§ 1715z-9. — Coinsurance of eligible mortgage, advance, or loan.
[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-9]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER II--MORTGAGE INSURANCE
Sec. 1715z-9. Co-insurance of eligible mortgage, advance, or
loan
(a) Authority of Secretary; request of mortgagee; premium charges;
provisions of contract of co-insurance; non-applicability of
state insurance laws
In addition to providing insurance as otherwise authorized under
this chapter, and notwithstanding any other provision of this chapter
inconsistent with this section, the Secretary, upon request of any
mortgagee and for such mortgage insurance premium as he may prescribe
(which premium, or other charges to be paid by the mortgagor, shall not
exceed the premium, or other charges, that would otherwise be
applicable), may insure and make a commitment to insure under any
provision of this subchapter any mortgage, advance, or loan otherwise
eligible under such provision, pursuant to a co-insurance contract
providing that the mortgagee will--
(1) assume a percentage of any loss on the insured mortgage,
advance, or loan in direct proportion to the amount of the co-
insurance, which co-insurance shall not be less than 10 per centum,
subject to any reasonable limit or limits on the liability of the
mortgagee that may be specified in the event of unusual or
catastrophic losses that may be incurred by any one mortgagee; and
(2) carry out (under a delegation or otherwise and with or
without compensation but subject to audit, exception, or review
requirements) such credit approval, appraisal, inspection,
commitment, property disposition, or other functions as the
Secretary, pursuant to regulations, shall approve as consistent with
the purposes of this chapter.
Any contract of co-insurance under this section shall contain such
provisions relating to the sharing of premiums on a sound actuarial
basis, establishment of mortgage reserves, manner of calculating
insurance benefits, conditions with respect to foreclosure, handling and
disposition of property prior to claim or settlement, rights of
assignees (which may elect not to be subject to the loss sharing
provisions), and other similar matters as the Secretary may prescribe
pursuant to regulations. A mortgagee which enters into a contract of co-
insurance under this section shall not by reason of such contract, or
its adherence to such contract or applicable regulations of the
Secretary, including provisions relating to the retention of risks in
the event of sale or assignment of a mortgage, be made subject to any
State law regulating the business of insurance.
(b) Inspection of construction of dwellings or projects as prerequisite;
minimum standards or criteria applicable
No insurance shall be granted pursuant to this section with respect
to dwellings or projects approved for insurance prior to the beginning
of construction unless the inspection of such construction is conducted
in accordance with at least the minimum standards and criteria used with
respect to dwellings or projects approved for mortgage insurance
pursuant to other provisions of this subchapter.
(c) Repealed. Pub. L. 100-242, title IV, Sec. 414(a), Feb. 5, 1988, 101
Stat. 1907
(d) Repealed. Pub. L. 100-242, title IV, Sec. 401(a)(3), Feb. 5, 1988,
101 Stat. 1898
(e) Availability unaffecting insurance otherwise authorized; criteria
for exercise of authority by Secretary
The Secretary shall not withdraw, deny, or delay insurance otherwise
authorized under any other provision of this chapter by reason of the
availability of insurance pursuant to this section. The Secretary shall
exercise his authority under this section only to the extent that he
finds that the continued exercise of such authority will not adversely
affect the flow of mortgage credit to older and declining neighborhoods
and to the purchasers of older and lower cost housing.
(f) Multifamily housing project; contract provisions; aggregate
principal amount of all mortgages insured; loans on defaulted
mortgages; insurance for state assisted projects and projects
under construction; definitions; amount of reserves
(1) Where the mortgage covers a multifamily housing project, the co-
insurance contract may provide that the mortgagee assume (i) the full
amount of any loss on the insured mortgage up to an amount equal to a
fixed percentage of the outstanding principal balance of the mortgage at
the time of claim for insurance benefits, or (ii) the full amount of any
losses on insured mortgages in a portfolio of mortgages approved by the
Secretary up to an amount equal to a fixed percentage of the outstanding
principal balance of all mortgages in such portfolio at the time of
claim for insurance benefits on a mortgage in the portfolio, plus a
share of any loss in excess of the amount under clause (i) or (ii),
whichever is applicable.
