§ 1715z-7. — Mortgage insurance for hospitals.
[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-7]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER II--MORTGAGE INSURANCE
Sec. 1715z-7. Mortgage insurance for hospitals
(a) Purpose
The purpose of this section is to assist the provision of urgently
needed hospitals for the care and treatment of persons who are acutely
ill or who otherwise require medical care and related services of the
kind customarily furnished only (or most effectively) by hospitals. Such
assistance shall be provided regardless of the amount of public
financial or other support a hospital may receive, and the Secretary
shall neither require additional security or collateral to guarantee
such support, nor impose more stringent eligibility or other
requirements on publicly owned or supported hospitals.
(b) Definitions
For the purposes of this section--
(1) the term ``hospital'' means a facility--
(A) which provides community service for inpatient medical
care of the sick or injured (including obstetrical care);
(B) not more than 50 per centum of the total patient days of
which during any year are customarily assignable to the
categories of chronic convalescent and rest, drug and alcoholic,
epileptic, mentally deficient, mental, nervous and mental, and
tuberculosis; and
(C) which is a public facility, proprietary facility, or
facility of a private nonprofit corporation or association,
licensed or regulated by the State (or, if there is no State law
providing for such licensing or regulation by the State, by the
municipality or other political subdivision in which the
facility is located); and
(2) the terms ``mortgage'' and ``mortgagor'' shall have the
meanings respectfully set forth in section 1713(a) of this title.
(c) Authorization to insure; prohibition of premiums on guarantees of
principal and interest under title VII of the Public Health
Service Act
The Secretary is authorized to insure any mortgage (including
advances on such mortgage during construction) in accordance with the
provisions of this section upon such terms and conditions as he may
prescribe and to make commitments for insurance of such mortgage prior
to the date of its execution or disbursement thereon. No mortgage
insurance premium shall be charged with respect to the amount of
principal and interest guaranteed by the Department of Health and Human
Services under title VII of the Public Health Service Act [42 U.S.C. 292
et seq.].
(d) Insurance of mortgages covering new or rehabilitated hospitals,
including equipment; terms and conditions
In order to carry out the purpose of this section, the Secretary is
authorized to insure any mortgage which covers a new or rehabilitated
hospital, including equipment to be used in its operation, subject to
the following conditions:
(1) The mortgage shall be executed by a mortgagor approved by
the Secretary. The Secretary may in his discretion require any such
mortgagor to be regulated or restricted as to charges and methods of
financing, and, in addition thereto, if the mortgagor is a corporate
entity, as to capital structure and rate of return. As an aid to the
regulation or restriction of any mortgagor with respect to any of
the foregoing matters, the Secretary may make such contracts with
and acquire for not to exceed $100 such stock or interest in such
mortgagor as he may deem necessary. Any stock or interest so
purchased shall be paid for out of the General Insurance Fund, and
shall be redeemed by the mortgagor at par upon the termination of
all obligations of the Secretary under the insurance.
(2) The mortgage shall involve a principal obligation in the
amount requested by the mortgagor if such amount does not exceed 90
percent of the estimated replacement cost of the property or project
including--
(A) equipment to be used in the operation of the hospital,
when the proposed improvements are completed and the equipment
is installed; and
(B) a solar energy system (as defined in subparagraph (3) of
the last paragraph of section 1703(a) of this title) or
residential energy conservation measures (as defined in section
8211(11)(A) through (G) and (I) of title 42) \1\ in cases where
the Secretary determines that such measures are in addition to
those required under the minimum property standards and will be
cost-effective over the life of the measure.
---------------------------------------------------------------------------
\1\ See References in Text note below.
(3) The mortgage shall--
(A) provide for complete amortization by periodic payments
within such term as the Secretary shall prescribe; and
(B) bear interest at such rate as may be agreed upon by the
mortgagor and the mortgagee.
(4) The Secretary shall not insure any mortgage under this
section unless he has received, from the State agency designated in
accordance with section 604(a)(1) or section 1521 \1\ of the Public
Health Service Act [42 U.S.C. 291d(a)(1) or 300m] for the State in
which is located the hospital covered by the mortgage, a
certification that (A) there is a need for such hospital, and (B)
there are in force in such State or the political subdivision of the
State in which the proposed hospital would be located reasonable
minimum standards of licensure and methods of operation for
hospitals. No such mortgage shall be insured under this section
unless the Secretary has received such assurance as he may deem
satisfactory from the State agency that such standards will be
applied and enforced with respect to any hospital located in the
State for which mortgage insurance is provided under this section.
