§ 1743. — 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: 12USC1743]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER VI--WAR HOUSING INSURANCE
Sec. 1743. Insurance of mortgages
(a) Additional authorization; advances during construction
In addition to mortgages insured under section 1738 of this title,
the Secretary is authorized to insure mortgages as defined in section
1736 of this title (including advances on such mortgages during
construction) which are eligible for insurance as hereinafter provided.
(b) Eligibility requirements
To be eligible for insurance under this section a mortgage shall
meet the following conditions:
(1) The mortgaged property shall be held by a mortgagor approved
by the Secretary. The Secretary may, in his discretion, require such
mortgagor to be regulated or restricted as to rents or sales,
charges, capital structure, rate of return, and methods of
operation. The Secretary may make such contracts with, and acquire
for not to exceed $100 stock or interest in any such mortgagor, as
the Secretary may deem necessary to render effective such
restriction or regulation. Such stock or interest 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) Preference or priority of opportunity in the occupancy of
the mortgaged property for veterans of World War II and their
immediate families, and for hardship cases as defined by the
Secretary, shall be provided under such regulations and procedures
as may be prescribed by the Secretary.
(3) The mortgage shall involve a principal obligation in an
amount--
(A) not to exceed $5,000,000; and
(B) not to exceed 90 per centum of the amount which the
Secretary estimates will be the necessary current cost of the
completed property or project, including the land; the proposed
physical improvements; utilities within the boundaries of the
property or project; architects' fees; taxes and interest
accruing during construction; and other miscellaneous charges
incidental to construction and approved by the Secretary:
Provided, That such mortgage shall not in any event exceed the
amount which the Secretary estimates will be the cost of the
completed physical improvements on the property or project,
exclusive of off-site public utilities and streets, and
organization and legal expenses: And provided further, That the
principal obligation of the mortgage shall not, in any event,
exceed 90 per centum of the Secretary's estimate of the
replacement cost of the property or project on the basis of the
costs prevailing on December 31, 1947, for properties or
projects of comparable quality in the locality where such
property or project is to be located; and
(C) not to exceed $8,100 per family unit for such part of
such property or project as may be attributable to dwelling use.
The mortgage shall provide for complete amortization by periodic payment
within such term as the Secretary shall prescribe, and shall bear
interest (exclusive of premium charges for insurance) at not to exceed
4\1/2\ per centum per annum on the amount of the principal obligation
outstanding at any time. The Secretary may consent to the release of a
part or parts of the mortgaged property from the lien of the mortgage
upon such terms and conditions as he may prescribe and the mortgage may
provide for such release.
(c) Payments; default; insurance benefits for mortgagee; value of
mortgage; foreclosure of mortgage
The failure of the mortgagor to make any payment due under or
provided to be paid by the terms of a mortgage insured under this
section shall be considered a default under such mortgage, and if such
default continues for a period of thirty days, the mortgagee shall be
entitled to receive the benefits of the insurance as hereinafter
provided, upon assignment, transfer, and delivery to the Secretary,
within a period and in accordance with rules and regulations to be
prescribed by the Secretary of (1) all rights and interests arising
under the mortgage so in default; (2) all claims of the mortgagee
against the mortgagors or others, arising out of the mortgage
transaction; (3) all policies of title or other insurance or surety
bonds or other guaranties and any and all claims thereunder; (4) any
balance of the mortgage loan not advanced to the mortgagor; (5) any cash
or property held by the mortgagee, or to which it is entitled, as
deposits made for the account of the mortgagor and which have not been
applied in reduction of the principal of the mortgage indebtedness; and
(6) all records, documents, books, papers, and accounts relating to the
mortgage transaction. Upon such assignment, transfer, and delivery the
obligation of the mortgagee to pay the premium charges for mortgage
insurance shall cease, and the Secretary shall, subject to the cash
adjustment provided for in section 1739(c) of this title, issue to the
mortgagee debentures having a total face value equal to the value of the
mortgage, and a certificate of claim as hereinafter provided. For the
purposes of this subsection, the value of the mortgage shall be
determined in accordance with rules and regulations prescribed by the
Secretary, by adding to the amount of the original principal obligation
of the mortgage which was unpaid on the date of default, the amount the
mortgagee may have paid for (A) taxes, special assessments, and water
rates, which are liens prior to the mortgage; (B) insurance on the
property; and (C) reasonable expenses for the completion and
preservation of the property and any mortgage insurance premiums paid
after default; less the sum of (i) an amount equivalent to 1 per centum
of the unpaid amount of such principal obligation on the date of
default; (ii) any amount received on account of the mortgage after such
date; and (iii) any net income received by the mortgagee from the
property after such date: Provided, That the mortgagee in the event of a
default under the mortgage may, at its option and in accordance with
regulations of, and in a period to be determined by the Secretary,
proceed to foreclose on and obtain possession of or otherwise acquire
such property from the mortgagor after default, and receive the benefits
of the insurance as herein provided, upon (1) the prompt conveyance to
the Secretary of title to the property which meets the requirements of
the rules and regulations of the Secretary in force at the time the
mortgage was insured, and which is evidenced in the manner prescribed by
such rules and regulations; and (2) the assignment to him of all claims
of the mortgagee against the mortgagor or others, arising out of the
mortgage transaction or foreclosure proceedings, except such claims that
may have been released with the consent of the Secretary. Upon such
conveyance and assignment, the obligation of the mortgagee to pay the
premium charges for insurance shall cease and the mortgagee shall be
entitled to receive the benefits of the insurance as provided in this
subsection, except that in such event the 1 per centum deduction, set
out in (i) hereof, shall not apply.