(2) The Secretary may make loans, from the applicable insurance
fund, to public housing agencies in connection with mortgages which have
been insured pursuant to this subsection and which are in default.
(3) The Secretary may insure and make a commitment to insure in
connection with a co-insurance contract pursuant to this subsection (A)
a mortgage on a project assisted under the second proviso in the fist
sentence of section 1715z-1(b) of this title, and (B) a mortgage or
advance on a mortgage made to a public housing agency on a project under
construction which is not approved for insurance prior to construction.
(4) As used in this subsection, the term ``public housing agency''
has the meaning given such term in section 1437a(b)(6) of title 42.
(5) Notwithstanding any other provision of this chapter, the
Secretary may include in the determination of replacement cost of a
project to be covered by a mortgage made to a public housing agency and
insured pursuant to this subsection, such reserves and development
costs, not to exceed 5 per centum of the amount otherwise allowable, as
may be established or authorized by the public housing agency consistent
with such agency's procedures and underwriting standards.
(g) Redesignated (f)
(h) Acceptable co-insurance provisions for rental rehabilitation;
termination date
Notwithstanding any other provision of this section, in the case of
a mortgage insured under section 1715n(f) of this title secured by
property which is to be rehabilitated or developed under section 1437o
\1\ of title 42, such co-insurance may include provisions that--
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\1\ See References in Text note below.
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(1) insurance benefits shall equal the sum of (A) 90 per centum
of the mortgage on the date of institution of foreclosure
proceedings (or on the date of acquisition of the property otherwise
after default), and (B) 90 per centum of interest arrears on the
date benefits are paid;
(2) the mortgagee shall remit to the Secretary, for credit to
the General Insurance Fund, 90 per centum of any proceeds of the
property, including sale proceeds, net of the mortgagee's actual and
reasonable costs related to the property and the enforcement of
security;
(3) payment of such benefits shall be made in cash unless the
mortgagee submits a written request for debenture payment; and
(4) the underwriter of co-insurance may reinsure 10 per centum
of the mortgage amount with a private mortgage insurance company or
with a State mortgage insurance agency.
(i) \2\ Authority of mortgagee to assign its interest in any note or
mortgage subject to a contract of co-insurance; terms and
conditions respecting retention of co-insurance risk of such
note or mortgage
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\2\ So in original. Two subsecs. (i) have been enacted.
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Any mortgagee which enters into a contract of co-insurance under
this section shall have the authority to assign its interest in any note
or mortgage subject to a contract of co-insurance to a warehouse bank or
other financial institution which provides interim funding for a loan
co-insured under this section, and to retain the co-insurance risk of
such note or mortgage, upon such terms and conditions as the Secretary
shall prescribe.
(i) \2\ Annual review of, and assessment of compliance with,
requirements; report; adjustment of requirements
The Secretary shall, by January 15 and July 15 of each year (1)
review the adequacy of capital and other requirements for mortgagees
under this section, (2) assess the compliance by mortgagees with such
requirements, and (3) make such adjustment to such requirements as the
Secretary, after providing opportunity for hearing, determines to be
appropriate to improve the long-term financial soundness of the Federal
Housing Administration funds. Such requirements shall include the
minimum capital or net worth of mortgagees; the ratio that mortgagees
shall maintain between the mortgagee's capital and the volume of
mortgages co-insured by such mortgagee; and such other requirements as
the Secretary determines to be appropriate to ensure the long-term
financial soundness of the Federal Housing Administration funds. The
Secretary shall submit to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Banking, Finance and Urban
Affairs of the House of Representatives a report on the review and
assessment under the previous sentence, and an explanation of the
Secretary's reasons for making any adjustment in requirements authorized
under this section.
