12 U.S.C. § 1706c | Insurance of mortgages

(a)

Supplemental system; limitation on amount; termination of authority

section 1707 of this titleProvidedAnd provided furtherAugust 2, 1954To assist in providing adequate housing for families of low and moderate income, particularly in suburban and outlying areas, this section is designed to supplement systems of mortgage insurance under other provisions of this chapter by making feasible the insurance of mortgages covering properties in areas where it is not practicable to obtain conformity with many of the requirements essential to the insurance of mortgages on housing in built-up urban areas. The Secretary is authorized, upon application by the mortgagee, to insure, as hereinafter provided, any mortgage (as defined in ) offered to him which is eligible for insurance as hereinafter provided, and, upon such terms as the Secretary may prescribe, to make commitments for the insuring of such mortgages prior to the date of their execution or disbursement thereon: , That the aggregate amount of principal obligations of all mortgages insured under this section and outstanding at any one time shall not exceed $100,000,000, except that with the approval of the President such aggregate amount may be increased at any time or times by additional amounts aggregating not more than $150,000,000 upon a determination by the President, taking into account the general effect of any such increase upon conditions in the building industry and upon the national economy, that such increase is in the public interest: , That no mortgage shall be insured under this section after , except pursuant to a commitment to insure issued on or before such date.

(b)

Eligibility conditions

To be eligible for insurance under this section, a mortgage shall—

(1)

have been made to, and be held by, a mortgagee approved by the Secretary as responsible and able to service the mortgage properly;

(2)

ProvidedProvided furtherAnd provided further involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Secretary shall approve) in an amount not to exceed $5,700, and not to exceed 95 per centum of the appraised value, as of the date the mortgage is accepted for insurance, of a property upon which there is located a dwelling designed principally for a single-family residence, and which is approved for mortgage insurance prior to the beginning of construction: , That the mortgagor shall be the owner and occupant of the property at the time of insurance and shall have paid on account of the property at least 5 per centum of the Secretary’s estimate of the cost of acquisition in cash or its equivalent, or shall be the builder constructing the dwelling, in which case the principal obligation shall not exceed 85 per centum of the appraised value of the property or $5,100: , That the Secretary finds that the project with respect to which the mortgage is executed is an acceptable risk, giving consideration to the need for providing adequate housing for families of low and moderate income particularly in suburban and outlying areas: , That, where the mortgagor is the owner and occupant of the property and establishes (to the satisfaction of the Secretary) that his home, which he occupied as an owner or as a tenant, was destroyed or damaged to such an extent that reconstruction is required as a result of a flood, fire, hurricane, earthquake, storm or other catastrophe, which the President, pursuant to sections 5122(2) and 5170 of title 42, has determined to be a major disaster, such maximum dollar limitation may be increased by the Secretary from $5,700 to $7,000, and the percentage limitation may be increased by the Secretary from 95 per centum to 100 per centum of the appraised value;

(3)

have a maturity satisfactory to the Secretary but not to exceed thirty years from the date of insurance of the mortgage;

(4)

contain complete amortization provisions satisfactory to the Secretary requiring periodic payments by the mortgagor not in excess of his reasonable ability to pay as determined by the Secretary;

(5)

bear interest (exclusive of premium charges for insurance and service charges, if any) at not to exceed 5 per centum per annum on the amount of the principal obligation outstanding at any time;

(6)

provide, in a manner satisfactory to the Secretary, for the application of the mortgagor’s periodic payments (exclusive of the amount allocated to interest and to the premium charge which is required for mortgage insurance as hereinafter provided and to the service charge, if any) to amortization of the principal of the mortgage; and

(7)

contain such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, service charges, default reserves, delinquency charges, foreclosure proceedings, anticipation of maturity, and other matters as the Secretary may in his discretion prescribe.