If no such State agency exists, or if the State agency exists but is
not empowered to provide a certification that there is a need for
the hospital as set forth in clause (A) of the first sentence, the
Secretary shall not insure any mortgage under this section unless
(A) the State in which the hospital is located has conducted or
commissioned and paid for the preparation of an independent study of
market need and feasibility that (i) is prepared in accordance with
the principles established by the American Institute of Certified
Public Accountants; (ii) assesses, on a marketwide basis, the impact
of the proposed hospital on, and its relationship to, other health
care facilities and services, the percentage of excess beds,
demographic projections, alternative health care delivery systems,
and the reimbursement structure of the hospital; (iii) is addressed
to and is acceptable to the Secretary in form and substance; and
(iv) in the event the State does not prepare the study, is prepared
by a financial consultant selected by the State and approved by the
Secretary; and (B) the State complies with the other provisions of
this paragraph that would otherwise be required to be met by a State
agency designated in accordance with section 604(a)(1) or section
1521 \1\ of the Public Health Service Act. The proposed mortgagor
may reimburse the State for the cost of the independent feasibility
study required in the preceding sentence.
(5) The Secretary shall not insure any mortgage or approve any
modification of an existing mortgage insured pursuant to this
section or section 1715n(f) of this title if such insurance or
modification is to be made in connection with a guarantee, as
authorized pursuant to section 1721 of this title, of a trust
certificate or other security which is exempt from Federal taxation
or which is to be used to collateralize obligations which are so
exempt, except that the Secretary shall not refuse to insure such a
mortgage or approve such a modification solely on the basis that
such insurance or modification is to be made in connection with a
guarantee, as authorized pursuant to section 1721 of this title, of
a trust certificate or other security which is exempt from Federal
taxation or which is to be used to collateralize obligations which
are so exempt if--
(A) a written application for such insurance or modification
submitted at the express direction of the hospital has been
submitted to the appropriate office of the Department of Health
and Human Services prior to March 29, 1979; or
(B) in the case of a nonprofit mortgagor which is seeking
refinancing or modification of an existing mortgage insured
pursuant to this section or section 1715n(f) of this title, the
mortgagor (i) had engaged an investment banker for the purpose
of obtaining such refinancing or modification, or had undertaken
or arranged for the undertaking of a market or feasibility study
with respect to the advisability of obtaining such refinancing
or modification, and had made written notification of its
interest in such refinancing or modification to the Department
of Health and Human Services or the Department of Housing and
Urban Development prior to June 7, 1979; and (ii) receives from
the programs established under titles XVIII [42 U.S.C. 1395 et
seq.] and XIX [42 U.S.C. 1396 et seq.] of the Social Security
Act a percentage of its total revenue which is greater than 125
per centum of the national average for hospitals which derive
revenue from such titles.
This paragraph shall not limit the authority of the Secretary to
approve a mortgage increase on any mortgage eligible for insurance
under this paragraph at any time prior to final endorsement of the
loan for insurance; except that such mortgage increase may not be
approved for the cost of constructing any improvements not included
in the original plans and specifications approved by the Department
of Health and Human Services unless approved by the Secretary of
Housing and Urban Development and by the Secretary of Health and
Human Services.
(6) To the extent that a private nonprofit or public facility
mortgagor is required by the Secretary to provide cash equity in
excess of the amount of the mortgage to complete the project, the
mortgagor shall be entitled, at the option of the mortgagee, to fund
the excess with a letter of credit. In such event, mortgage proceeds
may be advanced to the mortgagor prior to any demand being made on
the letter of credit.
(e) Release of part of property or project from lien
The Secretary may consent to the release of a part or parts of the
mortgaged property or project from the lien of any mortgage insured
under this section upon such terms and conditions as he may prescribe.
(f) Encouragement of programs undertaking responsibility to provide
comprehensive health care; immediate processing of applications
for public hospitals
The activities and functions provided for in this section shall be
carried out by the agencies involved so as to encourage programs that
undertake responsibility to provide comprehensive health care, including
outpatient and preventive care, as well as hospitalization, to a defined
population, and, in the case of public hospitals, to encourage programs
that are undertaken to provide essential health care services to all
residents of a community regardless of ability to pay. The Secretary
shall begin immediately to process applications of public facilities for
mortgage insurance under this section in accordance with regulations,
guidelines, and procedures applicable to facilities of private nonprofit
corporations and associations.
