One- to four-family dwellings; maximum term of mortgage; adjustments in effective rate of interest
The Secretary may insure under any provision of this subchapter a mortgage involving property upon which there is located a dwelling designed principally for occupancy by one to four families, where the mortgage provides for periodic adjustments by the mortgagee in the effective rate of interest charged. Such interest rate adjustments may be accomplished through adjustments in the monthly payment amount, the outstanding principal balance, or the mortgage term, or a combination of these factors, except that in no case may any extension of a mortgage term result in a total term in excess of 40 years. Adjustments in the effective rate of interest shall correspond to a specified national interest rate index approved in regulations by the Secretary, information on which is readily accessible to mortgagors from generally available published sources. Adjustments in the effective rate of interest shall (1) be made on an annual basis; (2) be limited, with respect to any single interest rate increase, to no more than 1 percent on the outstanding loan balance; and (3) be limited to a maximum increase of 5 percentage points above the initial contract interest rate over the term of the mortgage.
Written explanation of mortgage features
15 U.S.C. 1601The Secretary shall require that the mortgagee make available to the mortgagor, at the time of loan application, a written explanation of the features of an adjustable rate mortgage consistent with the disclosure requirements applicable to variable rate mortgages secured by a principal dwelling under the Truth in Lending Act [ et seq.].
Number of mortgages and loans
The aggregate number of mortgages and loans insured under this section in any fiscal year may not exceed 30 percent of the aggregate number of mortgages and loans insured by the Secretary under this subchapter during the preceding fiscal year.
Adjustable rate mortgage with initial fixed rate of interest
June 27, 1934, ch. 847Pub. L. 98–181, title I97 Stat. 1225Pub. L. 100–242, title IV, § 415(a)101 Stat. 1907Pub. L. 107–73, title II, § 206115 Stat. 674Pub. L. 108–186, title III, § 301(a)117 Stat. 2692(, title II, § 251, as added [title IV, § 443], , ; amended , , ; , , ; , , .)
Editorial Notes
References in Text
Pub. L. 90–32182 Stat. 146section 1601 of Title 15The Truth in Lending Act, referred to in subsec. (b), is title I of , , , which is classified generally to subchapter I (§ 1601 et seq.) of chapter 41 of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see Short Title note set out under and Tables.
Amendments
Pub. L. 108–1862003—Subsec. (d)(1)(C). substituted “3” for “five”
Pub. L. 107–73, § 206(1)2001—Subsec. (b). , substituted “require that the mortgagee make available to the mortgagor, at the time of loan application, a written explanation of the features of an adjustable rate mortgage consistent with the disclosure requirements applicable to variable rate mortgages secured by a principal dwelling under the Truth in Lending Act” for “issue regulations requiring that the mortgagee make available to the mortgagor, at the time of loan application, a written explanation of the features of the adjustable rate mortgage, including a hypothetical payment schedule that displays the maximum potential increases in monthly payments to the mortgagor over the first 5 years of the mortgage term”.
Pub. L. 107–73, § 206(2)Subsec. (d). , added subsec. (d).
Pub. L. 100–242section 1715z–10(c) of this titlesection 1715z–17 of this title1988—Subsec. (c). amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: “The aggregate number of mortgages and loans insured under this section, , and in any fiscal year may not exceed 10 percent of the aggregate number of mortgages and loans insured by the Secretary under this subchapter during the preceding fiscal year.”
Statutory Notes and Related Subsidiaries
Effective Date of 2003 Amendment
Pub. L. 108–186, title III, § 301(b)117 Stat. 2692