 3.14 The Company shall be allocated from the General Support Fund for the Building or Acquisition of Residential Houses or Flats 7 million litas for paying up for the Company's shares and 1 million litas for the formation of its organisational fund; 3.15 If the Company fails to fulfil its obligations under the insurance contracts guaranteed by the Government of the Republic of Lithuania within 30 days or fulfils only part of its obligations, these obligations shall be fulfilled by the Government of the Republic of Lithuania; 3.16 The Government of the Republic of Lithuania shall assume the responsibility to redeem, within 30 days upon the receipt of the consent of the Bank of Lithuania that such operation is reasonable, at least 50 per cent of the loans extended by the bank and insured by the Company, in the event of the threat to the bank's liquidity, upon submission of the application by this bank to the Ministry of Finance and the report on the bank's structure of assets and liabilities, broken down by periods. The loans insured by the Company and subject to redemption shall be paid for with Government securities, the maturity period and interest of which are the same as maturity and interest of the loan extended by the bank .
4. (until 16 November 1998 - version of Government Resolution No 739 of 18 June 1998, Official Gazette No 57-1603) (after 17 November 1998 - version of the Government Resolution No. 1221 of 13 October 1998, Official Gazette No 91-2522) Following this Resolution, to instruct the Minister of Finance to sign all the documents pertaining to the establishment of the Company.
5. (until 16 November 1998 - version of Government Resolution No 739 of 18 June 1998, Official Gazette No 57-1603) (after 17 November 1998 - version of the Government Resolution No. 1221 of 13 October 1998, Official Gazette No 91-2522) To establish that the Board of the Company shall comprise five persons, including one person from each of the following institutions: the Ministry of Public Administration Reforms and Local Authorities, Ministry of Social Security and Labour, Ministry of Finance, Ministry of Environment and the Prime Minister's Office.
6. (until 16 November 1998 - version of Government Resolution No 739 of 18 June 1998, Official Gazette No 57-1603) (after 17 November 1998 - version of the Government Resolution No. 1221 of 13 October 1998, Official Gazette No 91-2522) To instruct the Ministry of Finance: 6.1 to establish the procedure for the calculation of the insurance premium rates; 6.2 to prepare and approve the procedure for giving advance notice and to ensure its effective implementation; 6.3 to prepare, in collaboration with the Ministry of Social Security and Labour, the procedure for the refund of insurance premium from the General Support Fund for the Building or Acquisition of Residential Houses or Flats to the banks which make loans to individuals who are on the waiting lists of municipalities for receiving soft loans for the acquisition of a dwelling under the Republic of Lithuania Law on Housing and who hold insurance contracts with the Company ; 6.4 to prepare the procedure for the redemption of the loans extended by the bank and insured by the Company; 6.5 to establish the Dwelling Council, the chairperson of which will be a vice minister of Finance and members will be vice ministers of Social Security and Labour and of Public Administration Reforms and Local Authorities; 6.6 to approve the composition of the Dwelling Council, nominated by the respective ministers; 6.7 to prepare and approve the Statutes of the Dwelling Council (they should provide, inter alia, that the Dwelling Council shall monitor the correctness of the calculation of specific insurance premium rates.
7. (until 16 November 1998 - version of Government Resolution No 739 of 18 June 1998, Official Gazette No 57-1603) (after 17 November 1998 - version of the Government Resolution No. 1221 of 13 October 1998, Official Gazette No 91-2522) Prime Minister Gediminas Vagnorius Minister of Public Administration Reforms and Local Authorities Kęstutis Skrebys Approved by Government of the Republic of Lithuani a Resolution No 739 of 18 June 1998 Statutes of the Operation of Private Insurance Company Home Loans Insurance Company General provisions
8. The Private Insurance Company Home Loans Insurance Company (hereinafter referred to as the Company) shall conclude insurance contracts with the banks extending loans to individuals for the building, acquisition and renovation of dwellings (thereinafter referred to as insurance contracts), which provide that the beneficiary of the insurance benefit shall be the bank extending the loan. Only the insurance contracts for loans, which are extended for the building, acquisition and renovation of residential houses and dwellings and may not be used for any other purpose shall be concluded.
9. A decision on the conclusion of the insurance contract shall be taken only after the submission of the documents referred to in point
10. Conclusions for the conclusion of insurance contracts
11. The insurance contract shall be concluded only with the bank extending a loan to an individual, who is included into the waiting list of municipalities for receiving soft loans for the acquisition of dwellings under the Law on Housing of the Republic of Lithuania.
12. The receiver of the loan shall have accumulated a prescribed initial contribution ( 20 per cent or 10 per cent of the total price of a dwelling for young families), shall have regular income and meet other requirements established by the Company or the bank.
13. The insured loan may not exceed 80 per cent of the total price of a dwelling (for young families the percentage is 90 per cent). The total price of a dwelling shall be the amount of funds necessary for the buying, acquisition and renovation of a residential house or flat.
14. The insured loan may not exceed the loan the expenses for the servicing and redemption of which would exceed 40 per cent of the annual household income. Annuity payments for meeting all loan and other debt liabilities (including the expenses for redeeming the loan) may nor exceed 45 per cent of the annual household income.
15. The period of the loan shall not exceed 15 years.
16. The loan agreement shall provide that not later than within a one-month period since receiving the person shall mortgage the acquired property, allowed for mortgage according to the procedure established by law and registered at the Mortgage Office.