(g) Insurance of mortgages providing permanent financing or refinancing
of existing mortgage indebtedness; aggregate principal balance
of mortgages
(1) Notwithstanding any of the other provisions of this subchapter,
the Secretary may insure under this section a mortgage which provides
permanent financing or refinancing of existing mortgage indebtedness in
the case of a hospital whose permanent financing is presently lacking,
if the construction of such hospital was completed between January 1,
1966, and August 1, 1968.
(2) The aggregate principal balance of all mortgages insured under
paragraph (1) and outstanding at any one time shall not exceed
$20,000,000.
(h) Applicability of other laws
The provisions of subsections (d), (e), (g), (h), (i), (j), (k),
(l), and (n) of section 1713 of this title shall apply to mortgages
insured under this section and all references therein to section 1713 of
this title shall be deemed to refer to this section.
(June 27, 1934, ch. 847, title II, Sec. 242, as added Pub. L. 90-448,
title XV, Sec. 1501, Aug. 1, 1968, 82 Stat. 599; amended Pub. L. 91-609,
title I, Secs. 109, 110(a), Dec. 31, 1970, 84 Stat. 1772; Pub. L. 93-
383, title III, Sec. 304(i), Aug. 22, 1974, 88 Stat. 678; Pub. L. 95-
128, title III, Sec. 308, Oct. 12, 1977, 91 Stat. 1135; Pub. L. 96-88,
title V, Sec. 509(b), Oct. 17, 1979, 93 Stat. 695; Pub. L. 96-153, title
III, Sec. 315, Dec. 21, 1979, 93 Stat. 1117; Pub. L. 96-399, title III,
Sec. 310(h), Oct. 8, 1980, 94 Stat. 1643; Pub. L. 97-35, title III,
Sec. 339H, Aug. 13, 1981, 95 Stat. 418; Pub. L. 98-181, title IV,
Secs. 404(b)(15), 436, Nov. 30, 1983, 97 Stat. 1210, 1222; Pub. L. 98-
479, title II, Secs. 201(a)(1), 204(a)(13), Oct. 17, 1984, 98 Stat.
2227, 2232; Pub. L. 100-242, title IV, Secs. 411(a), 412(a)-(d), Feb. 5,
1988, 101 Stat. 1905, 1906.)
References in Text
The Public Health Service Act, referred to in subsec. (c), is act
July 1, 1944, ch. 373, 58 Stat. 682, as amended. Title VII of the Act
was added by act July 30, 1956, ch. 779, Sec. 2, 70 Stat. 717, and is
classified generally to subchapter V (Sec. 292 et seq.) of chapter 6A of
Title 42, The Public Health and Welfare. For complete classification of
this Act to the Code, see Short Title note set out under section 201 of
Title 42 and Tables.
Section 8211 of title 42, referred to in subsec. (d)(2)(B), was
omitted from the Code pursuant to section 8229 of Title 42, The Public
Health and Welfare, which terminated authority under that section on
June 30, 1989.
Section 1521 of the Public Health Service Act, referred to in
subsec. (d)(4), is section 1521 of act July 1, 1944, which was
classified to section 300m of Title 42, The Public Health and Welfare,
prior to repeal, effective Jan. 1, 1987, by Pub. L. 99-660, title VII,
Sec. 701(a), Nov. 14, 1986, 100 Stat. 3799.
The Social Security Act, referred to in subsec. (d)(5), is act Aug.
14, 1935, ch. 531, 49 Stat. 620, as amended. Titles XVIII and XIX of the
Act are classified generally to subchapters XVIII (Sec. 1395 et seq.)
and XIX (Sec. 1396 et seq.) of chapter 7 of Title 42, The Public Health
and Welfare. For complete classification of this Act to the Code, see
section 1305 of Title 42 and Tables.
Amendments
1988--Subsec. (a). Pub. L. 100-242, Sec. 412(a), inserted at end
``Such assistance shall be provided regardless of the amount of public
financial or other support a hospital may receive, and the Secretary
shall neither require additional security or collateral to guarantee
such support, nor impose more stringent eligibility or other
requirements on publicly owned or supported hospitals.''
