12 U.S.C. § 1706c — Insurance of mortgages

Page 529 TITLE 12—BANKS AND BANKING § 1706c L. 98–479, title II, § 204(a)(1), Oct. 17, 1984, 98 Stat. 2231.) Editorial Notes AMENDMENTS 1984—Pub. L. 98–479 substituted ‘‘such’’ for ‘‘suuch’’. 1967—Pub. L. 90–19 substituted ‘‘Secretary’’ for ‘‘Com- missioner’’. 1950—Act Apr. 20, 1950, § 122, substituted ‘‘Commis- sioner’’ for ‘‘Administrator’’. 1947—Act June 30, 1947, struck out references to Re- construction Finance Corporation. § 1706. Repealed. Aug. 2, 1954, ch. 649, title VIII, § 802(b), 68 Stat. 642 Section, acts June 27, 1934, ch. 847, title I, § 5, 48 Stat. 1247; Mar. 28, 1941, ch. 31, § 3, 55 Stat. 61; Aug. 10, 1948, ch. 832, title IV, § 402 (part), 62 Stat. 1283; Aug. 8, 1949, ch. 403, § 2 (part), 63 Stat. 576; Apr. 20, 1950, ch. 94, title I, § 122, 64 Stat. 59; Sept. 1, 1951, ch. 378, title II, § 202 (part), 65 Stat. 303, related to reports to Congress. See section 1701o of this title. § 1706a. Repealed. June 3, 1939, ch. 175, § 3, 53 Stat. 805 Section, act June 27, 1934, ch. 847, title I, § 6, as added act Apr. 17, 1936, ch. 234, § 3, 49 Stat. 1233; amended act Apr. 22, 1937, ch. 121, § 1, 50 Stat. 70, related to insurance of financial institutions financing rehabilitation of property damaged by fires, floods, storms, etc. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal effective July 1, 1939, see section 4 of act June 3, 1939, set out as an Effective Date of 1939 Amendment note under section 1703 of this title. § 1706b. Taxation of real property held by Sec- retary Nothing in this subchapter shall be construed to exempt any real property acquired and held by the Secretary in connection with the pay- ment of insurance heretofore or hereafter grant- ed under this subchapter from taxation by any State or political subdivision thereof, to the same extent, according to its value, as other real property is taxed. (June 27, 1934, ch. 847, title I, § 7, as added June 28, 1941, ch. 261, § 7, 55 Stat. 365; amended Apr. 20, 1950, ch. 94 title I, § 122, 64 Stat. 59; Pub. L. 90–19, § 1(a)(3), May 25, 1967, 81 Stat. 17.) Editorial Notes AMENDMENTS 1967—Pub. L. 90–19 substituted ‘‘Secretary’’ for ‘‘Com- missioner’’. 1950—Act Apr. 20, 1950, substituted ‘‘Commissioner’’ for ‘‘Administrator’’. § 1706c. Insurance of mortgages (a) Supplemental system; limitation on amount; termination of authority To assist in providing adequate housing for families of low and moderate income, particu- larly in suburban and outlying areas, this sec- tion is designed to supplement systems of mort- gage insurance under other provisions of this chapter by making feasible the insurance of mortgages covering properties in areas where it is not practicable to obtain conformity with many of the requirements essential to the insur- ance of mortgages on housing in built-up urban areas. The Secretary is authorized, upon appli- cation by the mortgagee, to insure, as herein- after provided, any mortgage (as defined in sec- tion 1707 of this title) offered to him which is el- igible 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 aggre- gate amount of principal obligations of all mort- gages insured under this section and out- standing at any one time shall not exceed $100,000,000, except that with the approval of the President such aggregate amount may be in- creased at any time or times by additional amounts aggregating not more than $150,000,000 upon a determination by the President, taking into account the general effect of any such in- crease upon conditions in the building industry and upon the national economy, that such in- crease is in the public interest: And provided fur- ther, That no mortgage shall be insured under this section after August 2, 1954, except pursuant to a commitment to insure issued on or before such date. (b) Eligibility conditions 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 $5,700, and not to exceed 95 per centum of the appraised value, as of the date the mortgage is accepted for insurance, of a property upon which there is located a dwelling designed principally for a single-family residence, and which