12 U.S.C. § 1715z — Homeownership or membership in cooperative association for lower income families

(a) Assistance payments and manufactured homes. (1) To help lower-income families become homeowners or members of housing cooperatives, the Secretary may make or promise periodic payments on their behalf. The payments go to mortgagees holding mortgages that meet this section's special requirements or that are assisted under a State^* or local loan, loan-insurance, or tax-abatement program. The Secretary must prefer low-income families who would probably be forced to move without help, including people likely to be displaced when rental housing is converted to a condominium or cooperative. The help may cover buying a condominium or cooperative membership. (2)(A) Despite other parts of this section, the Secretary may make payments for families whose income is no more than the limit in subsection (h)(2) to help them buy a manufactured home made of at least two modules and the lot where it is or will be located. These payments may cover no more than 20 percent of all units approved for assistance under this section after January 1, 1976. The payments go, on behalf of the lower-income manufactured-home owner, to the financial institution that makes or finances the loan or buys the obligation representing it. Section 1703 insurance must cover that loan or obligation. (B) These payments may not exceed the lesser of: (i) the unpaid part of the monthly payment for principal, interest, real and personal property taxes, insurance, and the section 1703 insurance premium after 20 percent of the owner's income is applied; or (ii) the difference between the monthly principal, interest, and section 1703 insurance-premium payment the owner must make and the principal-and-interest payment the owner would owe if the loan's interest rate were reduced by the difference between the maximum interest rate plus mortgage-insurance premium for subsection (i) mortgages when the loan was made and the rate those mortgages are presumed to have under the Secretary's regulations for subsection (c)(2).

(b) Eligibility. The homeowner or cooperative member must be lower income and meet the Secretary's eligibility rules. In addition: (1) A homeowner must be a mortgagor under a mortgage that meets and is insured under subsection (i) or (j)(4). A mortgage that meets subsection (i)(3)(A) but is insured under section 1715z–2 may also qualify if the mortgagor was otherwise eligible but was found not to be an acceptable credit^* risk for mortgage insurance under subsection (j)(4), section 1715l(d)(2), or section 1715y(c), and was accepted as a reasonably satisfactory credit risk under section 1715z–2. (2) The cooperative must operate either: (A) a housing project whose construction or substantial rehabilitation was financed by a mortgage insured under section 1715e or 1715l(d)(3), completed within two years before the assistance application, with no occupant before the family; or (B) a project financed under a State or local loan, loan-insurance, or tax-abatement program and approved for this section's benefits before construction or rehabilitation is complete. If a cooperative member who received payments transfers membership and occupancy rights to someone who meets the Secretary's eligibility rules and agrees to pay occupancy charges, the new member may qualify after applying for the unit. A unit in an existing cooperative project may also qualify if it meets the Secretary's standards and the family is a displaced family as defined in section 1715l(f), a family with at least five minor people, or a family living in low-rent public housing. The mortgage principal tied to the unit may not exceed $40,000, or $47,500 in an area where the Secretary permits an increase because costs require it. For a family with at least five people, those limits are $47,500 and $55,000.

(c) Homeowner payment limits, occupancy, recapture, and fund. (1) The Secretary pays the mortgagee for a mortgagor only while the mortgagor continues to occupy the property securing the mortgage. Payments may continue for a homeowner who assumes a subsection (i) or (j)(4) insured mortgage that previously received payments if the Secretary approves the homeowner. They may also continue after the mortgage is assigned to the Secretary. A new contract made after September 30, 1983, using authority approved for a fiscal year beginning after that date, may provide payments for no more than 10 years, unless it is connected with subsection (r) refinancing. Each payment is no more than the lesser of: (A) the unpaid balance of the monthly principal, interest, taxes, insurance, and mortgage-insurance-premium payment after applying 20 percent of the mortgagor's income; or (B) the difference between the payment for principal, interest, and mortgage insurance that the mortgagor must make and the principal-and-interest payment the mortgagor would owe at 1 percent annual interest, or 4 percent for a mortgage described in subsection (o). (2)(A) When the homeowner disposes of assisted property, or rents it for more than one year (including the owner's unit in a two- to four-family property), the Secretary must provide for recapture of the lesser of: (i) all assistance actually received under this section except subsection (e) amounts; or (ii) at least 50 percent of the property's net appreciation, as the Secretary determines. Net appreciation means the increase over the original purchase price, minus reasonable sale costs, reasonable improvement costs, and any increase in the mortgage amount at sale over the original balance caused by insurance under section 1715z–10. The recaptured assistance is a debt secured by the property to the extent the Secretary provides. (B) This recapture rule does not apply when the property is assumed under paragraph (1), or when it is subject to a mortgage, loan, or other credit advance insured under subsection (q). (3)(A) The Treasury fund established by this paragraph may be used, when appropriations approve it, to carry out subparagraph (B). It receives: (i) recaptured amounts; (ii) authority committed in a contract but unused because the mortgage, loan, or advance is refinanced, except as subsection (r) provides, or because payments end or are suspended before the contract's original end; and (iii) amounts received under subparagraph (C). (B) If payments end because of the 10-year limit and the Secretary finds that the homeowner cannot make the full mortgage, loan, or advance payments, the Secretary must, to the extent the fund has money, promise and make continued payments. The amount follows paragraph (1) or subsection (a)(2)(B), and the Secretary chooses the period. (C) Excess fund money must be invested in United States obligations or obligations guaranteed by the United States or its agencies as to principal and interest. Budget or contract authority recaptured from contracts for mortgages being refinanced must be rescinded if it is not needed for subsection-insured mortgage assistance.

