§ 1738. — Insurance of 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: 12USC1738]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER VI--WAR HOUSING INSURANCE
Sec. 1738. Insurance of mortgages
(a) Relief of housing shortage; eligibility; limitations on time and
amount
In order to assist in relieving the acute shortage of housing which
now exists and to increase the supply of housing accommodations
available to veterans of World War II at prices within their reasonable
ability to pay, the Secretary is authorized, upon application by the
mortgagee, to insure as hereinafter provided any mortgage which is
eligible for insurance as hereinafter provided, and, upon such terms as
the Secretary may prescribe, to make commitments for the insuring of
such mortgages prior to the date of their execution or disbursement
thereon: Provided, That the aggregate amount of principal obligations of
all mortgages insured under this subchapter shall not exceed
$6,150,000,000 except that with the approval of the President such
aggregate amount may be increased to not to exceed $6,650,000,000:
Provided further, That no mortgage shall be insured under this section
after April 30, 1948, except (A) pursuant to a commitment to insure
issued on or before April 30, 1948, or (B) a mortgage given to refinance
an existing mortgage insured under this section and which does not
exceed the original principal amount and unexpired term of such existing
mortgage, and no mortgage shall be insured under section 1743 of this
title after March 1, 1950, except (i) pursuant to a commitment to insure
issued on or before March 1, 1950, or (ii) a mortgage given to refinance
an existing mortgage insured under section 1743 of this title and which
does not exceed the original principal amount and unexpired term of such
existing mortgage: Provided further, That no mortgage shall be insured
under section 1743 of this title unless the mortgagor certifies under
oath that in selecting tenants for the property covered by the mortgage
he will not discriminate against any family by reason of the fact that
there are children in the family, and that he will not sell the property
while the insurance is in effect unless the purchaser so certifies, such
certifications to be filed with the Secretary; and violation of any such
certification shall be a misdemeanor punishable by a fine of not to
exceed $500: And provided further, That the Secretary shall, in his
discretion, have power to require the availability for rental purposes
of properties covered by mortgages insured under this subchapter, in
such instances and for such periods of time as he may prescribe.
Notwithstanding the first proviso of this subsection, mortgages may
be insured under sections 1744 and 1746 of this title if the aggregate
amounts of principal obligations of mortgages insured under said
sections plus the aggregate amount of principal obligations of mortgages
insured under section 1745 of this title do not exceed the limitation
contained in said section 1745 upon the aggregate amount of principal
obligations of mortgages insured pursuant to said section.
Notwithstanding the second proviso of this subsection, mortgages
otherwise eligible for insurance under section 1743 of this title may be
hereafter insured thereunder if the application for such insurance was
received by the Department of Housing and Urban Development on or before
March 1, 1950, and for such purpose the aggregate amount of principal
obligations authorized to be insured under section 1743 of this title is
increased by not to exceed $500,000,000.
(b) Eligibility requirements
To be eligible for insurance under this section a mortgage shall--
(1) have been made to, and be held by, a mortgagee approved by
the Secretary as responsible and able to service the mortgage
properly;
(2) involve a principal obligation (including such initial
service charges, appraisal, inspection, and other fees as the
Secretary shall approve) in an amount not to exceed 90 per centum of
the Secretary's estimate of the value (as of the date the mortgage
is accepted for insurance), except that as to applications received
by the Secretary on or before March 31, 1948, the mortgage may
involve a principal obligation in an amount not to exceed 90 per
centum of the Secretary's estimate of the necessary current cost
(including the land and such initial service charges and such
appraisal, inspection, and other fees as the Secretary shall
approve); of a property, urban, suburban, or rural, upon which there
is located a dwelling designed principally for residential use for
not more than four families in the aggregate, which is approved for
mortgage insurance prior to the beginning of construction. The
principal obligation of such mortgage shall in no event, however,
exceed--
(A) $5,400 if such dwelling is designed for a single-family
residence, or
(B) $7,500 if such dwelling is designed for a two-family
residence, or
(C) $9,500 if such dwelling is designed for a three-family
residence, or
(D) $12,000 if such dwelling is designed for a four-family
residence:
Provided, That the Secretary may, if he finds that at any time or in
any particular geographical area it is not feasible, within such
limitations of maximum mortgage amounts, to construct dwellings
without sacrifice of sound standards of construction, design, or
livability, prescribe by regulation or otherwise higher maximum
mortgage amounts not to exceed--
(A) $8,100 if such dwelling is designed for a single-family
residence, or
(B) $12,500 if such dwelling is designed for a two-family
residence, or
(C) $15,750 if such dwelling is designed for a three-family
residence, or
(D) $18,000 if such dwelling is designed for a four-family
residence.