is approved for mortgage insurance prior to the beginning of construction: Provided, That the mortgagor shall be the owner and occupant of the prop- erty at the time of insurance and shall have paid on account of the property at least 5 per centum of the Secretary’s estimate of the cost of acquisition in cash or its equivalent, or shall be the builder constructing the dwelling, in which case the principal obligation shall not exceed 85 per centum of the appraised value of the property or $5,100: Provided fur- ther, That the Secretary finds that the project with respect to which the mortgage is exe- cuted is an acceptable risk, giving consider- ation to the need for providing adequate hous- ing for families of low and moderate income particularly in suburban and outlying areas: And provided further, That, where the mort- gagor is the owner and occupant of the prop- erty and establishes (to the satisfaction of the Secretary) that his home, which he occupied as an owner or as a tenant, was destroyed or damaged to such an extent that reconstruc- tion is required as a result of a flood, fire, hur- ricane, earthquake, storm or other catas- trophe, which the President, pursuant to sec- Page 530 TITLE 12—BANKS AND BANKING § 1706c 1 See References in Text note below. tions 5122(2) and 5170 of title 42, has deter- mined to be a major disaster, such maximum dollar limitation may be increased by the Sec- retary from $5,700 to $7,000, and the percentage limitation may be increased by the Secretary from 95 per centum to 100 per centum of the appraised value; (3) have a maturity satisfactory to the Sec- retary but not to exceed thirty years from the date of insurance of the mortgage; (4) contain complete amortization provisions satisfactory to the Secretary requiring peri- odic payments by the mortgagor not in excess of his reasonable ability to pay as determined by the Secretary; (5) bear interest (exclusive of premium charges for insurance and service charges, if any) at not to exceed 5 per centum per annum on the amount of the principal obligation out- standing 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 hereinafter provided and to the service charge, if any) 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, service charges, default re- serves, delinquency charges, foreclosure pro- ceedings, anticipation of maturity, and other matters as the Secretary may in his discretion prescribe. (c) Premium charge The Secretary is authorized to fix a premium charge for the insurance of mortgages under this section, 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 1 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 section at par plus accrued in- terest, in such manner as may be prescribed by the Secretary: Provided, That the Secretary may require the payment of one or more such pre- mium 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 tender of the initial premium charge or charges so required, that the mortgage complies with the provisions of this section, such mortgage may be accepted for insurance by endorsement or otherwise as the Secretary may prescribe. In the event that the principal obligation of any mortgage accepted for insurance under this sec- tion is paid in full prior to the maturity date, the Secretary is further authorized, in his dis- cretion, 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 had continued to be insured until such maturity date; and in the event that the prin- cipal 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. (d) Release of mortgagor The Secretary may, at any time under such terms and conditions as he may prescribe, con- sent to the release of the mortgagor from his li- ability under the mortgage or the credit instru- ment secured thereby, or consent to the release of parts of the mortgaged property from the lien of the mortgage. (e) Conclusiveness of insurance contract as to eligibility Any contract of insurance executed by the Secretary under this section 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. (f) Rights of mortgagee upon foreclosure In any case in which the mortgagee under a mortgage