(d) Certificates of claim; amount
The certificate of claim issued by the Secretary to any mortgagee in
connection with the insurance of mortgages under this section shall be
for an amount determined in accordance with subsections (e) and (f) of
section 1739 of this title, except that any amount remaining after the
payment of the full amount under the certificate of claim shall be
retained by the Secretary and credited to the General Insurance Fund.
(e) Debentures; date of issuance; interest
Debentures issued under this section shall be issued in accordance
with the provisions of section 1739 (d) of this title except that such
debentures shall be dated as of the date of default as determined in
subsection (c) of this section, and shall bear interest from such date.
(f) Applicability of other provisions
The provisions of section 1713(k) of this title shall be applicable
to mortgages insured under this section, except that, as applied to such
mortgages, the reference therein to subsection (g) shall be construed to
refer to subsection (c) of this section.
(g) Mortgages in connection with sale of property under subchapter I,
II, VIII, or X of this chapter
The Secretary shall also have power to insure under this subchapter
or subchapter I, II, VIII, or X of this chapter any mortgage executed in
connection with the sale by him of any property acquired under any of
such subchapters without regard to limitations upon eligibility, time,
or aggregate amount contained therein.
(June 27, 1934, ch. 847, title VI, Sec. 608, as added May 26, 1942, ch.
319, Sec. 11, 56 Stat. 303; amended Mar. 31, 1945, ch. 48, Sec. 2, 59
Stat. 47; May 22, 1946, ch. 268, Sec. 10(f), (g), 60 Stat. 214; Aug. 10,
1948, ch. 832, title I, Sec. 101(b), (c), 62 Stat. 1269; Apr. 20, 1950,
ch. 94, title I, Sec. 122, 64 Stat. 59; Sept. 1, 1951, ch. 378, title
II, Sec. 206, 65 Stat. 303; Pub. L. 89-117, title XI, Sec. 1108(q), Aug.
10, 1965, 79 Stat. 506; Pub. L. 90-19, Sec. 1(a)(3), (4), May 25, 1967,
81 Stat. 17.)
References in Text
The General Insurance Fund, referred to in subsecs. (b) and (d), was
established by section 1735c of this title.
Amendments
1967--Pub. L. 90-19, Sec. 1(a)(3), substituted ``Secretary'' for
``Commissioner'' wherever appearing in subsecs. (a), (b)(1), (2),
(3)(B), following (C), (c), (d), and (g).
Subsec. (b)(3)(B). Pub. L. 90-19, Sec. 1(a)(4), substituted
``Secretary's'' for ``Commissioner's''.
1965--Subsecs. (b)(1), (d). Pub. L. 89-117, Sec. 1108(q)(1),
substituted ``General Insurance Fund'' for ``War Housing Insurance
Fund''.
Subsec. (f). Pub. L. 89-117, Sec. 1108(q)(2), struck out provisions
that, as applied to mortgages insured under this section, all references
in section 1713(k) of this title to the ``Housing Fund'' shall be
construed to refer to the ``War Housing Insurance Fund''.
1951--Subsec. (g). Act Sept. 1, 1951, inserted references to
subchapters I, VIII and X of this chapter.
1950--Act Apr. 20, 1950, substituted ``Commissioner'' for
``Administrator'' wherever appearing.
1948--Subsec. (b). Act Aug. 10, 1948, inserted second proviso in
par. (3)(B), substituted ``$8,100 per family unit'' for ``$1,500 per
room'' and struck out proviso relating to authority to increase
``$1,500'' to ``$1,800'' per room.
1946--Subsec. (b)(2). Act May 22, 1946, substituted ``Preference or
priority of opportunity in the occupancy of the mortgaged property for
veterans of World War II and their immediate families, and for hardship
cases as defined by the Administrator, shall be provided under such
regulations and procedures as may be prescribed by the Administrator''
for ``The mortgaged property shall be designed for rent for residential
use by warworkers''.
Subsec. (b)(3). Act May 22, 1946, substituted ``necessary current
cost'' after ``estimates will be the'' for ``reasonable replacement
cost'' in par. (B), and increased mortgage per room from $1,350 to
$1,500 and inserted proviso in par. (C).
Subsec. (c). Act May 22, 1946, inserted ``and any mortgage insurance
premiums paid after default'' before semicolon in cl. (C) of third
sentence.
1945--Subsec. (g). Act Mar. 31, 1945, inserted provisions empowering
Commissioner to insure mortgages without regard to any limitations upon
time or aggregate amount contained in this subchapter.
Construction of Act May 26, 1942, With Ex. Ord. No. 9070, Consolidating
National Housing Agency
Section 12 of act May 26, 1942, provided that nothing contained in
act May 26, 1942 [amending this subchapter] shall be construed to
supersede or be inconsistent with the provisions of Ex. Ord. No. 9070,
Feb. 24, 1942.
Section Referred to in Other Sections
This section is referred to in sections 1715c, 1731b, 1738, 1745,
1746, 1750g, 3702 of this title; title 5 sections 551, 701; title 42
section 1594a.
