§ 1715z-6. — Supplemental loans for multifamily projects.
[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-6]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER II--MORTGAGE INSURANCE
Sec. 1715z-6. Supplemental loans for multifamily projects
(a) Authorization to insure; ``supplemental loan'' defined
With respect to a multifamily project, hospital, or group practice
facility covered by a mortgage insured under any section or subchapter
of this chapter or covered by a mortgage held by the Secretary, the
Secretary is authorized, upon such terms and conditions as he may
prescribe, to make commitments to insure, and to insure, supplemental
loans (including advances during construction or improvement) made by
financial institutions approved by the Secretary. As used in this
section, ``supplemental loan'' means a loan, advance of credit, or
purchase of an obligation representing a loan or advance of credit made
for the purpose of financing improvements or additions to such project,
hospital, or facility: Provided, That a loan involving a nursing home,
hospital, or a group practice facility may also be made for the purpose
of financing equipment to be used in the operation of such nursing home,
hospital, or facility.
(b) Eligibility for insurance
To be eligible for insurance under this section, a supplemental loan
shall--
(1) be limited to 90 per centum of the amount which the
Secretary estimates will be the value of such improvements,
additions, and equipment, except that such amount when added to the
outstanding balance of the mortgage covering the project or
facility, shall not exceed the maximum mortgage amount insurable
under the section or subchapter pursuant to which the mortgage
covering such project or facility is insured or an amount acceptable
to the Secretary;
(2) have a maturity satisfactory to the Secretary;
(3) bear interest at such rate as may be agreed upon by the
borrower and the financial institution;
(4) be secured in such manner as the Secretary may require;
(5) be governed by the labor standards provisions of section
1715c of this title that are applicable to the section or subchapter
pursuant to which the mortgage covering the project or facility is
insured or pursuant to which the original mortgage covering the
project or facility was insured; and
(6) contain such other terms, conditions, and restrictions as
the Secretary may prescribe.
(c) Applicability of other provisions of law
The provisions of subsections (d), (e), (g), (h), (i), (j), (k),
(l), and (n) of section 1713 of this title shall be applicable to loans
insured under this section, except that (1) all references to the term
``mortgage'' shall be construed to refer to the term ``loan'' as used in
this section, (2) loans involving projects covered by a mortgage insured
under section 1715e of this title that is the obligation of the
Cooperative Management Housing Insurance Fund shall be insured under and
shall be the obligation of such fund, and (3) loans involving projects
covered by a mortgage insured under section 1715z-1 of this title shall
be insured under and shall be the obligation of the Special Risk
Insurance Fund.
(d) Authorization to insure loans for improvements or additions; terms
and conditions; limitation on amount
Notwithstanding the foregoing, the Secretary may insure a loan for
improvements or additions to a multifamily housing project, or a group
practice or medical practice facility or hospital or other health
facility approved by the Secretary, which is not covered by a mortgage
insured under this chapter, if he finds that such a loan would assist in
preserving, expanding, or improving housing opportunities, or in
providing protection against fire or other hazards. Such loans shall
have a maturity satisfactory to the Secretary and shall meet such other
conditions as the Secretary may prescribe. In no event shall such a loan
be insured if it is for an amount in excess of the maximum amount which
could be approved if the outstanding indebtedness, if any, covering the
property were a mortgage insured under this chapter. At any sale under
foreclosure of a mortgage on a project or facility which is not insured
under this chapter but which is senior to a loan assigned to the
Secretary pursuant to subsection (c) of this section, the Secretary is
authorized to bid, in addition to amounts authorized under section
1713(k) of this title, any sum up to but not in excess of the total
unpaid indebtedness secured by such senior mortgage, plus taxes,
insurance, foreclosure costs, fees, and other expenses. In the event
that, pursuant to subsection (c) of this section, the Secretary acquires
title to, or is assigned, a loan covering a project or facility which is
subject to a mortgage which is not insured under this chapter, the
Secretary is authorized to make payments from the General Insurance Fund
on the debt secured by such mortgage, and to take such other steps as
the Secretary may deem appropriate to preserve or protect the
Secretary's interest in the project or facility.