insured under this section shall have foreclosed and taken possession of the mort- gaged property in accordance with the regula- tions of, and within a period to be determined by, the Secretary or shall, with the consent of the Secretary, have otherwise acquired such property from the mortgagor after default, the mortgagee shall be entitled to receive the bene- fits of the insurance as provided in section 1710(a) of this title with respect to mortgages in- sured under section 203(b)(2)(D) of this Act. (g) Applicability of other sections Subsections (c), (d), (e), (f), (g), (h),1 (j), and (k) 1 of section 1710 of this title shall be applica- ble to mortgages insured under this section ex- cept that all references therein to the Mutual Mortgage Insurance Funds or the Fund shall be construed to refer to the General Insurance Fund, and all references therein to section 1709 of this title shall be construed to refer to this section: Provided, That debentures issued in con- nection with mortgages insured under this sec- tion shall have the same tax exemption as de- bentures issued in connection with mortgages insured under section 1709 of this title. (June 27, 1934, ch. 847, title I, § 8, as added Apr. 20, 1950, ch. 94, title I, § 102, 64 Stat. 48; amended Aug. 3, 1951, ch. 293, § 1, 65 Stat. 173; June 30, 1953, ch. 170, § 2, 67 Stat. 121; Aug. 2, 1954, ch. 649, title I, § 103, 68 Stat. 591; Pub. L. 86–372, title I, § 116(a), Sept. 23, 1959, 73 Stat. 664; Pub. L. 89–117, title XI, § 1108(b), Aug. 10, 1965, 79 Stat. 504; Pub. L. 90–19, § 1(a)(3), (4), May 25, 1967, 81 Stat. 17; Pub. L. 91–606, title III, § 301(b), Dec. 31, 1970, 84 Stat. 1758; Pub. L. 93–288, title VII, § 702(b), formerly Page 531 TITLE 12—BANKS AND BANKING § 1706e title VI, § 602(b), May 22, 1974, 88 Stat. 163, re- numbered title VII, § 702(b), Pub. L. 103–337, div. C, title XXXIV, § 3411(a)(1), (2), Oct. 5, 1994, 108 Stat. 3100; Pub. L. 100–707, title I, § 109(e)(1), Nov. 23, 1988, 102 Stat. 4708.) Editorial Notes REFERENCES IN TEXT This chapter, referred to in subsec. (a), was in the original ‘‘this Act’’, meaning act June 27, 1934, ch. 847, 48 Stat. 1246, which is classified principally to this chapter (§ 1701 et seq.). For complete classification of this Act to the Code, see Tables. Section 203(b)(2)(D) of this Act, referred to in subsec. (f), which was formerly classified to section 1709(b)(2)(D) of this title, was repealed by act Aug. 2, 1954, ch. 649, title I, § 104, 68 Stat. 591. Subsection (h) of section 1710 of this title, referred to in subsec. (g), was redesignated subsec. (i) by Pub. L. 105–276, title VI, § 602(1), Oct. 21, 1998, 112 Stat. 2674. Subsection (k) of section 1710 of this title, referred to in subsec. (g), was repealed by Pub. L. 105–276, title VI, § 601(c), Oct. 21, 1998, 112 Stat. 2673. The General Insurance Fund, referred to in subsec. (g), was established by section 1735c of this title. AMENDMENTS 1988—Subsec. (b)(2). Pub. L. 100–707 substituted ‘‘5170 of title 42’’ for ‘‘5141 of title 42’’. 1974—Subsec. (b)(2). Pub. L. 93–288 substituted ‘‘sec- tions 5122(2) and 5141 of title 42’’ for ‘‘section 4402(1) of title 42’’. 1970—Subsec. (b)(2). Pub. L. 91–606 substituted ref- erence to section ‘‘4402(1)’’ for ‘‘1855a(a)’’ of title 42. 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 (f). Subsec. (b)(2). Pub. L. 90–19, § 1(a)(4), substituted ‘‘Secretary’s’’ for ‘‘Commissioner’s’’. 1965—Subsec. (g). Pub. L. 89–117, § 1108(b)(1), sub- stituted ‘‘General Insurance Fund’’ for ‘‘Title I Housing Insurance Fund’’. Subsec. (h). Pub. L. 89–117, § 1108(b)(2), repealed sub- sec. (h) which created the Title I Housing Insurance Fund. Subsec. (i). Pub. L. 89–117, § 1108(b)(2), repealed subsec. (i) which dealt with the disposition of surplus funds of the Title I Housing Insurance Fund, purchase of deben- tures, and credits and charges to fund. 1959—Subsec. (g). Pub. L. 86–372 inserted reference to subsecs. (j) and (k) of section 1710 of this title. 