OREGON CREDIT ENHANCEMENT FUND
Program Examples:
#1
Loan Amount: $1,000,000
Loan Term: 10 years
Collateral Coverage: $850,000
Collateral Shortfall: $150,000
Insurance Provided: 15%
($150,000/$1,000,000 = 15%)
Term of Insurance: 5 years
Premium Factor: 3.5%
Premium for a $1,000,000 loan, with
15% Collateral Support Insurance for five
years is $5,250.00
($1,000,000 x .15 x .035 = $5,250.00)
#2
Loan Amount: $120,000
Loan Term: 4 years
Collateral Coverage: $84,000
Collateral Shortfall: $36,000
Insurance Provided: 25%
($36,000/$120,000 = 30%; max coverage
is 25%, or $30,000)
Term of Insurance: 4 years
Premium Factor: 3%
Premium for a $120,000 loan, with 25%
Collateral Support Insurance for four years
is $900.00
($120,000 x .25 x .03 = $900.00)
BUSINESSOREGON
Main Office:
775 Summer Street, NE, Suite 200
Salem, OR 97301
www.oregon4biz.com
503-986-0123
Business Oregon is an agency
of the state of Oregon.
www.oregon4biz.com
New “Collateral Support” Insurance Program
Feedback from economic development partners, banks and communities across Oregon have
prompted the creation of the First Loss Collateral Support Insurance program enabling lenders to
meet their clients’ borrowing needs and comply with internal advance rate policies.
Purpose:
The First Loss Collateral Support Insurance Program is intended to mitigate a collateral shortfall,
but not other credit deficiencies, where other types of loan insurance may already be available. Loan
proceeds may finance a new project or be used to pay off an existing loan (see additional criteria
below) where the collateral value is no longer adequate to secure the loan due mainly to a decline
in the value of the existing collateral (not due to the loan having been less than fully secured at
inception).
Structure:
• Enrolled loans must meet a participating Lender’s credit underwriting criteria with the
exception of loan collateral adequacy.
• Borrowers must demonstrate significant current and historical cash flow coverage and a strong
credit history, significant owners must provide personal guaranties, and the loan request must
satisfy other prudent underwriting criteria.
• Provides coverage to the extent necessary to facilitate the collateral shortage, no more than 25%
of the loan amount up to $500,000 or no more than 20% up to $1,000,000, for a term of up
to 5 years.
Amount Insurance Pays:
The Department’s maximum liability under the Collateral Support Insurance will be the lesser of:
• The insured percentage times the authorized loan amount;
• The insured percentage times the outstanding balance of the loan, including accrued interest
and reasonable costs and expenses of collection and liquidation of collateral, exclusive of costs
attributable to environmental problems, after taking into account payments by guarantors but
not taking into account proceeds of collateral; or,
• $1,000,000.
Collateral proceeds received after payment of a deficiency are applied first to any uninsured portion of
the loan and then to the portion of the loan insured through Collateral Support Insurance.
Restrictions:
• If any proceeds of the new loan are used to pay an existing loan from the same lender, in order
for the new loan to be eligible for Collateral Support Insurance, the existing loan must have
reached its maturity date and the new loan must also include new monies advanced to the
borrower. (A restriction due to Federal funds used to capitalize the program). These conditions
do not apply if one lender is only refinancing a loan or loans from a different lender.
• Enrollment of the new loan in the Collateral Support Insurance will be limited to the amount
of the collateral shortfall, and on a refinance limited to the decline in the collateral value if that
is less.
Collateral
Support
Term
of Insurance
Insurance Premiums:
Insurance premium
The Department charges a one-time (up-front)
Up to 1 year
2.0%
insurance premium. Financial institutions may pass
Up to 2 years
2.5%
along the cost of premiums to borrowers. Premiums,
expressed as a percentage of the Department’s
Up to 4 years
3.0%
maximum guarantee amount, are charged in
Up to 5 years
3.5%
accordance with the following schedule: