Section 2-29 Calculation of the value of underlying assets

Upon inclusion of loans as mentioned in section 2-28 first paragraph a) to c) in the cover pool, a prudent value shall be established for the asset furnished as security for each loan. Prudent market value may not exceed the market value resulting from a cautious assessment.

Prudent value shall be fixed by individual assessment of the registered asset concerned. Valuations shall be conducted by a competent and independent person in accordance with recognised principles. A valuation shall be documented and shall indicate who has conducted it, when it was conducted and the assumptions on which it was based. Valuation of residential properties may never the less be based on general price levels provided this is deemed prudent based on market conditions.The mortgage credit institution shall establish systems for subsequent monitoring of asset values.

The mortgage credit institution shall also monitor market trends and factors bearing on the value of the individual registered assets. Should market conditions or factors pertaining to the individual asset indicate that a significant value impairment has taken place, the mortgage credit institution shall ensure that a new prudent value is established in accordance with the first and second paragraph.

The King may in regulations establish further rules on valuation and on requirements with regard to the mortgage credit institution’s systems. The King may in regulations also establish rules governing changes to loan-to-value ratios resulting from a subsequent fall in the value of assets as mentioned in section 2-28 first paragraph a) to c).