(d) Cooperative-member payments. The Secretary may pay a mortgagee for a cooperative family only while the family occupies the project. The amount is calculated under subsection (c), using the member's proportional share of project-mortgage obligations for the items in that formula.

(e) Mortgage-handling costs. The Secretary may add an amount to the mortgagee's payment to reimburse mortgage-handling expenses. The added amount may be in addition to amounts calculated under (a)(2)(B), (c), (d), (j)(7), or (r).

(f) Income recertification. The Secretary must adopt procedures to recertify a mortgagor's or cooperative member's income every two years, or more often if desirable, and adjust assistance within subsection (c)'s formula.

(g) Sales price. The Secretary must issue regulations needed to ensure that the sales price or other consideration for a homeowner's assisted property is not above the appraised value used to calculate the maximum mortgage the Secretary will insure.

(h) Appropriations, income limits, and unit limits. (1) Congress may appropriate amounts needed for this section and its contracts. Outstanding contract authority may not exceed appropriated amounts. Before July 1, 1969, annual payments could not exceed $75 million; that maximum was increased by $125 million on July 1, 1969, $150 million on July 1, 1970, and $200 million on July 1, 1971, and later by amounts approved in the stated appropriation periods after June 30, 1974, and on or after October 1, 1983, using the additional title 42 authority identified in the section. Obligations over the life of post-October 1, 1983 contracts, other than subsection (r) mortgage obligations, may not exceed new budget authority appropriated after November 30, 1983. After that date, the Secretary must begin new insurance and assistance commitments and reservations within 30 days after the relevant appropriation is approved. One year after August 22, 1974, the Secretary could no longer make new contracts using authority appropriated before July 1, 1974. After May 20, 1983, the Secretary could not make new contracts using pre-November 30, 1983 appropriations, except under a commitment issued by the specified dates, for housing included under section 119 of the 1974 Act, or for housing on municipally owned land meeting the stated local-contribution requirements. In no event may the Secretary make a new contract after September 30, 1989, except a subsection (r) contract. (2) At initial occupancy, family income may not exceed 95 percent of area median income, adjusted for family size. The Secretary may set a higher or lower ceiling if construction costs, unusually high or low median incomes, or other factors require it. (3) Despite subsections (b)(2), (i)(3)(A), and (j)(1), no more than 25 percent of pre-July 1, 1969 contract authority and no more than 30 percent of additional post-June 30, 1969 contract authority may be used for existing dwellings or units in existing projects. This does not apply to subsection (r) contracts. (4) At least 10 percent of post-June 30, 1971 contract authority must be available only for dwellings or project units approved before substantial rehabilitation.