(June 27, 1934, ch. 847, title II, Sec. 244, as added Pub. L. 93-383,
title III, Sec. 307, Aug. 22, 1974, 88 Stat. 679; amended Pub. L. 94-
375, Sec. 6, Aug. 3, 1976, 90 Stat. 1070; Pub. L. 95-60, Sec. 1(d), June
30, 1977, 91 Stat. 257; Pub. L. 95-80, Sec. 1(d), July 31, 1977, 91
Stat. 339; Pub. L. 95-128, title III, Sec. 301(f), Oct. 12, 1977, 91
Stat. 1131; Pub. L. 95-406, Sec. 1(f), Sept. 30, 1978, 92 Stat. 879;
Pub. L. 95-557, title III, Sec. 301(f), Oct. 31, 1978, 92 Stat. 2096;
Pub. L. 96-71, Sec. 1(f), Sept. 28, 1979, 93 Stat. 501; Pub. L. 96-105,
Sec. 1(f), Nov. 8, 1979, 93 Stat. 794; Pub. L. 96-153, title III,
Sec. 301(f), Dec. 21, 1979, 93 Stat. 1111; Pub. L. 96-372, Sec. 1(f),
Oct. 3, 1980, 94 Stat. 1363; Pub. L. 96-399, title III, Sec. 301(f),
Oct. 8, 1980, 94 Stat. 1638; Pub. L. 96-470, title I, Sec. 107(a), Oct.
19, 1980, 94 Stat. 2238; Pub. L. 97-35, title III, Sec. 331(f), Aug. 13,
1981, 95 Stat. 413; Pub. L. 97-289, Sec. 1(f), Oct. 6, 1982, 96 Stat.
1230; Pub. L. 98-35, Sec. 1(f), May 26, 1983, 97 Stat. 197; Pub. L. 98-
109, Sec. 1(f), Oct. 1, 1983, 97 Stat. 745; Pub. L. 98-181, title III,
Sec. 303(a), title IV, Secs. 401(e), 434, Nov. 30, 1983, 97 Stat. 1206,
1207, 1222; Pub. L. 98-479, title I, Sec. 104(a)(5), Oct. 17, 1984, 98
Stat. 2225; Pub. L. 99-120, Sec. 1(e), Oct. 8, 1985, 99 Stat. 502; Pub.
L. 99-156, Sec. 1(e), Nov. 15, 1985, 99 Stat. 815; Pub. L. 99-219,
Sec. 1(e), Dec. 26, 1985, 99 Stat. 1730; Pub. L. 99-267, Sec. 1(e), Mar.
27, 1986, 100 Stat. 73; Pub. L. 99-272, title III, Sec. 3007(e), 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)(3), 414, 429(g), Feb. 5, 1988, 101 Stat.
1898, 1907, 1919; Pub. L. 101-235, title I, Sec. 139(a), Dec. 15, 1989,
103 Stat. 2029.)
References in Text
Section 1437o of title 42, referred to in subsec. (h), was repealed
by Pub. L. 101-625, title II, Sec. 289(b), Nov. 28, 1990, 104 Stat.
4128.
Amendments
1989--Subsec. (i). Pub. L. 101-235 added subsec. (i) relating to
annual review of, and assessment of compliance with, requirements.
1988--Subsec. (c). Pub. L. 100-242, Sec. 414(a), struck out subsec.
(c) which read as follows: ``No insurance shall be granted pursuant to
this section unless the Secretary has, after due consultation with the
mortgage lending industry, determined that the demonstration program of
co-insurance authorized by this section will not disrupt the mortgage
market or reduce the availability of mortgage credit to borrowers who
depend upon mortgage insurance provided under this chapter.''