(c)

Premium charge

ProvidedThe Secretary is authorized to fix a premium charge for the insurance of mortgages under this section, but in the case of any mortgage, such charge shall not be less than an amount equivalent to one-half of 1 per centum per annum nor more than an amount equivalent to 1 per centum per annum of the amount of the principal obligation of the mortgage outstanding at any time, without taking into account delinquent payments or prepayments. Such premium charges shall be payable by the mortgagee, either in cash or in debentures issued by the Secretary under this section at par plus accrued interest, in such manner as may be prescribed by the Secretary: , That the Secretary may require the payment of one or more such premium charges at the time the mortgage is insured, at such discount rate as he may prescribe not in excess of the interest rate specified in the mortgage. If the Secretary finds, upon the presentation of a mortgage for insurance and the tender of the initial premium charge or charges so required, that the mortgage complies with the provisions of this section, such mortgage may be accepted for insurance by endorsement or otherwise as the Secretary may prescribe. In the event that the principal obligation of any mortgage accepted for insurance under this section is paid in full prior to the maturity date, the Secretary is further authorized, in his discretion, to require the payment by the mortgagee of an adjusted premium charge in such amount as the Secretary determines to be equitable, but not in excess of the aggregate amount of the premium charges that the mortgagee would otherwise have been required to pay if the mortgage had continued to be insured until such maturity date; and in the event that the principal obligation is paid in full as herein set forth, the Secretary is authorized to refund to the mortgagee for the account of the mortgagor all, or such portion as he shall determine to be equitable, of the current unearned premium charges theretofore paid.

(d)

Release of mortgagor

The Secretary may, at any time under such terms and conditions as he may prescribe, consent to the release of the mortgagor from his liability under the mortgage or the credit instrument secured thereby, or consent to the release of parts of the mortgaged property from the lien of the mortgage.

(e)

Conclusiveness of insurance contract as to eligibility

Any contract of insurance executed by the Secretary under this section shall be conclusive evidence of the eligibility of the mortgage for insurance, and the validity of any contract of insurance so executed shall be incontestable in the hands of an approved mortgagee from the date of the execution of such contract, except for fraud or misrepresentation on the part of such approved mortgagee.

(f)

Rights of mortgagee upon foreclosure

section 1710(a) of this titleIn any case in which the mortgagee under a mortgage insured under this section shall have foreclosed and taken possession of the mortgaged property in accordance with the regulations of, and within a period to be determined by, the Secretary or shall, with the consent of the Secretary, have otherwise acquired such property from the mortgagor after default, the mortgagee shall be entitled to receive the benefits of the insurance as provided in with respect to mortgages insured under section 203(b)(2)(D) of this Act.

(g)

Applicability of other sections

1 See References in Text note below.

1 section 1710 of this title section 1709 of this titleProvidedsection 1709 of this titleSubsections (c), (d), (e), (f), (g), (h), (j), and (k)  of shall be applicable to mortgages insured under this section except that all references therein to the Mutual Mortgage Insurance Funds or the Fund shall be construed to refer to the General Insurance Fund, and all references therein to shall be construed to refer to this section: , That debentures issued in connection with mortgages insured under this section shall have the same tax exemption as debentures issued in connection with mortgages insured under .

June 27, 1934, ch. 847 Apr. 20, 1950, ch. 94 64 Stat. 48 Aug. 3, 1951, ch. 293, § 1 65 Stat. 173 June 30, 1953, ch. 170, § 2 67 Stat. 121 Aug. 2, 1954, ch. 649 68 Stat. 591 Pub. L. 86–372, title I, § 116(a)Sept. 23, 195973 Stat. 664 Pub. L. 89–117, title XI, § 1108(b)Aug. 10, 196579 Stat. 504 Pub. L. 90–19, § 1(a)(3)May 25, 196781 Stat. 17 Pub. L. 91–606, title III, § 301(b)Dec. 31, 197084 Stat. 1758 Pub. L. 93–288, title VII, § 702(b)May 22, 197488 Stat. 163 Pub. L. 103–337, div. C, title XXXIV, § 3411(a)(1)Oct. 5, 1994108 Stat. 3100 Pub. L. 100–707, title I, § 109(e)(1)Nov. 23, 1988102 Stat. 4708(, title I, § 8, as added , title I, § 102, ; amended , ; , ; , title I, § 103, ; , , ; , , ; , (4), , ; , , ; , formerly title VI, § 602(b), , , renumbered title VII, § 702(b), , (2), , ; , , .)

