Requirements for use of first mortgage or first deed of trust as collateral

1. To be accepted as collateral for a deposit of money by the State Treasurer, first mortgages or first deeds of trust must be on real property which is located in this state and is used for residences of single families. 2. Each such first mortgage or first deed of trust must be accompanied by the promissory note which it secures. 3. No first mortgage or first deed of trust may be accepted for such collateral if: (a) Any payment on the related promissory note is more than 30 days past due; (b) A prior lien is on the mortgage or deed; (c) In the case of a mortgage, an action to foreclose has been commenced or, in the case of a deed of trust, a notice of default and election to sell has been recorded; (d) In the case of a loan which is not insured or guaranteed by the Federal Government, the initial amount lent was greater than 80 percent of the appraised value of the real property at the time the loan was made; (e) The loan has been outstanding for less than 1 year; (f) The grantor of the property resides on the property; or (g) The loan does not meet the requirements for eligibility of the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association or the Government National Mortgage Association, although it is not necessary that any of those agencies have participated in the loan. 4. If any collateral consisting of a promissory note with a mortgage or deed of trust is found not to meet the requirements of this section, the depository bank, credit union, savings and loan association or savings bank shall substitute a note of equal or greater value which does meet the requirements. 5. The financial institution shall assign the pledged mortgages and deeds of trust to the depositor and deliver them with their promissory notes to the trust company. The assignment must be recorded when the financial institution fails to pay any part of the deposit for which the security is pledged.