Subsec. (d). Pub. L. 100-242, Sec. 401(a)(3), struck out subsec. (d)
which read as follows: ``No mortgage, advance, or loan shall be insured
pursuant to this section after March 15, 1988, except pursuant to a
commitment to insure made before that date.''
Subsec. (f). Pub. L. 100-242, Sec. 429(g)(1), which directed that
subsec. (g) be amended by striking out par. (2) which read: ``The second
sentence of subsection (d) of this section shall not apply to mortgages
made to public housing agencies, but for purposes of such second
sentence such mortgages shall not be counted in the aggregate principal
amount of all mortgages insured under this subchapter.'', and by
redesignating former pars. (3) to (6) as (2) to (5), was executed to
subsec. (f) to reflect the probable intent of Congress, because of the
prior redesignation of subsec. (g) as (f) by Pub. L. 96-470,
Sec. 107(a).
Subsec. (h). Pub. L. 100-242, Secs. 414(b)(1), 429(g)(2), made
identical amendments, substituting ``co-insurance'' for ``coinsurance''
in introductory provision and par. (4).
Pub. L. 100-242, Sec. 401(a)(3), struck out at end ``No commitment
for insurance pursuant to this subsection may be issued after March 15,
1988.''
Subsec. (i). Pub. L. 100-242, Sec. 414(b)(2), added subsec. (i).
1987--Subsecs. (d), (h). 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--Subsecs. (d), (h). 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. (d). Pub. L. 99-219, Sec. 1(e)(1), substituted ``March
17, 1986'' for ``December 15, 1985''.
Pub. L. 99-156, Sec. 1(e)(1), substituted ``December 15, 1985'' for
``November 14, 1985''.
Pub. L. 99-120, Sec. 1(e)(1), substituted ``November 14, 1985'' for
``September 30, 1985''.
Subsec. (h). Pub. L. 99-219, Sec. 1(e)(2), substituted ``after March
17, 1986'' for ``on or after December 16, 1985''.
Pub. L. 99-156, Sec. 1(e)(2), substituted ``December 16, 1985'' for
``November 15, 1985''.
Pub. L. 99-120, Sec. 1(e)(2), substituted ``November 15, 1985'' for
``October 1, 1985''.
1984--Subsec. (d). Pub. L. 98-479 amended subsec. (d) generally,
thereby striking out last sentence which provided: ``The aggregate
principal amount of mortgages and loans insured pursuant to this section
in any fiscal year beginning on or after July 1, 1974, and ending prior
to October 1, 1985, shall not exceed 20 per centum of the aggregate
principal amount of all mortgages and loans insured under this
subchapter during such fiscal year.''
1983--Subsec. (d). Pub. L. 98-181, Sec. 401(e)(3), which directed
that last two sentences of subsec. (d) be struck out was executed by
striking out last sentence which provided that the overall percentage
limitation specified in the preceding sentence also apply separately
within each of the categories of mortgages and loans covering one- to
four-family dwellings and mortgages and loans covering projects with
five or more dwelling units, as the probable intent of Congress, in view
of the amendment to the next to last sentence by section 401(e)(2) of
Pub. L. 98-181.
Pub. L. 98-181, Sec. 401(e)(1), (2), substituted ``September 30,
1985'' for ``November 30, 1983'' and ``October 1, 1985'' for ``December
1, 1983''.
Pub. L. 98-109 substituted ``November 30, 1983'' for ``September 30,
1983'' and ``December 1, 1983'' for ``October 1, 1983''.
Pub. L. 98-35 substituted ``September 30, 1983'' for ``May 20,
1983'' and ``October 1, 1983'' for ``May 21, 1983''.
Subsec. (f)(1). Pub. L. 98-181, Sec. 434(1), struck out ``the
mortgagee is a public housing agency or an insured depository
institution and'' after ``Where''. Notwithstanding the directory
language that amendment be made to subsec. (g)(1), the amendment was
executed to subsec. (f)(1) to reflect the probable intent of Congress
and the intervening redesignation of subsec. (g) as (f) by Pub. L. 96-
470.
