12 U.S.C. § 1749aaa — Insurance of mortgages

Page 840 TITLE 12—BANKS AND BANKING § 1749aaa 1 See References in Text note below. 89–117, title II, § 201(a), 79 Stat. 463; renumbered § 1005 and amended Nov. 3, 1966, Pub. L. 89–754, title IV, §§ 401(a), 403, 80 Stat. 1271, 1272; May 25, 1967, Pub. L. 90–19, § 1(a)(3), 81 Stat. 17, directed adoption of require- ments to encourage homebuilding industry and proper balance of housing for moderate and low income fami- lies. Section 1749ee, act June 27, 1934, ch. 847, title X, § 1006, formerly § 1005, as added Aug. 10, 1965, Pub. L. 89–117, title II, § 201(a), 79 Stat. 463; renumbered § 1006 and amended Nov. 3, 1966, Pub. L. 89–754, title IV, §§ 401(a), 404, 80 Stat. 1271, 1272, related to service of land by pub- lic water and sewerage systems after development. Section 1749ff, act June 27, 1934, ch. 847, title X, § 1007, formerly § 1006, as added Aug. 10, 1965, Pub. L. 89–117, title II, § 201(a), 79 Stat. 464; renumbered § 1007, Nov. 3, 1966, Pub. L. 89–754, title IV, § 401(a), 80 Stat. 1271; amended May 25, 1967, Pub. L. 90–19, § 1(a)(3), 81 Stat. 17, related to release or subordination of mortgaged prop- erty. Section 1749gg, act June 27, 1934, ch. 847, title X, § 1008, formerly § 1007, as added Aug. 10, 1965, Pub. L. 89–117, title II, § 201(a), 79 Stat. 464; renumbered § 1008, Nov. 3, 1966, Pub. L. 89–754, title IV, § 401(a), 80 Stat. 1271; amended May 25, 1967, Pub. L. 90–19, § 1(a)(3), 81 Stat. 17, related to premium rates and other charges for mortgage insurance and report to Congress thereon. Section 1749hh, act June 27, 1934, ch. 847, title X, § 1009, formerly § 1008, as added Aug. 10, 1965, Pub. L. 89–117, title II, § 201(a), 79 Stat. 464; renumbered § 1009, Nov. 3, 1966, Pub. L. 89–754, title IV, § 401(a), 80 Stat. 1271; amended May 25, 1967, Pub. L. 90–19, § 1(a)(3), 81 Stat. 17, related to applicability of other provisions of law to this subchapter. Section 1749ii, act June 27, 1934, ch. 847, title X, § 1010, formerly § 1009, as added Aug. 10, 1965, Pub. L. 89–117, title II, § 201(a), 79 Stat. 464; renumbered § 1010, Nov. 3, 1966, Pub. L. 89–754, title IV, § 401(a), 80 Stat. 1271; amended May 25, 1967, Pub. L. 90–19, § 1(a)(3), 81 Stat. 17, provided that insurance contract under this subchapter was conclusive evidence of eligibility for insurance and that the validity of such contract was incontestable. Section 1749jj, act June 27, 1934, ch. 847, title X, § 1011, formerly § 1010, as added Aug. 10, 1965, Pub. L. 89–117, title II, § 201(a), 79 Stat. 464; renumbered § 1011, Nov. 3, 1966, Pub. L. 89–754, title IV, § 401(a), 80 Stat. 1271; amended May 25, 1967, Pub. L. 90–19, § 1(a)(3), 81 Stat. 17, authorized making rules and regulations to carry out provisions of subchapter. Section 1749kk, act June 27, 1934, ch. 847, title X, § 1012, formerly § 1011, as added Aug. 10, 1965, Pub. L. 89–117, title II, § 201(a), 79 Stat. 464; renumbered § 1012, Nov. 3, 1966, Pub. L. 89–754, title IV, § 401(a), 80 Stat. 1271; amended May 25, 1967, Pub. L. 90–19, § 1(a)(3), 81 Stat. 17, related to taxation of real property acquired by Secretary. Section 1749ll, act June 27, 1934, ch. 847, title X, § 1013, formerly § 1012, as added Aug. 10, 1965, Pub. L. 89–117, title II, § 201(a), 79 Stat. 