(i) Insurance for eligible homeowner mortgages. (1) On a mortgagee's application, the Secretary may insure a mortgage, including construction or rehabilitation advances under a self-help program, made to a mortgagor who meets subsection (b)'s assistance eligibility rules. The Secretary may issue an insurance commitment before execution or disbursement on terms and conditions prescribed by the Secretary. (2) The mortgage must meet section 1715l(d)(2) or 1715y(c), as modified here. (3) It must: (A) cover a single- or two-family dwelling approved before construction or substantial rehabilitation, a three-family dwelling approved before substantial rehabilitation, or a one-family condominium unit released from a multifamily project completed within two years before the application and never previously occupied except by the mortgagor. Existing dwellings or condominium units meeting the Secretary's standards may qualify; so may units previously assisted under subsection (j)(4), units in an existing section 1715z–1 project, and units in an existing project receiving section 1701s financial assistance. (B) For a condominium unit, have principal no more than $40,000, or $47,500 where the Secretary permits an increase for costs; for families of at least five people, the limits are $47,500 and $55,000. (C) For a non-condominium or cooperative unit, have principal, including approved initial service, appraisal, inspection, and other fees, no more than $40,000 or $47,500 in an approved higher-cost area; for families of at least five, the limits are $47,500 and $55,000. (D) For a two- or three-family dwelling, have principal including approved fees no more than $60,000 or $66,250 in an approved higher-cost area. (E) Be made to a mortgagor who paid at least 3 percent of the Secretary's estimated acquisition cost in cash or its equivalent, excluding the insurance premium paid when insured. (F) Have interest no higher than the annual rate the Secretary finds necessary for the mortgage market, considering primary and secondary market yields. (4) The Secretary may not deny insurance because the mortgage covers a two- or three-family dwelling or substantial rehabilitation instead of new construction. (5) For a two- or three-family mortgage, the Secretary must require the mortgagor not to discriminate against tenants because they receive or qualify for Federal, State, or local housing aid, and to agree that each rental unit will be occupied by or available to people and families with income no more than 100 percent of area median income.

(j) Insurance for nonprofit or public borrowers and resale. (1) In addition to subsection (i), the Secretary may insure a mortgage, including rehabilitation advances, made to an approved nonprofit organization or public body or agency to buy housing and rehabilitate it if deteriorating or substandard, for resale to lower-income purchasers eligible under subsection (b). Commitments may precede execution or disbursement. (2) The mortgage must: (A) be made to an approved private nonprofit organization or public body or agency to buy, intending later resale, and rehabilitate when needed, property consisting of at least four detached, semidetached, or row single-family dwellings, or at least four one-family units in structures with a Secretary-approved family-unit ownership plan. If deterioration or substandard condition is not involved, it may consist of one or more such dwellings or units. (B) Have principal no more than appraised purchase value plus estimated rehabilitation cost. (C) Have interest no more than the rate the Secretary finds necessary for the market, considering primary and secondary yields. (D) Be fully amortized by periodic payments within the Secretary's prescribed term, subject to (4)(E). (E) Release each dwelling from the blanket mortgage lien when sold under paragraph (4). (3) The mortgagor must show either that the property is in a sufficiently stable neighborhood with enough public facilities and amenities for long-term values, or that the purchase or rehabilitation, related owner activities, other neighborhood housing-owner activities, and public-authority actions promise to create a stable neighborhood. (4)(A) The mortgagor must agree, to the Secretary's satisfaction, to offer each dwelling after purchase and rehabilitation for sale to eligible lower-income people or families. (B) The Secretary may insure the buyer's mortgage. It may not exceed the blanket mortgage's unpaid principal allocable to that dwelling, must have the blanket mortgage's interest rate, and must be fully amortized by periodic payments over the blanket mortgage's remaining term, ignoring subparagraph (E). (C) The sale price must equal the allocable unpaid blanket-mortgage principal plus an additional amount of at least $200, which may be applied to closing costs and paid in cash or its equivalent, as the Secretary finds reasonable. (D) The dwelling is released from the blanket lien at sale. Until all dwellings are sold, the mortgagor must hold and operate unsold dwellings as rental units under the Secretary's terms. (E) When all dwellings are sold and released, blanket-mortgage insurance ends and no adjusted premium is charged for ending it. (5) Under a Secretary-approved family-unit ownership plan, “single-family dwelling,” “individual dwelling,” and their plural forms mean a family unit or units plus the undivided interest in common areas and facilities. This section does not otherwise define those terms. (6) Except for paragraph (5), “single-family dwelling” includes a Secretary-approved two- or three-family dwelling. This section does not otherwise define that term. (7) In addition to subsection (b) payments, the Secretary may pay a mortgagee for a nonprofit or public mortgagor the difference between the mortgage's monthly principal, interest, and insurance-premium payment and the principal-and-interest payment at 1 percent annual interest. (8) A mortgage on property that is not deteriorating or substandard may be insured only if the property is in an area where section 1715l(h) mortgages may be insured. (9) The Secretary may not deny insurance because the mortgage covers a two- or three-family dwelling or substantial rehabilitation rather than new construction.

