Section 266.110 - Reserve requirements(a)HFAs with an issuer credit rating of "A" or better or overall rating of "A" or better on general obligation bonds. An HFA with an issuer credit rating of "A" or better, or an equivalent designation, or an HFA with an overall rating of "A" or better on its general obligation bonds, is not required to have additional reserves so long as the HFA maintains that designation or rating, unless the Commissioner determines that a prescribed level of reserves is necessary. If the designation or rating is lost, the HFA must immediately establish a reserve account funded in accordance with the requirements set forth in paragraph (b) of this section. The reserve account must reflect all loans in the HFA's portfolio endorsed under this part.(b)Other HFAs.(1) For other HFAs, a specifically identified dedicated account consisting entirely of liquid assets (i.e., cash or cash equivalents or readily marketable securities) must be established and maintained in a financial institution acceptable to HUD. This account may be drawn upon by HUD and may be used by the HFA only with the prior written approval of HUD for the purpose of meeting the HFA's risk-sharing obligations under this part. The account must be established prior to the execution of any risk-sharing agreement under this part in an initial amount of not less than $500,000. Thereafter, the HFA must deposit at each loan closing and thereafter maintain the following additional amounts in the dedicated account:(i) $10.00 per $1,000 of the unpaid principal balance that is equal to or less than $50 million; plus(ii) $7.50 per $1,000 of the unpaid principal balance that is greater than $50 million and less than $150 million; plus(iii) $5.00 per $1,000 of the unpaid principal balance that is greater than $150 million.(2) The Commissioner may determine that higher levels of reserves may be necessary.59 FR 62524, Dec. 5, 1994, as amended at 85 FR 83441 , Dec. 22, 2020