12 U.S.C. § 1750b — Insurance in critical areas

Page 846 TITLE 12—BANKS AND BANKING § 1750 Section 1749bbb–15, act June 27, 1934, ch. 847, title XII, § 1245, formerly § 1235, as added Pub. L. 90–448, title XI, § 1103, Aug. 1, 1968, 82 Stat. 565; amended Pub. L. 91–152, title IV, § 407, Dec. 24, 1969, 83 Stat. 396; renumbered § 1245, Pub. L. 91–609, title VI, § 602(d), Dec. 31, 1970, 84 Stat. 1789; amended Pub. L. 98–181, title I [title IV, § 452(b)(1)], Nov. 30, 1983, 97 Stat. 1230, related to study of reinsurance and other programs, and report to the President and Congress. Section 1749bbb–16, act June 27, 1934, ch. 847, title XII, § 1246, formerly § 1236, as added Pub. L. 90–448, title XI, § 1103, Aug. 1, 1968, 82 Stat. 565; renumbered § 1246, Pub. L. 91–609, title VI, § 602(d), Dec. 31, 1970, 84 Stat. 1789; amended Pub. L. 98–181, title I [title IV, § 452(b)(1)], Nov. 30, 1983, 97 Stat. 1230, related to other studies and co- operation with State insurance authorities and private insurance industry. Section 1749bbb–17, act June 27, 1934, ch. 847, title XII, § 1247, formerly § 1237, as added Pub. L. 90–448, title XI, § 1103, Aug. 1, 1968, 82 Stat. 566; renumbered § 1247, Pub. L. 91–609, title VI, § 602(d), Dec. 31, 1970, 84 Stat. 1789; amended Pub. L. 98–181, title I [title IV, § 452(b)(1), (4)], Nov. 30, 1983, 97 Stat. 1230; Pub. L. 98–479, title II, § 202(a)(2), Oct. 17, 1984, 98 Stat. 2228, related to general powers of Director. Section 1749bbb–18, act June 27, 1934, ch. 847, title XII, § 1248, formerly § 1238, as added Pub. L. 90–448, title XI, § 1103, Aug. 1, 1968, 82 Stat. 566; renumbered § 1248, Pub. L. 91–609, title VI, § 602(d), Dec. 31, 1970, 84 Stat. 1789; amended Pub. L. 98–181, title I [title IV, § 452(b)(1)], Nov. 30, 1983, 97 Stat. 1230, related to utilization of services and facilities of other agencies. Section 1749bbb–19, act June 27, 1934, ch. 847, title XII, § 1249, formerly § 1239, as added Pub. L. 90–448, title XI, § 1103, Aug. 1, 1968, 82 Stat. 566; renumbered § 1249, Pub. L. 91–609, title VI, § 602(d), Dec. 31, 1970, 84 Stat. 1789; amended Pub. L. 98–181, title I [title IV, § 452(b)(1)], Nov. 30, 1983, 97 Stat. 1230, related to advance payments. Section 1749bbb–20, act June 27, 1934, ch. 847, title XII, § 1250, formerly § 1240, as added Pub. L. 90–448, title XI, § 1103, Aug. 1, 1968, 82 Stat. 566; renumbered § 1250, Pub. L. 91–609, title VI, § 602(d), Dec. 31, 1970, 84 Stat. 1789; amended Pub. L. 98–181, title I [title IV, § 452(b)(1)], Nov. 30, 1983, 97 Stat. 1230, related to tax issues. Section 1749bbb–21, act June 27, 1934, ch. 847, title XII, § 1251, formerly § 1241, as added Pub. L. 90–448, title XI, § 1103, Aug. 1, 1968, 82 Stat. 566; renumbered § 1251, Pub. L. 91–609, title VI, § 602(d), Dec. 31, 1970, 84 Stat. 1789, re- lated to authorization of appropriations for subchapter. SUBCHAPTER X—NATIONAL DEFENSE HOUSING INSURANCE Statutory Notes and Related Subsidiaries EXPIRATION DATE Insurance of mortgages under this subchapter prohib- ited, with certain exceptions, after July 31, 1954, see section 1591c of Title 42, The Public Health and Welfare. § 1750. Definitions As used in this subchapter, the terms ‘‘mort- gage’’, ‘‘first mortgage’’, ‘‘mortgagee’’, ‘‘mort- gagor’’, ‘‘maturity date’’, and ‘‘State’’ shall have the same meaning as in section 1707 of this title. (June 27, 1934, ch. 847, title IX, § 901, as added Sept. 1, 1951, ch. 378, title II, § 201, 65 Stat. 295.) § 1750a. Repealed. Pub. L. 89–117, title XI, § 1108(aa), Aug. 10, 1965, 79 Stat. 507 Section, act June 27, 1934, ch. 847, title IX, § 902, as added Sept. 1, 1951, ch. 378, title II, § 201, 65 Stat. 296, created the National Defense Housing Insurance Fund. For establishment of the General Insurance Fund, see section 1735c of this title. § 1750a–1. Omitted Editorial Notes CODIFICATION Section, act Nov. 1, 1951, ch. 665, Ch. V, 65 Stat. 763, authorized the National Defense Housing Insurance Fund to be available for administrative expenses of the Federal Housing Administration. Pub. L. 89–117, title XI, § 1108(aa), Aug. 10, 1965, 79 Stat. 507, eliminated the Fund, and all functions, powers, and duties of the Fed- eral Housing Administration and its Administrator were transferred to and vested in the Secretary of Housing and Urban Development by Pub. L. 89–174, § 5, Sept. 