(e) Loan insurance for energy conserving improvements and solar energy
systems
(1) Notwithstanding any other provision of this section, the
Secretary may insure a loan for purchasing and installing energy
conserving improvements (as defined in subparagraph (2) of the last
paragraph of section 1703(a) of this title), for purchasing and
installing a solar energy system (as defined in subparagraph (3) of the
last paragraph of section 1703(a) of this title), and for purchasing or
installing (or both) individual utility meters in a multifamily housing
project if such meters are purchased or installed in connection with
other energy conserving improvements or with a solar energy system or
the project meets minimum standards of energy conservation established
by the Secretary, without regard to whether the project is covered by a
mortgage under this chapter.
(2) Notwithstanding the provisions of subsection (b) of this
section, a loan insured under this subsection shall--
(A) not exceed an amount which the Secretary determines is
necessary for the purchase and installation of individual utility
meters plus an amount which the Secretary deems appropriate taking
into account amounts which will be saved in operation costs over the
period of repayment of the loan by reducing the energy requirements
of the project as a result of the installation of energy conserving
improvements or a solar energy system therein;
(B) be insured for 90 percent of any loss incurred by the person
holding the note for the loan; except that, for cooperative
multifamily projects receiving assistance under section 1715z-1 of
this title or financed with a below market interest rate mortgage
insured under section 1715l(d)(3) of this title, 100 percent of any
such loss may be insured;
(C) bear an interest rate not to exceed an amount which the
Secretary determines, after consulting with the Secretary of Energy,
to be necessary to meet market demands;
(D) have a maturity satisfactory to the Secretary;
(E) be insured pursuant to a premium rate established on a sound
actuarial basis to the extent practicable;
(F) be secured in such manner as the Secretary may require;
(G) be an acceptable risk in that energy conservation or solar
energy benefits to be derived outweigh the risks of possible loss to
the Federal Government; and
(H) contain such other terms, conditions, and restrictions as
the Secretary may prescribe.
(3) The provisions of subsection (c) of this section shall apply to
loans insured under this subsection.
(4) The Secretary shall provide that any person obligated on the
note for any loan insured under this section be regulated or restricted,
until the termination of all obligations of the Secretary under the
insurance, by the Secretary as to rents or sales, charges, capital
structure, rate of return, and methods of operations of the multifamily
project to such an extent and in such manner as to provide reasonable
rentals to tenants and a reasonable return on the investment.
(f) Repealed. Pub. L. 104-204, title II, Sept. 26, 1996, 110 Stat. 2885
(g) Extension of rental assistance for term of loan
(1) When underwriting a rehabilitation loan under this section in
connection with eligible multifamily housing, the Secretary may assume
that any rental assistance provided for purposes of servicing the
additional debt will be extended for the term of the rehabilitation
loan. The Secretary shall exercise prudent underwriting practices in
insuring rehabilitation loans under this section. For purposes of this
subsection, the term ``eligible multifamily housing'' means any housing
financed by a loan or mortgage that is--
(A) insured or held by the Secretary under section 1715l(d)(3)
of this title and assisted under section 1701s of this title or
section 1437f of title 42;
(B) insured or held by the Secretary and bears interest at a
rate determined under the proviso of section 1715l(d)(5) of this
title; or
(C) insured, assisted or held by the Secretary under section
1715z-1 of this title.
(2) A mortgagee approved by the Secretary may not withhold consent
to a rehabilitation loan insured in connection with eligible multifamily
housing on which that mortgagee holds a mortgage.
(June 27, 1934, ch. 847, title II, Sec. 241, as added Pub. L. 90-448,
title III, Sec. 307, Aug. 1, 1968, 82 Stat. 508; amended Pub. L. 91-609,
title I, Sec. 111, Dec. 31, 1970, 84 Stat. 1772; Pub. L. 93-383, title
III, Sec. 313, Aug. 22, 1974, 88 Stat. 684; Pub. L. 94-375, Sec. 5, Aug.
3, 1976, 90 Stat. 1070; Pub. L. 95-557, title III, Sec. 311(b), Oct. 31,
1978, 92 Stat. 2098; Pub. L. 95-619, title II, Sec. 247, Nov. 9, 1978,
92 Stat. 3234; Pub. L. 96-153, title III, Sec. 319, Dec. 21, 1979, 93
Stat. 1119; Pub. L. 96-399, title III, Sec. 314, Oct. 8, 1980, 94 Stat.
1645; Pub. L. 98-181, title IV, Sec. 404(b)(14), Nov. 30, 1983, 97 Stat.
