§ 1715z-16. — Adjustable rate single family 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-16]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER II--MORTGAGE INSURANCE
Sec. 1715z-16. Adjustable rate single family mortgages
(a) 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.
(b) Written explanation of mortgage features
The 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 [15 U.S.C. 1601 et
seq.].
(c) 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.
(d) Adjustable rate mortgage with initial fixed rate of interest
(1) The Secretary may insure under this subsection a mortgage that
meets the requirements of subsection (a) of this section, except that
the effective rate of interest--
(A) shall be fixed for a period of not less than the first 3
years of the mortgage term;
(B) shall be adjusted by the mortgagee initially upon the
expiration of such period and annually thereafter; and
(C) in the case of the initial interest rate adjustment, is
subject to the 1 percent limitation only if the interest rate
remained fixed for five or fewer years.
(2) The disclosure required under subsection (b) of this section
shall be required for a mortgage insured under this subsection.
(June 27, 1934, ch. 847, title II, Sec. 251, as added Pub. L. 98-181,
title IV, Sec. 443, Nov. 30, 1983, 97 Stat. 1225; amended Pub. L. 100-
242, title IV, Sec. 415(a), Feb. 5, 1988, 101 Stat. 1907; Pub. L. 107-
73, title II, Sec. 206, Nov. 26, 2001, 115 Stat. 674.)
References in Text
The Truth in Lending Act, referred to in subsec. (b), is title I of
Pub. L. 90-321, May 29, 1968, 82 Stat. 146, as amended, which is
classified generally to subchapter I (Sec. 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 section 1601 of Title 15
and Tables.
Amendments
2001--Subsec. (b). Pub. L. 107-73, Sec. 206(1), 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''.
Subsec. (d). Pub. L. 107-73, Sec. 206(2), added subsec. (d).
1988--Subsec. (c). Pub. L. 100-242 amended subsec. (c) generally.
Prior to amendment, subsec. (c) read as follows: ``The aggregate number
of mortgages and loans insured under this section, section 1715z-10(c)
of this title, 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.''
Section Referred to in Other Sections
This section is referred to in section 1709 of this title; title 38
section 3707.