464; renumbered § 1013, Nov. 3, 1966, Pub. L. 89–754, title IV, § 401(a), 80 Stat. 1271; amended May 25, 1967, Pub. L. 90–19, § 1(a)(3), (4), 81 Stat. 17, related to requirements to assure that amount of mortgage was not excessive and to requirement that mortgagor certify costs of land development. Statutory Notes and Related Subsidiaries SAVINGS PROVISION Pub. L. 101–235, title I, § 133(c), Dec. 15, 1989, 103 Stat. 2027, provided that: ‘‘Any contract of insurance entered into under title X [this subchapter, §§ 1749aa to 1749ll] before the date of enactment of this Act [Dec. 15, 1989] shall be governed by the provisions of such title as such title existed immediately before such date.’’ APPLICABILITY OF REPEAL Pub. L. 101–235, title I, § 133(b), Dec. 15, 1989, 103 Stat. 2027, provided that: ‘‘On or after the date of enactment of this Act [Dec. 15, 1989], no mortgage may be insured under title X [this subchapter, §§ 1749aa to 1749ll], as such title existed immediately before such date, except pursuant to a commitment to insure made before such date.’’ SUBCHAPTER IX–B—MORTGAGE INSUR- ANCE FOR GROUP PRACTICE FACILITIES AND MEDICAL PRACTICE FACILITIES § 1749aaa. Insurance of mortgages (a) Authority of Secretary; termination date The Secretary is authorized (1) to insure mort- gages (including advances on such mortgages during construction), upon such terms and con- ditions as he may prescribe, in accordance with the provisions of this subchapter, and (2) to make commitments for the insuring of such mortgages prior to the date of their execution or disbursement thereon. (b) Eligibility for insurance To be eligible for insurance under this sub- chapter, the mortgage shall (1) be executed by a mortgagor that is a group practice unit or orga- nization or other mortgagor approved by the Secretary, (2) be made to and held by a mort- gagee approved by the Secretary as responsible and able to service the mortgage properly, and (3) cover a property or project which is approved for mortgage insurance prior to the beginning of construction or rehabilitation and is designed for use as a group practice facility or medical practice facility which the Secretary finds will be constructed in an economical manner, will not be of elaborate or extravagant design or ma- terials, and will be adequate and suitable for carrying out the purposes of this subchapter. No mortgage shall be insured under this subchapter unless it is shown to the satisfaction of the Sec- retary that the applicant would be unable to ob- tain the mortgage loan without such insurance on terms comparable to those specified in sub- section (c). (c) Replacement cost of property; maturity; am- ortization; interest rate The mortgage shall— (1) Repealed. Pub. L. 93–383, title III, § 304(l), Aug. 22, 1974, 88 Stat. 678; (2) not exceed 90 per centum of the amount which the Secretary estimates will be the re- placement cost of the property or project when construction or rehabilitation is com- pleted. The replacement cost of the property may include the land and the proposed phys- ical improvements, equipment, utilities within the boundaries of the property, a solar energy system (as defined in subparagraph (3) of the last paragraph of section 1703(a) of this title) or residential