§ 1715z-10. — Graduated payment and indexed 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: 12USC1715z-10]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER II--MORTGAGE INSURANCE
Sec. 1715z-10. Graduated payment and indexed mortgages
(a) Criteria; principal obligation limitation; termination date
The Secretary may insure under any provision of this subchapter
mortgages and loans with provisions of varying rates of amortization
corresponding to anticipated variations in family income or with monthly
payments and outstanding balances adjusted by a percentage change in a
selected price index to the extent he determines such mortgages or loans
(1) have promise for expanding housing opportunities or meet special
needs, (2) can be developed to include any safeguards for mortgagors or
purchasers that may be necessary to offset special risks of such
mortgages, and (3) have a potential for acceptance in the private
market. Notwithstanding any other provision of this subchapter, except
as provided in subsections (b) and (c) of this section, the principal
obligation (including all interest to be deferred and added to
principal) of a mortgage insured pursuant to this subsection may not
exceed 97 per centum of the appraised value of the property covered by
the mortgage as of the date the mortgage is accepted for insurance.
(b) Inapplicability of principal obligation limitations
Notwithstanding the provisions of subsection (a) of this section,
the Secretary may insure under any provision of this subchapter a
mortgage or loan which meets the requirements of the first sentence of
subsection (a) of this section and which has provisions for varying
rates of amortization if the Secretary determines--
(1) the mortgagor could not reasonably afford to purchase the
dwelling unit by means of a mortgage insured under subsection (a) of
this section or any other mortgage insurance program under this
subchapter;
(2) the principal obligation of the mortgage or loan initially
does not exceed the percentage of the initial appraised value of the
property specified in section 1709(b) of this title as of the date
the mortgage or loan is accepted for insurance;
(3) the principal obligation of the mortgage or loan thereafter
(including all interest to be deferred and added to principal) will
not at any time be scheduled to exceed 97 per centum of the
projected value of the property; and
(4) the principal obligation of the mortgage thereafter will not
exceed 113 per centum of the initial appraised value of the
property.
Mortgage insurance under this subsection shall be limited to mortgages
executed by mortgagors who, as determined by the Secretary, have not
owned dwelling units within the preceding three years. For the purpose
of this subsection, the projected value of the property shall be
calculated by the Secretary by increasing the initial appraised value of
the property at a rate not in excess of 2\1/2\ per centum per annum. The
number of mortgages which are insured in accordance with this subsection
in any fiscal year may not exceed (A) that number of mortgages the
aggregate initial principal obligation of which equals 10 per centum of
the aggregate amount of the initial principal obligation of all
mortgages secured by properties improved by one- to four-family
residences which are insured under this subchapter during the preceding
fiscal year, or (B) 50,000 mortgages, whichever is greater. No loan or
mortgage may be insured under this subsection after February 5, 1988,
except pursuant to a commitment to insure entered into on or before
February 5, 1988.
(c) Mortgages with monthly adjustments based on selected price index;
priority; regulations; number
Notwithstanding the provisions of subsection (a) of this section,
the Secretary may insure under any provision of this subchapter a
mortgage or loan that meets the requirements of the first sentence of
subsection (a) of this section and that has provisions permitting
adjustment of monthly payments and outstanding principal according to
changes or percentages of changes in a selected price index if the
Secretary determines--
(1) the principal obligation of the mortgage or loan initially
does not exceed the percentage of the initial appraised value of the
property specified in section 1709(b) of this title as of the date
the mortgage or loan is accepted for insurance; and
(2) the monthly payments and principal obligation of the
mortgage or loan thereafter will not at any time be increased at a
rate greater than the percentage change in the price index
stipulated in the initial mortgage or loan contract.
In carrying out this subsection, the Secretary shall give a priority to
mortgages executed by mortgagors who, as determined by the Secretary,
have not owned dwelling units within the preceding 3 years. The
Secretary shall, not later than March 31, 1984, prescribe regulations
establishing guidelines governing mortgages and loans described in this
subsection and shall, to the extent practicable, conduct a demonstration
program to insure mortgages and loans in accordance with this subsection
during fiscal years 1984 and 1985. The aggregate number of mortgages and
loans insured under this subsection and section 1715z-17 of this title
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.
