12 U.S.C. § 1743 — Insurance of mortgages

Page 814 TITLE 12—BANKS AND BANKING § 1743 essary to carry out the provisions of this sub- chapter. (June 27, 1934, ch. 847, title VI, § 607, as added Mar. 28, 1941, ch. 31, § 1, 55 Stat. 61; 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’’. § 1743. Insurance of mortgages (a) Additional authorization; advances during construction In addition to mortgages insured under sec- tion 1738 of this title, the Secretary is author- ized to insure mortgages as defined in section 1736 of this title (including advances on such mortgages during construction) which are eligi- ble 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 Sec- retary may make such contracts with, and ac- quire for not to exceed $100 stock or interest in any such mortgagor, as the Secretary may deem necessary to render effective such re- striction 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 pre- scribed 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 com- pleted property or project, including the land; the proposed physical improvements; utilities within the boundaries of the prop- erty 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 Sec- retary estimates will be the cost of the com- pleted physical improvements on the prop- erty 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 replace- ment 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 amor- tization by periodic payment within such term as the Secretary shall prescribe, and shall bear interest (exclusive of premium charges for insur- ance) at not to exceed 41⁄2 per centum per annum on the amount of the principal obligation out- standing at any time. The Secretary may con- sent to the release of a part or parts of the mort- gaged property from the lien of the mortgage upon such terms and conditions as he may pre- scribe 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 pay- ment due under or provided to be paid by the terms of a mortgage insured under this section shall be considered a default under such mort- gage, and if such default continues for a period of thirty days, the mortgagee shall be entitled to receive the benefits of the insurance as here- inafter provided, upon assignment, transfer, and delivery to the Secretary, within a period and in accordance with rules and regulations to be pre- scribed by the Secretary of (1) all rights and in- terests arising under the mortgage so in default; (2) all claims of the mortgagee against the mort- gagors or others, arising out of the mortgage transaction; (3) all policies of title or other in- surance or surety bonds or other guaranties and any and all claims thereunder; (4) any balance of the mortgage loan not advanced to the mort- gagor; (5) any cash or property held by the mort- gagee, 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 ac- counts relating to the mortgage transaction. Upon such assignment, transfer, and delivery the obligation of the mortgagee to pay the pre- mium 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 here- inafter provided. For the purposes of this sub- section, the value of the mortgage shall be de- termined in accordance with rules and regula- tions 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 mort- gage; (B) insurance on the property; and (C) rea- sonable expenses for the completion and preser- vation of the property and any mortgage insur- Page 815 TITLE 12—BANKS AND BANKING § 1744 ance 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 ac- cordance with regulations of, and in a period to be determined by the Secretary, proceed to fore- close 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 convey- ance 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 evi- denced in the manner prescribed by such rules and regulations; and (2) the assignment to him of all claims of the mortgagee against the mort- gagor 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 convey- ance and assignment, the obligation of the mortgagee to pay the premium charges for in- surance 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 Sec- retary 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 cer- tificate of claim shall be retained by the Sec- retary 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 sec- tion 1739 (d) of this title except that such deben- tures 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 prop- erty under subchapter I, II, VIII, or X The Secretary shall also have power to insure under this subchapter or subchapter I, II, VIII, or X any mortgage executed in connection with the sale by him of any property acquired under any of such subchapters without regard to limi- tations upon eligibility, time, or aggregate amount contained therein. (June 27, 1934, ch. 847, title VI, § 608, as added May 26, 1942, ch. 319, § 11, 56 Stat. 303; amended Mar. 31, 1945, ch. 48, § 2, 59 Stat. 47; May 22, 1946, ch. 268, § 10(f), (g), 60 Stat. 214; Aug. 10, 1948, ch. 832, title I, § 101(b), (c), 62 Stat. 1269; Apr. 20, 1950, ch. 94, title I, § 122, 64 Stat. 59; Sept. 1, 1951, ch. 378, title II, § 206, 65 Stat. 303; Pub. L. 89–117, title XI, § 1108(q), Aug. 10, 1965, 79 Stat. 506; Pub. L. 90–19, § 1(a)(3), (4), May 25, 1967, 81 Stat. 17.) Editorial Notes 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, § 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, § 1(a)(4), substituted ‘‘Secretary’s’’ for ‘‘Commissioner’s’’. 1965—Subsecs. (b)(1), (d). Pub. L. 89–117, § 1108(q)(1), substituted ‘‘General Insurance Fund’’ for ‘‘War Hous- ing Insurance Fund’’. Subsec. (f). Pub. L. 89–117, § 1108(q)(2), struck out pro- visions 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 re- lating 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 occu- pancy 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 pre- scribed 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 ‘‘nec- essary current cost’’ after ‘‘estimates will be the’’ for ‘‘reasonable replacement cost’’ in par. (B), and in- creased mortgage per room from $1,350 to $1,500 and in- serted proviso in par. (C). Subsec. (c). Act May 22, 1946, inserted ‘‘and any mort- gage insurance premiums paid after default’’ before semicolon in cl. (C) of third sentence. 1945—Subsec. (g). Act Mar. 31, 1945, inserted provi- sions empowering Commissioner to insure mortgages without regard to any limitations upon time or aggre- gate amount contained in this subchapter. Statutory Notes and Related Subsidiaries CONSTRUCTION OF ACT MAY 26, 1942, WITH EX. ORD. NO. 9070, CONSOLIDATING NATIONAL HOUSING AGENCY Act May 26, 1942, ch. 319, § 12, 56 Stat. 305, provided that nothing contained in act May 26, 1942, was to be construed to supersede or be inconsistent with the pro- visions of Ex. Ord. No. 9070, Feb. 24, 1942. § 1744. Insurance of loans for manufacture of houses (a) Relief of housing shortage; advances In order to assist in relieving the acute short- age of housing which now exists and to promote the production of housing for veterans of World War II at moderate prices or rentals within their