Subsec. (d)(2). Pub. L. 100-242, Sec. 412(b), substituted ``The
mortgage shall involve a principal obligation in the amount requested by
the mortgagor if such amount does not exceed 90 percent of the estimated
replacement cost of the property or project including'' for ``The
mortgage shall involve a principal obligation in an amount not to exceed
90 per centum of the estimated replacement cost of the property or
project including''.
Subsec. (d)(4). Pub. L. 100-242, Sec. 411(a), inserted provisions at
end relating to authority of Secretary to insure a mortgage under this
section covering new or rehabilitated hospitals, including equipment, in
cases where no State agency exists, or where such agency does exist but
is not empowered to provide a certification for the need of such
hospital as required under this section.
Subsec. (d)(6). Pub. L. 100-242, Sec. 412(c), added par. (6).
Subsec. (f). Pub. L. 100-242, Sec. 412(d), inserted at end ``The
Secretary shall begin immediately to process applications of public
facilities for mortgage insurance under this section in accordance with
regulations, guidelines, and procedures applicable to facilities of
private nonprofit corporations and associations.''
1984--Subsec. (c). Pub. L. 98-479, Sec. 201(a)(1), substituted
``Health and Human Services'' for ``Health, Education, and Welfare''.
Subsec. (d)(3)(A). Pub. L. 98-479, Sec. 204(a)(13), substituted a
semicolon for the comma at end.
1983--Subsec. (b)(1)(C). Pub. L. 98-181, Sec. 436(1), inserted
``public facility,'' after ``which is a''.
Subsec. (d)(3)(B). Pub. L. 98-181, Sec. 404(b)(15), 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 the mortgage market.
Subsec. (f). Pub. L. 98-181, Sec. 436(2), inserted ``, and in the
case of public hospitals, to encourage programs that are undertaken to
provide essential health care services to all residents of a community
regardless of ability to pay'' after ``defined population''.
1981--Subsec. (d)(5). Pub. L. 97-35 inserted provisions respecting
limitation on authority of the Secretary to approve mortgage increases
on eligible mortgages.
1980--Subsec. (d)(2). Pub. L. 96-399 revised existing provisions
into introductory paragraph and subpar. (A) and added subpar. (B).
1979--Subsec. (d)(5). Pub. L. 96-153 added par. (5).
1977--Subsec. (c). Pub. L. 95-128, Sec. 308(b), prohibited charging
any mortgage insurance premium with respect to the amount of principal
and interest guaranteed by the Department of Health, Education, and
Welfare under title VII of the Public Health Service Act.
Subsec. (d)(4). Pub. L. 95-128, Sec. 308(a), inserted reference to
section 1521.
1974--Subsec. (d)(2). Pub. L. 93-383 struck out ``not to exceed
$50,000,000, and'' after ``an amount''.
1970--Subsec. (b)(1)(C). Pub. L. 91-609, Sec. 110(a), substituted as
definition of ``hospital'' a facility ``which is a proprietary facility,
or facility of a private nonprofit corporation or association, licensed
or regulated by the State (or, if there is no State law providing for
such licensing or regulation by the State, by the municipality or other
political subdivision in which the facility is located)'' for ``prior
definition as a facility which is owned and operated by one or more
nonprofit corporations or associations no part of the net earnings of
which inures, or may lawfully inure, to the benefit of any private
shareholder or individual''.
Subsec. (d)(2). Pub. L. 91-609, Sec. 109, increased limitation on
amount of mortgage from $25,000,000 to $50,000,000.
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.
Change of Name
``Department of Health and Human Services'' substituted for
``Department of Health, Education, and Welfare'' in subsec. (d)(5)(A),
(B) pursuant to section 509(b) of Pub. L. 96-88, which is classified to
section 3508(b) of Title 20, Education.
Regulations
Section 411(b) of Pub. L. 100-242 directed Secretary of Housing and
Urban Development to issue regulations to carry out amendment of this
section by not later than expiration of 90-day period following Feb. 5,
1988.
Secretary of Housing and Urban Development directed to issue
regulations implementing amendments to this section by section 436 of
Pub. L. 98-181, not later than Oct. 31, 1984, see section 104(f) of Pub.
L. 98-479, set out as a note under section 1715b of this title.
Section Referred to in Other Sections
This section is referred to in sections 1715c, 1715n, 1735f-19 of
this title; title 42 section 4822.