(3) have a maturity satisfactory to the Secretary but not to
exceed twenty-five years from the date of the insurance of the
mortgage;
(4) contain complete amortization provisions satisfactory to the
Secretary;
(5) bear interest (exclusive of premium charges for insurance)
at not to exceed 4 per centum per annum on the amount of the
principal obligation outstanding at any time;
(6) provide, in a manner satisfactory to the Secretary, for the
application of the mortgagor's periodic payments (exclusive of the
amount allocated to interest and to the premium charge which is
required for mortgage insurance as herein provided) to amortization
of the principal of the mortgage; and
(7) contain such terms and provisions with respect to insurance,
repairs, alterations, payment of taxes, default reserves,
delinquency charges, foreclosure proceedings, anticipation of
maturity, additional and secondary liens, and other matters as the
Secretary may in his discretion prescribe.
(c) Premium charges; payments; acceptance for insurance; preferences;
adjustments and refunds
The Secretary is authorized to fix a premium charge for the
insurance of mortgages under this subchapter but in the case of any
mortgage such charge shall not be less than an amount equivalent to one-
half of 1 per centum per annum nor more than an amount equivalent to
1\1/2\ per centum per annum of the amount of the principal obligation of
the mortgage outstanding at any time, without taking into account
delinquent payments or prepayments. Such premium charges shall be
payable by the mortgagee, either in cash, or in debentures issued by the
Secretary under this subchapter at par plus accrued interest, in such
manner as may be prescribed by the Secretary: Provided, That the
Secretary may require the payment of one or more such premium charges at
the time the mortgage is insured, at such discount rate as he may
prescribe not in excess of the interest rate specified in the mortgage.
If the Secretary finds, upon the presentation of a mortgage for
insurance and the tender of the initial premium charge and such other
charges as the Secretary may require, that the mortgage complies with
the provisions of this subchapter, such mortgage may be accepted for
insurance by endorsement or otherwise as the Secretary may prescribe;
but no mortgage shall be accepted for insurance under this subchapter
unless the Secretary finds that the project with respect to which the
mortgage is executed is an acceptable risk in view of the shortage of
housing referred to in this section. In the event that the principal
obligation of any mortgage accepted for insurance under this subchapter
is paid in full prior to the maturity date, the Secretary is further
authorized in his discretion to require the payment by the mortgagee of
an adjusted premium charge in such amount as the Secretary determines to
be equitable, but not in excess of the aggregate amount of the premium
charges that the mortgagee would otherwise have been required to pay if
the mortgage had continued to be insured under this subchapter until
such maturity date; and in the event that the principal obligation is
paid in full as herein set forth, the Secretary is authorized to refund
to the mortgagee for the account of the mortgagor all, or such portion
as he shall determine to be equitable, of the current unearned premium
charges theretofore paid. The Secretary shall prescribe such procedures
as in his judgment are necessary to secure to veterans of World War II,
and their immediate families, and to hardship cases as defined by the
Secretary, preference or priority of opportunity to purchase or rent
properties covered by mortgages insured under this subchapter.