17. The house or flat acquired for the loan may not be transferred to other persons without the authorisation of the Company or used otherwise than the loan or mortgage agreements provide. This provision shall be included into the aforementioned agreements.
18. The insurance contract shall provide that that bank assumes responsibility to appropriately take the property acquired for the loan in mortgage and, upon receiving the insurance benefit, to transfer all possessive rights to claim mortgaged property to the Company
19. The conditions for concluding insurance contracts stipulated by the aforementioned provisions shall be obligatory, and the insurance contract may only be concluded if the conditions are fully met. Conclusion of an insurance contract
20. The bank that agrees to extend the loan for the purpose of point 1 and, upon the assessment of the requirements for the conclusion of the insurance contract, shall apply to the Company for the conclusion of the insurance contract and submit the documents referred to in point 18 to it.
21. After the consideration of the application for the conclusion of the insurance contract the Company shall not later than within 15 days since the receipt of the aforementioned documents give either its advance consent to conclude the contract by establishing supplementary conditions, if necessary, or its refusal to conclude the contract.
22. On meeting the supplementary conditions established by the Company the bank shall submit to it a copy of the insurance contract on the basis of the insurance policy shall be issued.
23. (Until 16 October 98 – version of the Resolution No 739 of 18 June 1998 of the Government of the Republic of Lithuania, Official Gazette No 57- 1603, 1998) (After 17 October 1998 – version of the Resolution No 1221 of 13 October 1998 of the Government of the Republic of Lithuania, Official Gazette No 97-2522, 1998) The Company shall calculate the rate of the insurance premium according to the procedure for the calculation of premium rates established by the Ministry of Finance. The rate of the premium shall depend on the ratio of the insured sum to the price of a dwelling, i.e. the lower the percentage ratio of the insured sum to the price of a dwelling, the smaller the insurance premium is. The actual amount of the premium shall be established by the Company.
24. The insurance premium or the part thereof shall be paid from the General Support Fund for the Building and Acquisition of Residential Houses or Flats in cases and following the procedure established by the Ministry of Finance and the Ministry of Social Security and Labour.
25. The insurance contract shall come into force only after the Insurance Company receives the total amount of the insurance premium. Documents required for the submission to the Company
26. A bank willing to conclude the insurance contract shall submit the following documents to it: 18.1 application stipulating the purpose of the loan, the amount of the insured sum, the term of the loan and the insurance contract, and the date after which the loan is required; 18.2 identification data of the receiver of the loan: name, surname, personal number, passport number, date and authority of the issue of the passport and permanent residence; 18.3 documents on the size of the household; 18.4 work description of household members; 18.5 draft of the loan agreement; 18.6 documents guaranteeing the repayment of the loan by immovable or other property mortgaged to the bank; 18.7 title deeds to the habitable and gross floor area of the premises; 18.8 if the loan is taken out for building a residential house – title deeds to the building plot and the design of the house approved according to the established procedure; 18.9 documents guaranteeing that the receiver of the loan has accumulated the required initial contribution; 18.10 documents on the household income earned during the last 3-year period; 18.11 certificate issued by a municipality on the inclusion of the person into the waiting list of municipalities for receiving soft loans; 18.12 other documentation requested by the Company. Risk and loss allocation between the bank extending the loan and the company
27. The company shall guarantee under the insurance contract not more than 90 per cent of the outstanding portion of the loan, whereas the remaining risk shall be retained by the bank extending the loan.
28. Rules of credit insurance shall provide for insurance events after the occurrence of which the company pays insurance benefits, as well as non-insurance events, procedure for the calculation and payment of insurance benefits, and the condition under which the insurance benefit shall be paid in the case when, following the requirement set by the bank to the debtor concerning the elimination of violations of the insurance contract within a certain period of time, which may not be shorter than 60 days violations still remain.
29. Following the procedure established by the Company the bank shall submit to the administration of the company a documentary application for the transfer of funds. The Company being assured of the insurance event shall pay to the bank that has extended the loan not more than 90 per cent of the outstanding portion of the loan, and the bank shall transfer all possessive rights to the debtor’s property to the Company. Monitoring of the use of the insured loans
30. The company shall keep the file of an person whose loan was covered under the insurance contract, in which all submitted documents and decisions concerning the conclusion of insurance contracts and the payment of insurance contributions are registered. The file shall be kept until the redemption of the loan to the bank or the payment of insurance premiums, and shall be preserved in safekeeping 10 years thereafter.
31. Since the coming into force of the insurance contract the company shall inform the residential municipality of the receiver of the loan of the insurance contracts that have been concluded.
32. The company shall accumulate information concerning: 24.1 the number and value of all insurance contracts of loans awarded and valid at the moment of the submission of information; 24.2 the number of insurance benefits and the amount thereof, the amount of tangible assets and rights of claim taken over; 24.3 the number and amount of outstanding loans covered under insurance contracts; the actual amount of liabilities and the number and amount of recovered loans; 24.4 realisation of the mortgaged property of a person whose loan has been covered under the insurance contract;
33. The Administration of the Company shall inform on a monthly basis the Board of the Company about the position of loans covered under the insurance contacts and shall submit necessary proposals to it.
34. The administration of the Company shall monitor the supervision over the use of credits exercised by the bank and organise inspections, if any. The contract concluded with the bank should provide for the aforementioned types of activities.