energy conservation measures (as defined in section 8211(11)(A) through (G) and (I) of title 42) 1 in cases where the Sec- retary determines that such measures are in addition to those required under the minimum property standards and will be cost-effective over the life of the measure, architects’ fees, taxes, and interest accruing during construc- tion or rehabilitation, and other miscella- Page 841 TITLE 12—BANKS AND BANKING § 1749aaa neous charges incident to construction or re- habilitation and approved by the Secretary; (3) have a maturity satisfactory to the Sec- retary but not to exceed twenty-five years from the beginning of the amortization of the mortgage, and provide for complete amortiza- tion of the principal obligation by periodic payments within such term as the Secretary shall prescribe; and (4) bear interest at such rate as may be agreed upon by the mortgagor and the mort- gagee. (d) Conclusiveness of insurance contract as to eligibility; validity of contract incontestable Any contract of insurance executed by the Secretary under this subchapter shall be conclu- sive evidence of the eligibility of the mortgage for insurance, and the validity of any contract for 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. (e) Undertaking Each mortgage insured under this subchapter shall contain an undertaking (in accordance with regulations prescribed under this sub- chapter and in force at the time the mortgage is approved for insurance) to the effect that, ex- cept as authorized by the Secretary and the mortgagee, the property will be used as a group practice facility or medical practice facility until the mortgage has been paid in full or the contract of insurance otherwise terminated. (f) Recordkeeping; reports; examination and audit No mortgage shall be insured under this sub- chapter unless the mortgagor and the mortgagee certify (1) that they will keep such records re- lating to the mortgage transaction and indebt- edness, to the construction of the facility cov- ered by the mortgage, and to the use of such fa- cility as a group practice facility or medical practice facility as are prescribed by the Sec- retary at the time of such certification, (2) that they will make such reports as may from time to time be required by the Secretary pertaining to such matters, and (3) that the Secretary shall have access to and the right to examine and audit such records. (June 27, 1934, ch. 847, title XI, § 1101, as added Pub. L. 89–754, title V, § 502(a), Nov. 3, 1966, 80 Stat. 1274; amended Pub. L. 90–448, title XVII, § 1722(d), Aug. 1, 1968, 82 Stat. 610; Pub. L. 91–78, § 2(g), Sept. 30, 1969, 83 Stat. 125; Pub. L. 91–152, title I, § 101(i), title IV, § 418(f), Dec. 24, 1969, 83 Stat. 379, 402; Pub. L. 91–432, § 1(g), Oct. 2, 1970, 84 Stat. 887; Pub. L. 91–473, § 1(g), Oct. 21, 1970, 84 Stat. 1065; Pub. L. 91–525, § 1(g), Dec. 1, 1970, 84 Stat. 1384; Pub. L. 91–609, title I, § 101(i), Dec. 31, 1970, 84 Stat. 1770; Pub. L. 92–503, § 1(i), Oct. 18, 1972, 86 Stat. 906; Pub. L. 93–85, § 1(i), Aug. 10, 1973, 87 Stat. 220; Pub. L. 93–117, § 1(i), Oct. 2, 1973, 87 Stat. 422; Pub. L. 93–383, title III, §§ 304(l), 312(a)(1)–(4), 316(g), Aug. 22, 1974, 88 Stat. 678, 683, 685; Pub. L. 95–60, § 1(h), June 30, 1977, 91 Stat. 