9, 1965, 79 Stat. 669, classified to section 3534 of Title 42, The Public Health and Welfare. Act June 27, 1934, ch. 847, title V, § 519, as added Aug. 10, 1965, Pub. L. 89–117, title II, § 214, 79 Stat. 471, classified to section 1735c of this title, created the General Insurance Fund, which authorized the general expenses of the oper- ations of the Department of Housing and Urban Devel- opment relating to mortgages and loans which are obli- gations of the General Insurance Fund to be charged to the General Insurance Fund. § 1750b. Insurance in critical areas (a) Limitations; termination of certain commit- ments; requirements; discrimination against children This subchapter is designed to supplement sys- tems of mortgage insurance under other provi- sions of this chapter in order to assist in pro- viding adequate housing in areas which the President, pursuant to section 1591 of title 42, shall have determined to be critical defense housing areas. The Secretary is authorized, upon application by the mortgagee, to insure under this section or section 1750g of this title as here- inafter 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 prop- erty covered by the mortgage is in an area which the President, pursuant to section 1591 of title 42, shall have determined to be a critical defense housing area, and that the total number of dwelling units in properties covered by mort- gages insured under this subchapter in any such area does not exceed the number authorized by the Secretary of Housing and Urban Develop- ment from time to time as needed in such area for defense purposes and to be insured pursuant to this subchapter: Provided further, That in the event the Secretary has issued a commitment to insure a mortgage under this section, which commitment was in force and effect on June 1, 1953, and the Secretary determines that, because of changes in defense requirements, there is rea- sonable doubt that such housing is needed for defense purposes and that it is probable that the mortgage would become immediately in default and claim made for payment under the mort- gage insurance contract if the unit or units are completed and the mortgage insured, the Sec- retary is authorized, in the interest of con- serving the General Insurance Fund, to pay (in cash from the General Insurance Fund) to the mortgagee for the account of the mortgagor such amount as the Secretary shall determine to be necessary to reimburse the mortgagor the Page 847 TITLE 12—BANKS AND BANKING § 1750b 1 See References in Text note below. amounts paid or to be paid by the mortgagor on account of labor performed and materials in place, less the Secretary’s estimate of the rea- sonable salvage value of such materials, plus an allowance for development costs equal to 4 per centum of the principal amount of the mortgage specified in such commitment, and no payments shall be made pursuant to this proviso unless a claim therefor is filed not later than six months from date of the determination of lack of need and the claim is in such form and contains such supporting information, documents, and data as the Secretary may require: Provided further, That the aggregate amount of principal obliga- tions of all mortgages insured under this sub- chapter shall not exceed such sum as may be au- thorized by the President from time to time for the purposes of this subchapter pursuant to his authority under section 1715h 1 of this title: Pro- vided further, That the Secretary shall have power to require properties covered by mort- gages insured under this subchapter to be held for rental for such periods of time and at such rentals or other charges as he may prescribe; and, with respect to such properties being held for rental, (1) to require that the property be held by a mortgagor approved by him, and (2) to prescribe such requirements as he deems to be reasonable governing the method of operation and prohibiting or restricting sales of such prop- erties or interests therein or agreements relat- ing to such sales: Provided further, That the Sec- retary shall require each dwelling covered by a mortgage insured under this section, for which a commitment to insure is issued after August 2, 1954, to be held for rental for a period of not less than three years after the dwelling is made available for initial