§ 1706c. — Insurance of mortgages.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1706c]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER I--HOUSING RENOVATION AND MODERNIZATION
Sec. 1706c. Insurance of mortgages
(a) Supplemental system; limitation on amount; termination of authority
To 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 section 1707 of this
title) 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: Provided, 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: And provided further, That no mortgage shall
be insured under this section after August 2, 1954, 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) 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: Provided, 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: Provided further,
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: And
provided further, 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 the Secretary may in his
discretion prescribe.
(c) Premium charge
The 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: Provided, 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
In 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 section 1710(a) of this title with
respect to mortgages insured under section 203(b)(2)(D) of this Act.
(g) Applicability of other sections
Subsections (c), (d), (e), (f), (g), (h),\1\ (j), and (k) \1\ of
section 1710 of this title 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 section 1709 of
this title shall be construed to refer to this section: Provided, 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 section 1709 of this title.
---------------------------------------------------------------------------
\1\ See References in Text note below.
---------------------------------------------------------------------------
(June 27, 1934, ch. 847, title I, Sec. 8, as added Apr. 20, 1950, ch.
94, title I, Sec. 102, 64 Stat. 48; amended Aug. 3, 1951, ch. 293,
Sec. 1, 65 Stat. 173; June 30, 1953, ch. 170, Sec. 2, 67 Stat. 121; Aug.
2, 1954, ch. 649, title I, Sec. 103, 68 Stat. 591; Pub. L. 86-372, title
I, Sec. 116(a), Sept. 23, 1959, 73 Stat. 664; Pub. L. 89-117, title XI,
Sec. 1108(b), Aug. 10, 1965, 79 Stat. 504; Pub. L. 90-19, Sec. 1(a)(3),
(4), May 25, 1967, 81 Stat. 17; Pub. L. 91-606, title III, Sec. 301(b),
Dec. 31, 1970, 84 Stat. 1758; Pub. L. 93-288, title VII, Sec. 702(b),
formerly title VI, Sec. 602(b), May 22, 1974, 88 Stat. 163, renumbered
title VII, Sec. 702(b), Pub. L. 103-337, div. C, title XXXIV,
Sec. 3411(a)(1), (2), Oct. 5, 1994, 108 Stat. 3100; Pub. L. 100-707,
title I, Sec. 109(e)(1), Nov. 23, 1988, 102 Stat. 4708.)
References in Text
Section 203(b)(2)(D) of this Act, referred to in subsec. (f), which
was formerly classified to section 1709(b)(2)(D) of this title, was
repealed by act Aug. 2, 1954, ch. 649, title I, Sec. 104, 68 Stat. 591.
Subsection (h) of section 1710 of this title, referred to in subsec.
(g), was redesignated subsec. (i) by Pub. L. 105-276, title VI,
Sec. 602(1), Oct. 21, 1998, 112 Stat. 2674.
Subsection (k) of section 1710 of this title, referred to in subsec.
(g), was repealed by Pub. L. 105-276, title VI, Sec. 601(c), Oct. 21,
1998, 112 Stat. 2673.
The General Insurance Fund, referred to in subsec. (g), was
established by section 1735c of this title.
Amendments
1988--Subsec. (b)(2). Pub. L. 100-707 substituted ``5170 of title
42'' for ``5141 of title 42''.
1974--Subsec. (b)(2). Pub. L. 93-288 substituted ``sections 5122(2)
and 5141 of title 42'' for ``section 4402(1) of title 42''.
1970--Subsec. (b)(2). Pub. L. 91-606 substituted reference to
section ``4402(1)'' for ``1855a(a)'' of title 42.
1967--Pub. L. 90-19, Sec. 1(a)(3), substituted ``Secretary'' for
``Commissioner'' wherever appearing in subsecs. (a), (b)(1) to (4), (6),
(7), and (c) to (f).
Subsec. (b)(2). Pub. L. 90-19, Sec. 1(a)(4), substituted
``Secretary's'' for ``Commissioner's''.
1965--Subsec. (g). Pub. L. 89-117, Sec. 1108(b)(1), substituted
``General Insurance Fund'' for ``Title I Housing Insurance Fund''.
Subsec. (h). Pub. L. 89-117, Sec. 1108(b)(2), repealed subsec. (h)
which created the Title I Housing Insurance Fund.
Subsec. (i). Pub. L. 89-117, Sec. 1108(b)(2), 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.
1959--Subsec. (g). Pub. L. 86-372 inserted reference to subsecs. (j)
and (k) of section 1710 of this title.
1954--Subsec. (a). Act Aug. 2, 1954, inserted proviso prohibiting
the insurance of mortgages under this section after Aug. 2, 1954, except
pursuant to commitments to insure issued on or before such date.
1953--Subsec. (b)(2). Act June 30, 1953, 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.
1951--Subsec. (b)(2). Act Aug. 3, 1951, permitted more liberal
mortgage insurance for those building low-cost homes to replace their
homes lost in a flood or other major disaster.
Effective Date of 1974 Amendment
Amendment by Pub. L. 93-288 effective Apr. 1, 1974, see section 605
of Pub. L. 93-288, set out as an Effective Date note under section 5121
of Title 42, The Public Health and Welfare.
Effective Date of 1970 Amendment
Amendment by Pub. L. 91-606 effective Dec. 31, 1970, see section 304
of Pub. L. 91-606, set out as a note under section 165 of Title 26,
Internal Revenue Code.
Repayment to Treasury on Capital Account of Title I Insurance Fund
Section 2 of act Mar. 10, 1953, ch. 5, 67 Stat. 5, required Federal
Housing Commissioner prior to June 30, 1954, to pay out of capital
account of Title I Insurance Fund to Secretary of the Treasury amount of
$8,333,313.65 which constituted Government investment in capital account
of Title I Insurance Fund.
Section Referred to in Other Sections
This section is referred to in sections 1706d, 1715f of this title.