1954—Subsec. (a). Act Aug. 2, 1954, inserted proviso prohibiting the insurance of mortgages under this sec- tion after Aug. 2, 1954, except pursuant to commit- ments to insure issued on or before such date. 1953—Subsec. (b)(2). Act June 30, 1953, raised the max- imum mortgage, where the mortgagor is the owner-oc- cupant, from $4,750, not exceeding 95 per centum of value, to $5,700, not exceeding 95 per centum of value; and raised the maximum mortgage, where the builder is the mortgagor, from $4,250, not exceeding 85 per cen- tum of value, to $5,100, not exceeding 85 per centum of value. 1951—Subsec. (b)(2). Act Aug. 3, 1951, permitted more liberal mortgage insurance for those building low-cost homes to replace their homes lost in a flood or other major disaster. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1974 AMENDMENT Amendment by Pub. L. 93–288 effective Apr. 1, 1974, see section 605 of Pub. L. 93–288, formerly set out as an Effective Date note under section 5121 of Title 42, The Public Health and Welfare. EFFECTIVE DATE OF 1970 AMENDMENT Amendment by Pub. L. 91–606 effective Dec. 31, 1970, see section 304 of Pub. L. 91–606, set out as a note under section 165 of Title 26, Internal Revenue Code. REPAYMENT TO TREASURY ON CAPITAL ACCOUNT OF TITLE I INSURANCE FUND Act Mar. 10, 1953, ch. 5, § 2, 67 Stat. 5, directed the Federal Housing Commissioner to pay out of the cap- ital account of the Title I Insurance Fund to the Sec- retary of the Treasury, prior to June 30, 1954, the sum of $8,333,313.65 either in one lump sum or in install- ments, except that the first payment was to be made on July 1, 1953. § 1706d. Applicability The provisions of sections 1703 and 1706c of this title shall be applicable in the several States and Puerto Rico, the District of Colum- bia, Guam, the Trust Territory of the Pacific Is- lands, American Samoa, and the Virgin Islands. (June 27, 1934, ch. 847, title I, § 9, as added July 14, 1952, ch. 723, § 10(a)(1), 66 Stat. 603; amended Pub. L. 86–70, § 10(a), June 25, 1959, 73 Stat. 142; Pub. L. 86–624, § 6, July 12, 1960, 74 Stat. 411; Pub. L. 91–152, title IV, § 403(c)(3), Dec. 24, 1969, 83 Stat. 395; Pub. L. 98–181, title I [title IV, § 407(a)], Nov. 30, 1983, 97 Stat. 1211; Pub. L. 100–242, title IV, § 429(b), Feb. 5, 1988, 101 Stat. 1918.) Editorial Notes AMENDMENTS 1988—Pub. L. 100–242 inserted ‘‘Applicability’’ as sec- tion catchline. 1983—Pub. L. 98–181 inserted ‘‘American Samoa,’’ after ‘‘Pacific Islands,’’. 1969—Pub. L. 91–152 inserted ‘‘the Trust Territory of the Pacific Islands,’’ after ‘‘Guam,’’. 1960—Pub. L. 86–624 struck out ‘‘Hawaii,’’ before ‘‘Puerto Rico’’. 1959—Pub. L. 86–70 struck out ‘‘Alaska,’’ before ‘‘Ha- waii’’. Executive Documents TERMINATION OF TRUST TERRITORY OF THE PACIFIC ISLANDS For termination of Trust Territory of the Pacific Is- lands, see note set out preceding section 1681 of Title 48, Territories and Insular Possessions. § 1706e. Repealed. Pub. L. 101–625, title II, § 289(b), Nov. 28, 1990, 104 Stat. 4128 Section, Pub. L. 93–383, title VIII, § 810, Aug. 22, 1974, 88 Stat. 734; Pub. L. 94–375, § 20, Aug. 3, 1976, 90 Stat. 1077; Pub. L. 95–24, title I, § 103, Apr. 30, 1977, 91 Stat. 55; Pub. L. 95–128, title II, § 203, Oct. 12, 1977, 91 Stat. 1129; Pub. L. 95–557, title I, § 102, Oct. 31, 1978, 92 Stat. 2083; Pub. L. 96–153, title I, § 106, Dec. 21, 1979, 93 Stat. 1104; Pub. L. 96–399, title I, § 116, Oct. 8, 1980, 94 Stat. 1623; Pub. L. 97–35, title III, § 312, Aug. 13, 1981, 95 Stat. 397; Pub. L. 98–181, title I [title I, § 122], Nov. 30, 1983, 97 Stat. 1170; Pub. L. 98–479, title I, § 101(a)(14), Oct. 17, 1984, 98 Stat. 2220; Pub. L. 100–242, title V, § 517(a), (c)–(e), Feb. 5, 1988, 101 Stat. 1936, 1937; Pub. L. 101–73, title V, § 501(e)(1), Aug. 9, 1989, 103 Stat. 394; Pub. L. 101–235, title I, § 126(a), (b), Dec. 15, 1989, 103 Stat. 2025; Pub. L. 101–625, title IX, § 914(a), (b), Nov. 28, 1990, 104 Stat. 4394, 4395, related to urban homestead program of unit of general local government, State, or designated public agency. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal effective Oct. 1, 1991, and except with respect to projects and programs for which binding commit- ments have been entered into prior to Oct. 1, 1991, no