1210; Pub. L. 98-479, title II, Sec. 204(a)(11), (12), Oct. 17, 1984, 98
Stat. 2232; Pub. L. 100-242, title II, Sec. 231, title IV, Sec. 429(c),
Feb. 5, 1988, 101 Stat. 1884, 1918; Pub. L. 101-235, title II,
Secs. 203(c), (d), 204(b), Dec. 15, 1989, 103 Stat. 2038, 2039; Pub. L.
101-625, title VI, Sec. 602(a), Nov. 28, 1990, 104 Stat. 4275; Pub. L.
102-550, title III, Secs. 316(a), (b), 317(c), Oct. 28, 1992, 106 Stat.
3771, 3772; Pub. L. 104-204, title II, Sept. 26, 1996, 110 Stat. 2885.)
Amendments
1996--Subsec. (f). Pub. L. 104-204 struck out subsec. (f), which
related to insurance for second mortgage financing.
1992--Subsec. (f)(2)(B)(i). Pub. L. 102-550, Sec. 316(a)(1),
inserted ``the amount of rehabilitation costs required by the plan of
action and related charges and'' after ``equal to''.
Subsec. (f)(2)(B)(ii). Pub. L. 102-550, Sec. 317(c)(1), struck out
``and'' at end.
Subsec. (f)(3)(B). Pub. L. 102-550, Sec. 316(a)(2), inserted ``and
the amount of rehabilitation costs required by the plan of action and
related charges and'' after ``1990''.
Subsec. (f)(5)(A). Pub. L. 102-550, Sec. 316(a)(3)(B), added subpar.
(A) and struck out former subpar. (A) which read as follows: ``have a
maturity and provisions for amortization satisfactory to the Secretary,
bear interest at such rate as may be agreed upon by the mortgagor and
mortgagee, and be secured in such manner as the Secretary may require;
and''.
Subsec. (f)(5)(B), (C). Pub. L. 102-550, Sec. 316(a)(3), added
subpar. (B) and redesignated former subpar. (B) as (C).
Subsec. (f)(6). Pub. L. 102-550, Sec. 317(c)(2), which directed the
substitution of ``acquisition loan'' for ``acquisiton loan'' in par.
(7), was executed by making the substitution in par. (6) to reflect the
probable intent of Congress and the intervening redesignation of par.
(7) as (6) by Pub. L. 102-550, Sec. 316(a)(5). See below.
Pub. L. 102-550, Sec. 316(a)(4), (5), redesignated par. (7) as (6)
and struck out former par. (6) which read as follows: ``The Secretary
may provide for combination of loans insured under subsection (d) of
this section with equity and acquisition loans insured under this
subsection.''
Subsec. (f)(7) to (9). Pub. L. 102-550, Sec. 316(a)(5), redesignated
pars. (7) to (9) as (6) to (8), respectively.
Subsec. (f)(10). Pub. L. 102-550, Sec. 316(b), added par. (10).
1990--Subsec. (f). Pub. L. 101-625 amended subsec. (f) generally,
substituting present provisions for provisions relating to insurance of
``equity loans'' under the Emergency Low Income Housing Preservation Act
of 1987, providing for eligibility for such insurance, providing that a
qualified nonprofit organization or limited equity tenant cooperative
corporation may constitute an owner of housing for purposes of receiving
an insured loan, providing for applicability of certain provisions of
section 1713 of this title, and providing that an approved mortgagee may
not withhold consent to an equity loan on property on which mortgagee
holds a mortgage.
1989--Subsec. (f)(2). Pub. L. 101-235, Sec. 203(c)(1), inserted at
end ``When underwriting an equity loan under this subsection, the
Secretary may assume that the rental assistance provided in accordance
with an approved plan of action under section 225(b) of the Emergency
Low Income Housing Preservation Act of 1987 will be extended for the
full term of the contract entered into under section 225(c) of that Act.
The Secretary may accelerate repayment of a loan under this section in
the event rental assistance is not extended under section 225(c) of that
Act or the Secretary is unable to develop a revised package of
incentives to the owner comparable to those received under the original
approved plan of action.''
Subsec. (f)(3). Pub. L. 101-235, Sec. 203(c)(2), inserted ``public
entity,'' after ``A''.
Subsec. (f)(6). Pub. L. 101-235, Sec. 203(d), added par. (6).
Subsec. (g). Pub. L. 101-235, Sec. 204(b), added subsec. (g).
