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College Construction Loan Insurance Association (CCLIA) Definition
The College Construction Loan Insurance Association (CCLIA) was a non-profit organization. It offered insurance for bonds issued to fund construction projects initiated by colleges and universities.
The organization was funded by premiums paid by educational institutions that took part in the program. Investment income helped fund it, as well.
The CCLIA played a fundamental role in funding grants to institutions. We discuss its program services and detail its many achievements.
Table of Contents
KEY TAKEAWAYS
- The College Construction Loan Insurance Association was a non-profit organization. It provided insurance for bonds issued to fund construction projects initiated by colleges and universities.
- The CCLIA was funded by premiums paid by the institutions that took part in the program, as well as by investment income.
- Like Freddie Mac or Fannie Mae, the CCLIA was nicknamed Connie Lee.
- Ambac Financial paid over $100 million for Connie Lee’s outstanding shares.
What Is CCLIA?
The CCLIA was a non-profit organization incorporated in 1987 and initially funded by the Department of Education.
Similar to other government sponsored enterprises, the organization was nicknamed Connie Lee, the purpose of the CCLIA was to back debt instruments financially. Educational institutions issued these to finance buildings or educational facilities (renovated or new). It was a federally-authorized bond insurance holder. It primarily covered municipal bonds from certain schools with low credit history.
Connie Lee was generally required by federal law to only insure bonds with higher credit risks. For example, those with a rating below BBB.
Many academic facilities weren’t required to issue bonds. Nor did they have to get bond insurance in order to fund projects. Instead, they relied on an endowment contract, alumni gifts, or various federal sources.
Eligible institutions had to meet certain criteria and fulfill application procedures. They had to be accredited by a regional or national accrediting body. And they must have had a minimum of five years of experience in construction loan financing.
Eligible institutions needed to have a good credit rating. Those same eligible institutions were not to have any outstanding cost of construction loan debt.
Once an institution had met the eligibility requirements, it was able to apply for coverage through the CCLIA and needed to fill out organizational documents. The association then needed to review applicable documents and determine whether or not the institution is a good risk.
If the CCLIA determined that the institution was a good risk for educational purposes, it covered the cost of construction.
An authorized individual could then choose to purchase either primary or excess coverage, or both. Administrative costs and associated risks dictate the coverage bought by the authorized individual.
CCLIA was a valuable resource for universities planning to undertake construction projects. By purchasing insurance through the CCLIA, institutions could protect themselves from losses if the loan was not repaid. This type of insurance could provide repayment assistance to borrowers with financial difficulties.
A board of directors governed the CCLIA. They were composed of representatives from the college and secondary school. The board was responsible to set premiums, approve claims, and manage the association’s investments.
How CCLIA Privatization Works
In June of 1995, motions were made to move the CCLIA towards privatization. A Congressional bill was passed that ended the federal sponsorship of the CCLIA. By 1997, the CCLIA was privatized. At that time, Ambac Financial Group bought any outstanding shares while also paying off any remaining debt from the CCLIA’s. The CCLIA then became Ambac’s subsidiary and was formerly renamed to the Connie Lee Insurance Company. This subsidiary remained inactive until 2008 when it was reactivated. Upon reactivation, there was a focus placed on college and hospital infrastructure projects. Any public debt that was financed was in run off meaning that the insurance company would allow for any previous bonds to mature and avoiding any new issues being generated.
Summary
Though short-lived, the CCLIA insured approximately $2.6 billion in bonds. This historic achievement supported the advancement of education. The CCLIA provided opportunities for projects and initiatives to be completed with added assurity that institutions would be protected from any unforeseen losses or costs.
Frequently Asked Questions about CCLIA
Why was the CCLIA referred to as Connie Lee?
This was to follow suit of giving nicknames to other organizations. Most notably, entities like Fannie Mae and Sallie Mae. This is to give the loan programs a personable flair.
How much debt did Connie Lee incur?
Approximately $18.4 million in debt. However, Ambac helped pay down this debt when the organization was privatized.
How much did Connie Lee end up funding?
Connie Lee funded over $2 billion in its short life.
Why did Connie Lee cease operations?
Problems with state and federal laws ultimately resulted in Connie Lee disbanding.
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