(d) Multifamily housing
(1) The Secretary may insure, under any provision of this subchapter
relating to multifamily housing projects, mortgages and loans with
provisions of varying rates of amortization corresponding to anticipated
variations in project income, to the extent the Secretary determines
such mortgages or loans (A) have promise for expanding housing
opportunities or meet special needs; (B) can be developed to include any
safeguards for mortgagors, tenants, or purchasers that may be necessary
to offset special risks of such mortgages; and (C) have a potential for
acceptance in the private market.
(2) Notwithstanding any other provision of this subchapter, the
principal obligation of a mortgage or loan insured pursuant to this
subsection--
(A) may not exceed initially the percentage of the initial
appraised value or replacement cost of the property involved that is
required by the provision of this subchapter under which such
property is insured; and
(B) thereafter (including all interest to be deferred and added
to principal) may not at any time be scheduled to exceed 100 percent
of the projected value of such property.
(3) For purposes of this subsection, the projected value of a
property shall be calculated by the Secretary by increasing the initial
appraised value of such property at a rate not in excess of 2.5 percent
per annum.
(e) Inapplicability of State constitution, etc., provision limiting
interest or requiring minimum amortization of principal
Any mortgage or loan insured pursuant to this section which contains
or sets forth any graduated mortgage provisions (including but not
limited to provisions for adding deferred interest to principal) which
are authorized under this section and applicable regulations, or which
have been insured on the basis of their being so authorized, shall not
be subject to any State constitution, statute, court decree, common law,
or rule or public policy (1) limiting the amount of interest which may
be charged, taken, received, or reserved, or the manner of calculating
such interest (including but not limited to prohibitions against the
charging of interest on interest), if such constitution, statute, court
decree, common law, or rule would not apply to the mortgage or loan in
the absence of such graduated payment mortgage provisions, or (2)
requiring a minimum amortization of principal under the mortgage or
loan.
(June 27, 1934, ch. 847, title II, Sec. 245, as added Pub. L. 93-383,
title III, Sec. 308, Aug. 22, 1974, 88 Stat. 680; amended Pub. L. 94-
375, Sec. 7, Aug. 3, 1976, 90 Stat. 1071; Pub. L. 95-128, title III,
Secs. 301(g), 310, Oct. 12, 1977, 91 Stat. 1131, 1136; Pub. L. 95-406,
Sec. 1(g), Sept. 30, 1978, 92 Stat. 879; Pub. L. 95-557, title III,
Sec. 301(g), Oct. 31, 1978, 92 Stat. 2096; Pub. L. 95-630, title XV,
Sec. 1503, Nov. 10, 1978, 92 Stat. 3713; Pub. L. 96-71, Sec. 1(g), Sept.
28, 1979, 93 Stat. 501; Pub. L. 96-105, Sec. 1(g), Nov. 8, 1979, 93
Stat. 794; Pub. L. 96-153, title III, Secs. 301(g), 311(b), Dec. 21,
1979, 93 Stat. 1112, 1115; Pub. L. 96-372, Sec. 1(g), Oct. 3, 1980, 94
Stat. 1363; Pub. L. 96-399, title III, Sec. 301(g), Oct. 8, 1980, 94
Stat. 1638; Pub. L. 97-35, title III, Sec. 331(g) Aug. 13, 1981, 95
Stat. 413; Pub. L. 97-289, Sec. 1(g), Oct. 6, 1982, 96 Stat. 1230; Pub.
L. 98-35, Sec. 1(g), May 26, 1983, 97 Stat. 197; Pub. L. 98-109,
Sec. 1(g), Oct. 1, 1983, 97 Stat. 745; Pub. L. 98-181, title IV,
Secs. 401(f), 441, 442, Nov. 30, 1983, 97 Stat. 1208, 1223, 1224; Pub.