257; Pub. L. 95–80, § 1(h), July 31, 1977, 91 Stat. 339; Pub. L. 95–128, title III, § 301(k), Oct. 12, 1977, 91 Stat. 1131; Pub. L. 95–406, § 1(k), Sept. 30, 1978, 92 Stat. 879; Pub. L. 95–557, title III, § 301(k), Oct. 31, 1978, 92 Stat. 2096; Pub. L. 96–71, § 1(k), Sept. 28, 1979, 93 Stat. 501; Pub. L. 96–105, § 1(k), Nov. 8, 1979, 93 Stat. 794; Pub. L. 96–153, title III, § 301(k), Dec. 21, 1979, 93 Stat. 1112; Pub. L. 96–372, § 1(k), Oct. 3, 1980, 94 Stat. 1363; Pub. L. 96–399, title III, §§ 301(k), 310(i), Oct. 8, 1980, 94 Stat. 1639, 1643; Pub. L. 97–35, title III, § 331(j), Aug. 13, 1981, 95 Stat. 413; Pub. L. 97–289, § 1(k), Oct. 6, 1982, 96 Stat. 1230; Pub. L. 98–35, § 1(k), May 26, 1983, 97 Stat. 197; Pub. L. 98–109, § 1(k), Oct. 1, 1983, 97 Stat. 745; Pub. L. 98–181, title I [title IV, § 401(j)], Nov. 30, 1983, 97 Stat. 1208; Pub. L. 98–479, title I, § 104(a)(8), Oct. 17, 1984, 98 Stat. 2225; Pub. L. 99–120, § 1(j), Oct. 8, 1985, 99 Stat. 503; Pub. L. 99–156, § 1(j), Nov. 15, 1985, 99 Stat. 816; Pub. L. 99–219, § 1(j), Dec. 26, 1985, 99 Stat. 1731; Pub. L. 99–267, § 1(k), Mar. 27, 1986, 100 Stat. 74; Pub. L. 99–272, title III, § 3007(j), Apr. 7, 1986, 100 Stat. 105; Pub. L. 99–289, § 1(b), May 2, 1986, 100 Stat. 412; Pub. L. 99–345, § 1, June 24, 1986, 100 Stat. 673; Pub. L. 99–430, Sept. 30, 1986, 100 Stat. 986; Pub. L. 100–122, § 1, Sept. 30, 1987, 101 Stat. 793; Pub. L. 100–154, Nov. 5, 1987, 101 Stat. 890; Pub. L. 100–170, Nov. 17, 1987, 101 Stat. 914; Pub. L. 100–179, Dec. 3, 1987, 101 Stat. 1018; Pub. L. 100–200, Dec. 21, 1987, 101 Stat. 1327; Pub. L. 100–242, title IV, § 401(a)(8), Feb. 5, 1988, 101 Stat. 1898.) Editorial Notes REFERENCES IN TEXT Section 8211 of title 42, referred to in subsec. (c)(2), was omitted from the Code pursuant to section 8229 of Title 42, The Public Health and Welfare, which termi- nated authority under that section on June 30, 1989. AMENDMENTS 1988—Subsec. (a). Pub. L. 100–242 struck out at end ‘‘No mortgage shall be insured under this subchapter after March 15, 1988, except pursuant to a commitment to insure issued before that date.’’ 1987—Subsec. (a). Pub. L. 100–200 substituted ‘‘March 15, 1988’’ for ‘‘December 16, 1987’’. Pub. L. 100–179 substituted ‘‘December 16, 1987’’ for ‘‘December 2, 1987’’. Pub. L. 100–170 substituted ‘‘December 2, 1987’’ for ‘‘November 15, 1987’’. Pub. L. 100–154 substituted ‘‘November 15, 1987’’ for ‘‘October 31, 1987’’. Pub. L. 100–122 substituted ‘‘October 31, 1987’’ for ‘‘September 30, 1987’’. 1986—Subsec. (a). Pub. L. 99–430 substituted ‘‘Sep- tember 30, 1987’’ for ‘‘September 30, 1986’’. Pub. L. 99–345 substituted ‘‘September 30, 1986’’ for ‘‘June 6, 1986’’. Pub. L. 99–289 substituted ‘‘June 6, 1986’’ for ‘‘April 30, 1986’’. Pub. L. 99–272 made amendment identical to Pub. L. 99–219. See 1985 Amendment note below. Pub. L. 99–267 substituted ‘‘April 30, 1986’’ for ‘‘March 17, 1986’’. 1985—Subsec. (a). Pub. L. 99–219 substituted ‘‘March 17, 1986’’ for ‘‘December 15, 1985’’. Pub. L. 99–156 substituted ‘‘December 15, 1985’’ for ‘‘November 14, 1985’’. Pub. L. 99–120 substituted ‘‘November 14, 1985’’ for ‘‘September 30, 1985’’. 