occupancy: And provided fur- ther, That no mortgage shall be insured under this subchapter unless the mortgagor certifies under oath that in selecting tenants for any 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 in- surance is in effect unless the purchaser so cer- tifies, such certification to be filed with the Sec- retary. Violation of any such certification shall be a misdemeanor punishable by a fine of not to exceed $500. (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 re- sponsible and able to service the mortgage properly; (2) involve a principal obligation (including such initial service charges, appraisal, inspec- tion, and other fees as the Secretary shall ap- prove) in an amount not to exceed 90 per cen- tum of the appraised value (as of the date the mortgage is accepted for insurance) of a prop- erty, urban, suburban, or rural, upon which there is located a dwelling designed prin- cipally for residential use for not more than two families in the aggregate, which is ap- proved for mortgage insurance prior to the be- ginning of construction, the construction of which is begun after September 1, 1951. The principal obligation of such mortgage shall not, however, exceed $8,100 if such dwelling is designed for a single-family residence, or $15,000 if such dwelling is designed for a two- family residence except that the Secretary may by regulation increase these amounts to not to exceed $9,000 and $16,000, respectively, in any geographical area where he finds that cost levels so require: Provided, That if the Secretary finds that it is not feasible within the aforesaid dollar amount limitations to construct dwellings containing three or four bedrooms per family unit without sacrifice of sound standards of construction, design, and livability, he may increase such dollar amount limitations by not exceeding $1,080 for each additional bedroom (as defined by the Sec- retary) in excess of two contained in such fam- ily unit if he finds that such unit meets sound standards of livability as a three-bedroom or a four-bedroom unit as the case may be; (3) have a maturity satisfactory to the Sec- retary but not to exceed thirty 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 41⁄2 per centum per annum on the amount of the prin- cipal obligation outstanding at any time; (6) provide, in a manner satisfactory to the Secretary, for the application of the mortga- gor’s periodic payments (exclusive of the amount allocated to interest and to the pre- mium 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, pay- ment 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; needs of na- tional defense as prerequisite; 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 equiva- lent to one-half of 1 per centum per annum nor more than an amount equivalent to 11⁄2 per cen- tum 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, ei- ther in cash or in debentures issued by the Sec- retary 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 in- sured, 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 pres- entation of a mortgage for insurance and the Page 848 TITLE 12—BANKS AND BANKING § 1750c tender of the initial premium charge or charges so required 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 needs of national defense. In the event that the principal obligation of any mort- gage accepted for insurance under this sub- chapter is paid in full prior to the maturity date, the Secretary is further authorized in his discretion to require the payment by the mort- gagee of an adjusted premium charge in such amount as the Secretary determines to be equi- table, 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 has 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 un- earned premium charges theretofore paid. Upon application of the mortgagee with the consent of the mortgagor of a mortgage for which a com- mitment to insure has been issued pursuant to section 1709 of this title covering property on which the construction of the dwellings thereon was begun prior to the enactment of this sub- chapter and the determination of prevailing wages in the locality in accordance with section 1715c of this title, the Secretary is authorized, notwithstanding such beginning of construction, to convert such commitment to a commitment under section 