(d) Conclusiveness of insurance contract as to eligibility
Any contract of insurance heretofore or hereafter executed by the
Secretary under this subchapter shall be conclusive evidence of the
eligibility of the mortgage for insurance, and the validity of any
contract of insurance so executed shall be incontestable in the hands of
an approved mortgagee from the date of the execution of such contract,
except for fraud or misrepresentation on the part of such approved
mortgagee.
(June 27, 1934, ch. 847, title VI, Sec. 603, as added Mar. 28, 1941, ch.
31, Sec. 1, 55 Stat. 56; amended Sept. 2, 1941, ch. 410, 55, Stat. 686;
May 26, 1942, ch. 319, Secs. 1-4, 14(b), 56 Stat. 301, 305; Mar. 23,
1943, ch. 21, Sec. 1, 57 Stat. 42; Oct. 15, 1943, ch. 259, Sec. 1, 57
Stat. 571; June 30, 1944, ch. 334, 58 Stat. 648; Mar. 31, 1945, ch. 48,
Sec. 1, 59 Stat. 47; May 22, 1946, ch. 268, Sec. 10(a)-(d), 60 Stat.
212, 213; June 30, 1947, ch. 163, title I, Sec. 2, 61 Stat. 193; Aug. 5,
1947, ch. 495, Sec. 1, 61 Stat. 777; Dec. 27, 1947, ch. 525, Sec. 1, 61
Stat. 945; Mar. 31, 1948, ch. 165, Sec. 1(a)-(c), 62 Stat. 101; Aug. 10,
1948, ch. 832, title I, Sec. 101(a), (k)(2), 62 Stat. 1268, 1273; Mar.
30, 1949, ch. 42, title III, Sec. 304, 63 Stat. 29; July 15, 1949, ch.
338, title II, Sec. 201(3), 63 Stat. 421; Aug. 30, 1949, ch. 524, 63
Stat. 681; Oct. 25, 1949, ch. 729, Sec. 1(4), 63 Stat. 905; Apr. 20,
1950, ch. 94, title I, Secs. 119, 122, 64 Stat. 57, 59; Pub. L. 90-19,
Sec. 1(a)(1), (3), (4), (n), May 25, 1967, 81 Stat. 17, 19.)
Amendments
1967--Pub. L. 90-19, Sec. 1(a)(3), substituted ``Secretary'' for
``Commissioner'' wherever appearing in subsecs. (a), (b)(1), (2),
(b)(2)(D), (b)(3), (4), (6), (7), (c), and (d).
Subsec. (a). Pub. L. 90-19, Sec. 1(a)(1), (n), substituted
``Department of Housing and Urban Development'' for ``Federal Housing
Administration'' and ``by'' for ``in any field office of'' after
``received'', in third par., respectively.
Subsec. (b)(2). Pub. L. 90-19, Sec. 1(a)(4), substituted
``Secretary's'' for ``Commissioner's'' wherever appearing.
1950--Act Apr. 20, 1950, Sec. 122, substituted ``Commissioner'' for
``Administrator'' wherever appearing.
Subsec. (a). Act Apr. 20, 1950, Sec. 119, added last two pars.
1949--Subsec. (a). Joint Res. Oct. 25, 1949, substituted
``$6,150,000,000'' for ``$5,750,000,000'' and ``$6,650,000,000'' for
``$6,150,000,000'' in first proviso, and extended section to ``March 1,
1950'' by substituting the same for ``October 31, 1949'' in second
proviso.
Act Aug. 30, 1949, extended section from ``August 31, 1949'' to
``October 31, 1949''.
Act July 15, 1949, extended section from ``June 30, 1949'' to
``August 31, 1949''.
Act Mar. 30, 1949, extended section from ``March 30, 1949'' to
``June 30, 1949''.
1948--Subsec. (a). Act Aug. 10, 1948, struck out ``$5,350,000,000''
and inserted in lieu thereof ``$5,750,000,000 except that with the
approval of the President such aggregate amount may be increased to not
to exceed $6,150,000,000'', and struck out the second proviso and
inserted in lieu thereof the present second proviso.