1984—Subsec. (c)(4). Pub. L. 98–479 substituted ‘‘at such rate as may be agreed upon by the mortgagor and the mortgagee,’’ for ‘‘(exclusive of premium charges for insurance, and service charges if any) at a rate of not to exceed 5 per centum per annum of the amount of the principal obligation outstanding at any time, or not to exceed such rate (not in excess of 6 per centum per annum) as the Secretary finds necessary to meet the mortgage market.’’ Page 842 TITLE 12—BANKS AND BANKING § 1749aaa–1 1983—Subsec. (a). Pub. L. 98–181 substituted ‘‘Sep- tember 30, 1985’’ for ‘‘November 30, 1983’’. Pub. L. 98–109 substituted ‘‘November 30, 1983’’ for ‘‘September 30, 1983’’. Pub. L. 98–35 substituted ‘‘September 30, 1983’’ for ‘‘May 20, 1983’’. 1982—Subsec. (a). Pub. L. 97–289 substituted ‘‘May 20, 1983’’ for ‘‘September 30, 1982’’. 1981—Subsec. (a). Pub. L. 97–35 substituted ‘‘1982’’ for ‘‘1981’’. 1980—Subsec. (a). Pub. L. 96–399, § 301(k), substituted ‘‘September 30, 1981’’ for ‘‘October 15, 1980’’. Pub. L. 96–372 substituted ‘‘October 15, 1980’’ for ‘‘Sep- tember 30, 1980’’. Subsec. (c)(2). Pub. L. 96–399, § 310(i), inserted provi- sions relating to solar energy systems and residential energy conservation measures. 1979—Subsec. (a). Pub. L. 96–153 substituted ‘‘Sep- tember 30, 1980’’ for ‘‘November 30, 1979’’. Pub. L. 96–105 substituted ‘‘November 30, 1979’’ for ‘‘October 31, 1979’’. Pub. L. 96–71 substituted ‘‘October 31, 1979’’ for ‘‘Sep- tember 30, 1979’’. 1978—Subsec. (a). Pub. L. 95–557 substituted ‘‘Sep- tember 30, 1979’’ for ‘‘October 31, 1978’’. Pub. L. 95–406 substituted ‘‘October 31, 1978’’ for ‘‘Sep- tember 30, 1978’’. 1977—Subsec. (a). Pub. L. 95–128 substituted ‘‘Sep- tember 30, 1978’’ for ‘‘September 30, 1977’’. Pub. L. 95–80 substituted ‘‘September 30, 1977’’ for ‘‘July 31, 1977’’. Pub. L. 95–60 substituted ‘‘July 31, 1977’’ for ‘‘June 30, 1977’’. 1974—Subsec. (a). Pub. L. 93–383, § 316(g), substituted ‘‘June 30, 1977’’ for ‘‘October 1, 1974’’. Subsec. (b). Pub. L. 93–383, § 312(a)(1), (2), in cl. (1) in- serted ‘‘or other mortgagor’’ after ‘‘or organization’’, and in cl. (3) inserted ‘‘or medical practice facility’’ after ‘‘group practice facility’’. Subsec. (c)(1). Pub. L. 93–383, § 304(l), struck out par. (1) which set forth limitation on amount of mortgage. Subsecs. (e), (f). Pub. L. 93–383, § 312(a)(3), (4), inserted ‘‘or medical practice facility’’ after ‘‘group practice fa- cility’’. 1973—Subsec. (a). Pub. L. 93–117 substituted ‘‘October 1, 1974’’ for ‘‘October 1, 1973’’. Pub. L. 93–85 substituted ‘‘October 1, 1973’’ for ‘‘June 30, 1973’’. 1972—Subsec. (a). Pub. L. 92–503 substituted ‘‘June 30, 1973’’ for ‘‘October 1, 1972’’. 1970—Subsec. (a). Pub. L. 91–609 substituted ‘‘October 1, 1972’’ for ‘‘January 1, 1971’’. Pub. L. 91–525 substituted ‘‘January 1, 1971’’ for ‘‘De- cember 1, 1970’’. Pub. L. 91–473 substituted ‘‘December 1, 1970’’ for ‘‘No- vember 1, 1970’’. Pub. L. 91–432 substituted ‘‘November 1, 1970’’ for ‘‘Oc- tober 1, 1970’’. 1969—Subsec. (a). Pub. L. 91–152, § 101(i), substituted ‘‘October 1, 1970’’ for ‘‘January 1, 1970’’. Pub. L. 91–78 substituted ‘‘January 1, 1970’’ for ‘‘Octo- ber 1, 1969’’. Subsec. (c)(2). Pub. L. 91–152, § 418(f), substituted ‘‘re- placement cost’’ for ‘‘value’’ wherever appearing. 1968—Subsec. (c)(3). Pub. L. 90–448 limited term of mortgage to not more than twenty-five years from be- ginning of amortization of mortgage. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1981 AMENDMENT Amendment by Pub. L. 97–35 effective Oct. 1, 1981, see section 371 of Pub. L. 97–35, set out as an Effective Date note under section 3701 of this title. DECLARATION OF PURPOSE Pub. L. 89–754, title V, § 501, Nov. 3, 1966, 80 Stat. 1273, provided that: ‘‘It is the purpose of this title [enacting this subchapter and amending sections 24, 371, 1715c, and 1715r of this title, section 663 of former Title 11, Bankruptcy, and section 77ddd of Title 15, Commerce and Trade] to assure the availability of credit on rea- sonable terms to units or organizations engaged in the group practice of medicine, optometry, or dentistry, particularly those in smaller communities and those sponsored by cooperative or other nonprofit organiza- tions, to assist in financing the construction and equip- ment of group practice facilities.’’ § 1749aaa–1. Premiums and other charges The Secretary shall fix premium charges for the insurance of mortgages under this sub- chapter, but such charges shall not be more than 1 per centum per annum of the amount of the principal obligation of the mortgage out- standing at any time, without taking into ac- count delinquent payments or prepayments. In addition to the premium charge, the Secretary is authorized to charge and collect such amounts as he may deem reasonable for the analysis of a proposed project and the appraisal and inspection of the property and improve- ments. Where the principal obligation of any mortgage accepted for insurance under this sub- chapter is paid in full prior to the maturity date, the Secretary is authorized to require the payment by the mortgagee of an adjusted pre- mium charge. This charge shall be 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 the maturity date. Where such prepayment occurs, 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 equi- table, of the current unearned premium charges theretofore paid. Premium charges fixed under this section shall be payable by the mortgagee either in cash, or in debentures which are the obligation of the General Insurance Fund at par plus accrued interest, at such times and in such manner as may be prescribed by the Secretary. (June 27, 1934, ch. 847, title XI, § 1102, as added Pub. L. 89–754, title V, § 502(a), Nov. 3, 1966, 80 Stat. 1275.) § 1749aaa–2. Payment of insurance benefits The mortgagee shall be entitled to receive the benefits of the insurance under this subchapter in the manner provided in subsection (g) of sec- tion 1713 of this title with respect to mortgages insured under that section. For such purpose the provisions of subsections (g), (h), (i), (j), (k), (l), and (n) of such section 1713 shall apply to mort- gages insured under this subchapter and all ref- erences in such subsections to such section 1713 shall be deemed to refer to this subchapter. (June 27, 1934, ch. 847, title XI, § 1103, as added Pub. L. 89–754, title V, § 502(a), Nov. 3, 1966, 80 Stat. 1275.) § 1749aaa–3. Regulations The Secretary shall prescribe such regulations as may be necessary to carry out this sub- chapter, after consulting with the Secretary of Health and Human Services with respect to any health or medical aspects of the program under