1988--Subsec. (b)(3). Pub. L. 100-242, Sec. 429(c), substituted
``borrower and the financial institution'' for ``mortgagor and the
mortgagee''.
Subsec. (f). Pub. L. 100-242, Sec. 231, added subsec. (f).
1984--Subsec. (a). Pub. L. 98-479, Sec. 204(a)(11), substituted ``to
make'' for ``to made''.
Subsec. (b)(1). Pub. L. 98-479, Sec. 204(a)(12), substituted ``or
facility'' for ``of facility'' before ``is insured''.
1983--Subsec. (b)(3). Pub. L. 98-181 substituted provision that the
interest rate be such a rate as agreed upon by the mortgagor and the
mortgagee for provision that the interest rate, exclusive of premium
charges for insurance and service charges, not exceed such per centum
per annum, not in excess of 6 per centum, on the amount of the principal
obligation outstanding at any time, as the Secretary finds necessary to
meet market conditions.
1980--Subsec. (e)(1). Pub. L. 96-399 inserted provisions respecting
requirements for purchase or installation in connection with other
energy conserving improvements, etc.
1979--Subsec. (b)(2). Pub. L. 96-153 struck out ``but not to exceed
the remaining term of the mortgage'' after ``the Secretary''.
1978--Subsec. (d). Pub. L. 95-557 inserted provision relating to the
amounts the Secretary is authorized to bid at any sale under foreclosure
of a mortgage on a project or facility which is not insured under this
chapter but which is senior to a loan assigned to the Secretary pursuant
to subsection (c), and such other steps the Secretary is authorized to
take to preserve or protect his interest in the project or facility.
Subsec. (e). Pub. L. 95-619 added subsec. (e).
1976--Subsec. (a). Pub. L. 94-375 inserted ``, hospital,'' after
``multifamily project'', ``additions to such project'', ``involving a
nursing home'', and ``of such nursing home''.
1974--Subsec. (d). Pub. L. 93-383 added subsec. (d).
1970--Subsec. (a). Pub. L. 91-609, Sec. 111(1), (2), inserted in
first sentence ``or covered by a mortgage held by the Secretary'' after
``this chapter'' and substituted in proviso ``a nursing home or a group
practice facility'' for ``a nursing home covered by a mortgage insured
under section 1715w of this title or a loan involving a group practice
facility covered by a mortgage insured under subchapter IX-B of this
chapter'', respectively.
Subsec. (b)(1). Pub. L. 91-609, Sec. 111(3), inserted ``or an amount
acceptable to the Secretary'' before semicolon at end.
Subsec. (b)(5). Pub. L. 91-609, Sec. 111(4), inserted ``or pursuant
to which the original mortgage covering the project or facility was
insured'' before semicolon at end.
Effective Date of 1988 Amendment
Amendment by section 231 of Pub. L. 100-242 applicable to any
project that is eligible low income housing on or after Nov. 1, 1987,
see section 235 of Pub. L. 100-242.
Regulations
Section 316(c) of Pub. L. 102-550 directed Secretary, not later than
the expiration of 45-day period beginning on Oct. 28, 1992, to issue
regulations implementing subsec. (f)(1) of this section and provided
that such regulations are not subject to requirements of 5 U.S.C. 553.
Insurance for Second Mortgage Financing Not To Be Offered as Incentive
Under LIHPRHA and ELIHPA
Insurance for second mortgage financing provided under former
subsec. (f) of this section not to be offered as incentive under the
Low-Income Housing Preservation and Resident Homeownership Act of 1990
(12 U.S.C. 4101 et seq.) and the Emergency Low Income Housing
Preservation Act of 1987 (Pub. L. 100-242, title II, Feb. 5, 1988, 101
Stat. 1877, as amended), see title II in part of Pub. L. 104-204, set
out as a Low-Income Housing Preservation note under section 4101 of this
title.
Delegation of Processing of Mortgage Insurance
Secretary of Housing and Urban Development to implement system of
mortgage insurance for mortgages insured under this section that
delegates processing functions to selected approved mortgagees, with
Secretary to retain authority to approve rents, expenses, property
appraisals, and mortgage amounts and to execute firm commitments, see
section 328 of Pub. L. 101-625, set out as a note under section 1713 of
this title.
Section Referred to in Other Sections
This section is referred to in sections 4109, 4110, 4112, 4119 of
this title; title 42 section 4822.