Act Mar. 31, 1948, increased the insurance authorization from
$4,950,000,000 to $5,350,000,000, and provided for an extension from
Mar. 31, 1948, to Apr. 30, 1948.
Subsec. (b)(2). Act Mar. 31, 1948, changed the emergency necessary
current-cost formula to the appraised- value formula.
Subsec. (c). Act Aug. 10, 1948, struck out of next to last sentence
``and a mortgage on the same property is accepted for insurance at the
time of such payment''.
1947--Subsec. (a). Act Dec. 27, 1947, increased the mortgage
obligation from $4,000,000,000 to $4,450,000,000, and increased the
amount of obligation from $4,200,000,000 to $4,950,000,000 with the
President's approval.
Act Aug. 5, 1947, increased mortgage obligation from $2,800,000,000
to $4,000,000,000 and the amount of obligation from $3,800,000,000 to
$4,200,000,000 with the President's approval.
Act June 30, 1947, extended limitation dates in second proviso from
June 30, 1947, to Mar. 31, 1948.
1946--Subsec. (a). Act May 22, 1946, amended provisions generally,
and among other changes, increased the mortgage obligation from
$1,800,000,000 to $2,800,000,000, and extended the limitation date from
July 1, 1946, to June 30, 1947.
Subsec. (b)(2). Act May 22, 1946, amended provisions generally, and
among other changes, inserted proviso.
Subsec. (b)(5). Act May 22, 1946, lowered interest rate from 5 to 4
per centum and struck out provision allowing Administrator to increase
the rate in certain cases.
Subsec. (c). Act May 22, 1946, substituted ``shortage of housing''
for ``emergency'' in third sentence and amended last sentence.
1945--Subsec. (a). Act Mar. 31, 1945, increased the limit of
obligations from $1,700,000,000 to $1,800,000,000 and extended the
limitation date from 1945 to 1946.
1944--Subsec. (a). Act June 30, 1944, substituted ``$1,700,000,000''
for ``$1,600,000,000'' and inserted the provision contained in cl. (B).
1943--Subsec. (a). Act Oct. 15, 1943, substituted ``$1,600,000,000''
for ``$1,200,000,000'' and ``July 1, 1945'' for ``July 1, 1944''.
Act Mar. 23, 1943, substituted ``$1,200,000,000'' for
``$800,000,000'' and ``July 1, 1944'' for ``July 1, 1943''.
1942--Act May 21, 1942, Sec. 14(b), substituted ``War'' and ``war''
for ``Defense'' and ``defense'' wherever occurring.
Subsec. (a). Act May 26, 1942, Sec. 1, substituted ``$800,000,000''
for ``$300,000,000'', among other changes.
Subsec. (b)(2). Act May 26, 1942, Sec. 2, increased limitations on
amount of obligations.
Subsec. (b)(3). Act May 26, 1942, Sec. 3, substituted ``twenty-
five'' for ``twenty''.
Subsec. (c). Act May 26, 1942, Sec. 4, amended subsec. (c).
1941--Subsec. (a). Act Sept. 2, 1941, substituted ``$300,000,000''
for ``$100,000,000''.
Effective Date of 1949 Amendment
Amendment by act July 15, 1949, effective June 30, 1949, see section
202 of that act, set out as a note under section 1703 of this title.
Inflation Safeguards
Section 2 of act Dec. 27, 1947, provided: ``Title VI of the National
Housing Act, as amended [this subchapter], shall be employed to assist
in maintaining a high volume of new residential construction without
supporting unnecessary or artificial costs. In estimating necessary
current cost for the purposes of said title, the Federal Housing
Commissioner shall therefore use every feasible means to assure that
such estimates will approximate as closely as possible the actual costs
of efficient building operations.''
Section Referred to in Other Sections
This section is referred to in sections 1739, 1743, 1744, 1745 of
this title; title 5 sections 551, 701.