L. 99-120, Sec. 1(f), Oct. 8, 1985, 99 Stat. 502; Pub. L. 99-156,
Sec. 1(f), Nov. 15, 1985, 99 Stat. 815; Pub. L. 99-219, Sec. 1(f), Dec.
26, 1985, 99 Stat. 1730; Pub. L. 99-267, Sec. 1(f), Mar. 27, 1986, 100
Stat. 73; Pub. L. 99-272, title III, Sec. 3007(f), Apr. 7, 1986, 100
Stat. 105; Pub. L. 99-289, Sec. 1(b), May 2, 1986, 100 Stat. 412; Pub.
L. 99-345, Sec. 1, June 24, 1986, 100 Stat. 673; Pub. L. 99-430, Sept.
30, 1986, 100 Stat. 986; Pub. L. 100-122, Sec. 1, Sept. 30, 1987, 101
Stat. 793; Pub. L. 100-154, Nov. 5, 1987, 101 Stat. 890; Pub. L. 100-
170, Nov. 17, 1987, 101 Stat. 914; Pub. L. 100-179, Dec. 3, 1987, 101
Stat. 1018; Pub. L. 100-200, Dec. 21, 1987, 101 Stat. 1327; Pub. L. 100-
242, title IV, Secs. 401(a)(4), 408(b), 415(b)(1), Feb. 5, 1988, 101
Stat. 1898, 1903, 1907; Pub. L. 107-326, Sec. 3, Dec. 4, 2002, 116 Stat.
2793.)
Amendments
2002--Subsec. (a). Pub. L. 107-326, Sec. 3(1), struck out before
period at end ``, or if the mortgagor is a veteran and the mortgage is
to be insured in accordance with the provisions of section 1709 of this
title, such higher percentage of appraised value as is provided for
purposes of determining the maximum mortgage amount eligible for
insurance under section 1709(b)(2) of this title in the case of
veterans''.
Subsec. (b)(3). Pub. L. 107-326, Sec. 3(2), struck out ``, or, if
the mortgagor is a veteran, such higher percentage as is provided under
section 1709(b)(2) of this title for veterans,'' after ``97 per
centum''.
1988--Subsec. (a). Pub. L. 100-242, Sec. 401(a)(4), struck out at
end ``A mortgage or loan may not be insured pursuant to this subsection
after March 15, 1988, except pursuant to a commitment entered into prior
to such date.''
Subsec. (b). Pub. L. 100-242, Sec. 408(b), inserted at end ``No loan
or mortgage may be insured under this subsection after February 5, 1988,
except pursuant to a commitment to insure entered into on or before such
date.''
Subsec. (c). Pub. L. 100-242, Sec. 415(b)(1), struck out reference
to section 1715z-16 of this title in last sentence.
1987--Subsec. (a). Pub. L. 100-200 substituted ``March 15, 1988''
for ``December 16, 1987''.
Pub. L. 100-179 substituted ``December 16, 1987'' for ``December 2,
1987''.
Pub. L. 100-170 substituted ``December 2, 1987'' for ``November 15,
1987''.
Pub. L. 100-154 substituted ``November 15, 1987'' for ``October 31,
1987''.
Pub. L. 100-122 substituted ``October 31, 1987'' for ``September 30,
1987''.
1986--Subsec. (a). Pub. L. 99-430 substituted ``September 30, 1987''
for ``September 30, 1986''.
Pub. L. 99-345 substituted ``September 30, 1986'' for ``June 6,
1986''.
Pub. L. 99-289 substituted ``June 6, 1986'' for ``April 30, 1986''.
Pub. L. 99-272 made amendment identical to Pub. L. 99-219. See 1985
Amendment note below.
Pub. L. 99-267 substituted ``April 30, 1986'' for ``March 17,
1986''.
1985--Subsec. (a). Pub. L. 99-219 substituted ``March 17, 1986'' for
``December 15, 1985''.