Editorial Notes

References in Text

act June 27, 1934, ch. 847 48 Stat. 1246This chapter, referred to in subsec. (a), was in the original “this Act”, meaning , , which is classified principally to this chapter (§ 1701 et seq.). For complete classification of this Act to the Code, see Tables.

section 1709(b)(2)(D) of this title act Aug. 2, 1954, ch. 649, title I, § 104 68 Stat. 591Section 203(b)(2)(D) of this Act, referred to in subsec. (f), which was formerly classified to , was repealed by , .

section 1710 of this title Pub. L. 105–276, title VI, § 602(1)Oct. 21, 1998112 Stat. 2674Subsection (h) of , referred to in subsec. (g), was redesignated subsec. (i) by , , .

section 1710 of this title Pub. L. 105–276, title VI, § 601(c)Oct. 21, 1998112 Stat. 2673Subsection (k) of , referred to in subsec. (g), was repealed by , , .

section 1735c of this titleThe General Insurance Fund, referred to in subsec. (g), was established by .

Amendments

Pub. L. 100–7071988—Subsec. (b)(2). substituted “5170 of title 42” for “5141 of title 42”.

Pub. L. 93–288 section 4402(1) of title 421974—Subsec. (b)(2). substituted “sections 5122(2) and 5141 of title 42” for “”.

Pub. L. 91–6061970—Subsec. (b)(2). substituted reference to section “4402(1)” for “1855a(a)” of title 42.

Pub. L. 90–19, § 1(a)(3)1967—, substituted “Secretary” for “Commissioner” wherever appearing in subsecs. (a), (b)(1) to (4), (6), (7), and (c) to (f).

Pub. L. 90–19, § 1(a)(4)Subsec. (b)(2). , substituted “Secretary’s” for “Commissioner’s”.

Pub. L. 89–117, § 1108(b)(1)1965—Subsec. (g). , substituted “General Insurance Fund” for “Title I Housing Insurance Fund”.

Pub. L. 89–117, § 1108(b)(2)Subsec. (h). , repealed subsec. (h) which created the Title I Housing Insurance Fund.

Pub. L. 89–117, § 1108(b)(2)Subsec. (i). , repealed subsec. (i) which dealt with the disposition of surplus funds of the Title I Housing Insurance Fund, purchase of debentures, and credits and charges to fund.

Pub. L. 86–372 section 1710 of this title1959—Subsec. (g). inserted reference to subsecs. (j) and (k) of .

Aug. 2, 1954Aug. 2, 19541954—Subsec. (a). Act , inserted proviso prohibiting the insurance of mortgages under this section after , except pursuant to commitments to insure issued on or before such date.

June 30, 19531953—Subsec. (b)(2). Act , raised the maximum mortgage, where the mortgagor is the owner-occupant, from $4,750, not exceeding 95 per centum of value, to $5,700, not exceeding 95 per centum of value; and raised the maximum mortgage, where the builder is the mortgagor, from $4,250, not exceeding 85 per centum of value, to $5,100, not exceeding 85 per centum of value.

Aug. 3, 19511951—Subsec. (b)(2). Act , permitted more liberal mortgage insurance for those building low-cost homes to replace their homes lost in a flood or other major disaster.

Statutory Notes and Related Subsidiaries

Effective Date of 1974 Amendment

Pub. L. 93–288Apr. 1, 1974section 605 of Pub. L. 93–288 section 5121 of Title 42Amendment by effective , see , formerly set out as an Effective Date note under , The Public Health and Welfare.

Effective Date of 1970 Amendment

Pub. L. 91–606Dec. 31, 1970section 304 of Pub. L. 91–606 section 165 of Title 26Amendment by effective , see , set out as a note under , Internal Revenue Code.

Repayment to Treasury on Capital Account of Title I Insurance Fund

Act Mar. 10, 1953, ch. 5, § 2 67 Stat. 5June 30, 1954July 1, 1953, , directed the Federal Housing Commissioner to pay out of the capital account of the Title I Insurance Fund to the Secretary of the Treasury, prior to , the sum of $8,333,313.65 either in one lump sum or in installments, except that the first payment was to be made on .