IN HB1206

Establishes a voluntary five star mortgage program administered by the Department of Financial Institutions, effective upon passage, with program implementation guidelines due by June 1, 2010.

Requires creditors to certify they offer qualifying five star mortgages, have no record of significant mortgage law violations, and have no director or executive officer convicted of fraud-related felonies.

Defines five star mortgages as fixed-rate loans with minimum 10% down payment (or 10% equity for refinances), maximum 30-year terms, required escrow accounts for taxes and insurance, and no prepayment penalties.

Requires creditors to provide written statements to applicants who are denied five star mortgages, explaining reasons for denial; allows certified lenders to market themselves as five star mortgage providers.

Authorizes the Public Employees' Retirement Fund (PERF) and State Teachers' Retirement Fund (TRF) to invest in pooled funds and alternative investment programs consisting in part or entirely of five star mortgages, effective July 1, 2010.