Pub. L. 99-156 substituted ``December 15, 1985'' for ``November 14,
1985''.
Pub. L. 99-120 substituted ``November 14, 1985'' for ``September 30,
1985''.
1983--Subsec. (a). Pub. L. 98-181, Sec. 441(a), inserted ``or with
monthly payments and outstanding balances adjusted by a percentage
change in a selected price index'' after ``family income'' and
substituted ``subsections (b) and (c) of this section'' for ``subsection
(b) of this section''.
Pub. L. 98-181, Sec. 401(f), substituted ``September 30, 1985'' for
``November 30, 1983''.
Pub. L. 98-109 substituted ``November 30, 1983'' for ``September 30,
1983''.
Pub. L. 98-35 substituted ``September 30, 1983'' for ``May 20,
1983''.
Subsecs. (c) to (e). Pub. L. 98-181, Secs. 441(b), 442, added
subsecs. (c) and (d) and redesignated former subsec. (c) as (e).
1982--Subsec. (a). Pub. L. 97-289 substituted ``May 20, 1983'' for
``September 30, 1982''.
1981--Subsec. (a). Pub. L. 97-35 substituted ``1982'' for ``1981''.
1980--Subsec. (a). Pub. L. 96-399 substituted ``September 30, 1981''
for ``October 15, 1980''.
Pub. L. 96-372 substituted ``October 15, 1980'' for ``September 30,
1980''.
1979--Subsec. (a). Pub. L. 96-153, Secs. 301(g), 311(a)(1)-(4),
designated existing provisions as subsec. (a) and struck out provisions
that mortgages or loans insured pursuant to this section which contained
or set forth graduated mortgage provisions shall not be subject to local
usury laws and laws requiring a minimum amortization of principal or
otherwise relating to amortization of principal under the mortgage or
loan, and substituted ``September 30, 1980'' for ``November 30, 1979''.
Pub. L. 96-105 substituted ``November 30, 1979'' for ``October 31,
1979''.
Pub. L. 96-71 substituted ``October 31, 1979'' for ``September 30,
1979''.
Subsecs. (b), (c). Pub. L. 96-153, Sec. 311(5), added subsecs. (b)
and (c).
1978--Pub. L. 95-630 inserted ``(1)'' before ``limiting the amount
of interest'' and ``, or (2) requiring a minimum amortization of
principal or otherwise relating to the amortization of principal under
the mortgage or loan'' after ``payment mortgage provisions''.
Pub. L. 95-557 substituted ``September 30, 1979'' for ``October 31,
1978''.
Pub. L. 95-406 substituted ``October 31, 1978'' for ``September 30,
1978''.
1977--Pub. L. 95-128 substituted ``September 30, 1978'' for
``September 30, 1977'', struck out ``on an experimental basis'' after
``may insure'', substituted provision respecting limitation of principal
obligation for prior provision respecting limitation of outstanding
aggregate principal amount of mortgages authorized, and made any State
law interest limitation inapplicable to graduated mortgage provisions.
1976--Pub. L. 94-375 substituted ``September 30, 1977'' for ``June
30, 1976''.
Effective Date of 1981 Amendment
Amendment by Pub. L. 97-35 effective Oct. 1, 1981, see section 371
of Pub. L. 97-35, set out as an Effective Date note under section 3701
of this title.
Effective Date of 1978 Amendment
Amendment by Pub. L. 95-630 effective Nov. 10, 1978, see section
1505 of Pub. L. 95-630, set out as a note under section 27 of this
title.
Short Title of 1979 Amendment
For short title of section 311 of Pub. L. 96-153, which amended this
section, as the ``Homeownership Opportunity Act of 1979'', see section
311(a) of Pub. L. 96-153, set out as a note under section 1701 of this
title.
Section Referred to in Other Sections
This section is referred to in sections 1709, 1715n, 1715z, 1715z-
14, 1715z-17 of this title.