Subsec. (f)(5). Pub. L. 98-181, Sec. 434(2), substituted reference
to section 1437a(b)(6) of title 42 for reference to section 1437a(6) of
title 42 and struck out provision which defined the term ``insured
depository institution'' as any savings bank, savings and loan
association, commercial bank or other such depository institution whose
deposits are insured by the Federal Deposit Insurance Corporation, by
the Federal Savings and Loan Insurance Corporation, or by an agency or
instrumentality of a State. Notwithstanding the directory language that
amendment be made to subsec. (g)(5), the amendment was executed to
subsec. (f)(5) to reflect the probable intent of Congress and the
intervening redesignation of subsec. (g) as (f) by Pub. L. 96-470.
Subsec. (h). Pub. L. 98-181, Sec. 303(a), added subsec. (h).
1982--Subsec. (d). Pub. L. 97-289 substituted ``May 20, 1983'' and
``May 21, 1983'' for ``September 30, 1982'' and ``October 1, 1982'',
respectively.
1981--Subsec. (d). Pub. L. 97-35 substituted ``1982'' for ``1981''
in two places.
1980--Subsec. (d). Pub. L. 96-399 substituted ``September 30, 1981''
and ``October 1, 1981'' for ``October 15, 1980'' and ``October 16,
1980'', respectively.
Pub. L. 96-372 substituted ``October 15, 1980'' and ``October 16,
1980'' for ``September 30, 1980'' and ``October 1, 1980'', respectively.
Subsecs. (f), (g). Pub. L. 96-470 struck out subsec. (f) and
redesignated subsec. (g) as (f).
1979--Subsec. (d). Pub. L. 96-153 substituted ``September 30, 1980''
for ``November 30, 1979'' and ``October 1, 1980'' for ``December 1,
1979''.
Pub. L. 96-105 substituted ``November 30, 1979'' and ``December 1,
1979'' for ``October 31, 1979'' and ``November 1, 1979'', respectively.
Pub. L. 96-71 substituted ``October 31, 1979'' and ``November 1,
1979'' for ``September 30, 1979'' and ``October 1, 1979'', respectively.
1978--Subsec. (d). Pub. L. 95-557 substituted ``September 30, 1979''
for ``October 31, 1978'' and ``October 1, 1979'' for ``November 1,
1978''.
Pub. L. 95-406 substituted ``October 31, 1978'' for ``September 30,
1978'' and ``November 1, 1978'' for ``October 1, 1978''.
1977--Subsec. (d). Pub. L. 95-128 substituted ``September 30, 1978''
for ``September 30, 1977'' and ``October 1, 1978'' for ``October 1,
1977''.
Pub. L. 95-80 substituted ``September 30, 1977'' for ``July 31,
1977''.
Pub. L. 95-60 substituted ``July 31, 1977'' for ``June 30, 1977''.
1976--Subsec. (a). Pub. L. 94-375, Sec. 6(b), inserted, in text
following par. (2), a provision excluding a mortgagee which enters into
a contract under this section from regulation by state insurance laws.
Subsec. (g). Pub. L. 94-375, Sec. 6(a), added subsec. (g).
Change of Name
Committee on Banking, Finance and Urban Affairs of House of
Representatives treated as referring to Committee on Banking and
Financial Services of House of Representatives by section 1(a) of Pub.
L. 104-14, set out as a note preceding section 21 of Title 2, The
Congress. Committee on Banking and Financial Services of House of
Representatives abolished and replaced by Committee on Financial
Services of House of Representatives, and jurisdiction over matters
relating to securities and exchanges and insurance generally transferred
from Committee on Energy and Commerce of House of Representatives by
House Resolution No. 5, One Hundred Seventh Congress, Jan. 3, 2001.
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.
Section Referred to in Other Sections
This section is referred to in title 42 section 1437f.