1750g of this title; any charges or fees paid to the Secretary with respect to such insurance under section 1709 of this title shall be credited to charges or fees due the Secretary with respect to such insurance under section 1750g of this title; and the determination of pre- vailing wages in the locality for purposes of sec- tion 1715c of this title may be made by the Sec- retary of Labor at any time prior to the insur- ance under section 1750g of this title: Provided, That such mortgage, or the mortgage covering the same property executed in substitution therefor, is otherwise eligible for insurance under section 1750g of this title. (d) Preference or priority in purchasing or rent- ing properties Notwithstanding any other provisions of this chapter or any other Act, except provisions of law enacted hereafter expressly referring to this subsection (d), the Secretary is further author- ized to prescribe such procedures as are nec- essary to secure to persons engaged or to be en- gaged in national defense activities preference or priority of opportunity to purchase or rent properties, or interests therein, covered by mortgages insured under this subchapter. (e) Conclusiveness of insurance contract as to eligibility Any contract of insurance heretofore or here- after executed by the Secretary under this sub- chapter shall be conclusive evidence of the eligi- bility of the mortgage for insurance, and the va- lidity of any contract of insurance so executed shall be incontestable in the hands of an ap- proved mortgagee from the date of the execution of such contract, except for fraud or misrepre- sentation on the part of such approved mort- gagee. (June 27, 1934, ch. 847, title IX, § 903, as added Sept. 1, 1951, ch. 378, title II, § 201, 65 Stat. 296; amended July 14, 1952, ch. 723, § 13, 66 Stat. 604; June 30, 1953, ch. 170, § 11, 67 Stat. 124; Aug. 2, 1954, ch. 649, title I, § 128(b), 68 Stat. 609; Pub. L. 89–117, title XI, § 1108(x), Aug. 10, 1965, 79 Stat. 507; Pub. L. 90–19, § 1(a)(3), (4), (s), (t), May 25, 1967, 81 Stat. 17, 19.) Editorial Notes REFERENCES IN TEXT The General Insurance Fund, referred to in text, was established by section 1735c of this title. Section 1715h of this title, referred to in subsec. (a), was repealed by Pub. L. 100–242, title IV, § 401(a)(1), Feb. 5, 1988, 101 Stat. 1898. AMENDMENTS 1967—Pub. L. 90–19, § 1(a)(3), substituted ‘‘Secretary’’ for ‘‘Commissioner’’ wherever appearing in subsecs. (a), (b)(1) to (4), (6), (7), and (c) to (e). Subsec. (a). Pub. L. 90–19, § 1(a)(4), (s), substituted ‘‘Secretary’s’’ and ‘‘Secretary of Housing and Home De- velopment’’ for ‘‘Commissioner’s’’ and ‘‘Housing and Home Finance Administrator’’, respectively. Subsec. (d). Pub. L. 90–19, § 1(t), struck out ‘‘, with the approval of the Housing and Home Finance Admin- istrator,’’ before ‘‘is further authorized’’. 1965—Subsec. (a). Pub. L. 89–117 substituted ‘‘General Insurance Fund’’ for ‘‘National Defense Housing Insur- ance Fund’’. 1954—Subsec. (a). Act Aug. 2, 1954, inserted proviso re- lating to requirement for rental for a period of not less than three years after dwelling is made available for initial occupancy. 1953—Subsec. (a). Act June 30, 1953, inserted proviso commencing ‘‘Provided further, That in the event’’. 1952—Subsec. (c). Act July 14, 1952, inserted last sen- tence. § 1750c. Mortgage insurance benefits (a) Conveyance and assignment by mortgagee after foreclosure; debentures and certificates of claim; cost of foreclosure In any case in which the mortgagee under a mortgage insured under section 1750b of this title shall have foreclosed and taken possession of the mortgaged property, in accordance with regulations of, and within a period to be deter- mined by, the Secretary, or shall, with the con- sent of the Secretary, have otherwise acquired such property from the mortgagor after default, the mortgagee shall be entitled to receive the benefit of the insurance as hereinafter provided, upon (1) the prompt conveyance to the Sec- retary of title to the property which meets the requirements of 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 mort- gagee against the mortgagor or others, arising out of the mortgage transaction or foreclosure proceedings, except such claims as may have been released with the consent of the Secretary.