(k) Rural allocation. From time to time, the Secretary must allocate and transfer to the Secretary of Agriculture a reasonable part of the authority approved under subsection (h)(1) to contract for assistance payments in rural areas and small towns, subject to this section's terms.

(l) Minor deductions. In calculating a person's income, subtract $300 for each minor member of that person's immediate family who lives with the family. Do not include that minor's earnings in the person's or family's income.

(m) Insurance end date. Except for a subsection (r) mortgage, no mortgage may be insured after September 30, 1989, unless the commitment to insure was made before then.

(n) Subdivision limit. After October 12, 1977, mortgages insured under this section on units in one subdivision may not, together, represent more than 40 percent of the subdivision's units. The limit does not apply to rehabilitated units, units or subdivisions in an established urban neighborhood or area where a sound community redevelopment plan needs concentrated subsidized units, as the Secretary determines, or subsection (r) mortgages.

(o) Higher mortgage limit for redevelopment. The Secretary may insure a mortgage whose principal is no more than 20 percent above the maximum in subsection (b)(2) or (i)(3) if it covers a dwelling in an urban neighborhood with a community-sponsored concentrated redevelopment or revitalization program, and the Secretary finds the increase necessary to let eligible families in substandard housing or facing involuntary displacement remain there in decent, safe, and sanitary housing.

(p) Higher limit for physical accessibility. The Secretary may insure a mortgage whose principal is no more than 10 percent above the subsection (b)(2) or (i)(3) maximum, or the subsection (o) maximum if applicable, when the dwelling will be occupied by a physically handicapped person^* and the increase is needed for accessibility and usability.

(q) Emergency housing-market assistance. (1) If the Secretary finds a substantial need to stimulate the housing market urgently, the Secretary may use no more than 75 percent of subsection (h)(1) authority to make or promise payments for homeowners, including manufactured-home owners, to mortgagees or lenders holding qualifying mortgages, loans, or advances. The Secretary may set consistent criteria and terms and may insure a mortgage assisted under this subsection. This authority ends September 30, 1989, or earlier when the Secretary finds the need no longer exists, except for prior commitments. (2) Payments may be made only for an eligible homeowner who either (A)(i) is a mortgagor under a mortgage insured under this subsection or (ii) is the original owner of a new two-or-more-module manufactured home and its lot, with section 1703 insurance on the financing, and who (B) had initial-occupancy family income no more than 130 percent of area median income, adjusted as the Secretary determines. (3) Payments continue only while the homeowner occupies the secured property; they may continue after assignment of an insured mortgage to the Secretary. (4) For a mortgage, payment is no more than the lesser of: (A) the unpaid monthly principal, interest, taxes, insurance, and mortgage-insurance-premium balance after applying at least 25 percent of income, although the Secretary may reduce that percentage but not below 20 percent; or (B) the difference between the payment required at the applicable maximum section 1709(b) level-payment mortgage rate and the principal-and-interest payment at at least 9.5 percent annual interest. (5) For a manufactured home, payment is no more than the lesser of: (A) the unpaid monthly principal, interest, real and personal property taxes, insurance, and section 1703 insurance-premium balance after applying at least 25 percent of income, reducible but not below 20 percent; or (B) the difference between the required payment and the principal-and-interest payment at an interest rate set by the Secretary of at least 12 percent annually. (6) The Secretary may add reasonable and necessary handling expenses. (7) Regulations must prevent the sale price or other consideration from exceeding the Secretary's appraised value. (8) Paragraph (5) payments may cover no more than 20 percent of units assisted under this subsection. (9) The Secretary may additionally insure, on application, a mortgage made to a mortgagor meeting paragraph (2), with an advance commitment allowed. (10) Such a mortgage must: (A) be a first lien on fee-simple real estate or a qualifying leasehold; (B) be made to and held by a responsible Secretary-approved mortgagee able to service it; (C) cover an approved one- to four-family dwelling, either approved before construction or completed within one year before the insurance application and never sold except to the mortgagor; (D) cover a principal residence whose price is no more than 82 percent of the applicable section 1709(b)(2) maximum principal obligation, calculated without that section's last sentence; (E) have satisfactory maturity and amortization; (F) have interest, excluding insurance premiums and service charges, no higher than the applicable section 1709(b) maximum; (G) be made to a mortgagor who paid at least 3 percent of estimated acquisition cost; and (H) contain the Secretary's required terms. (11) To the extent practicable, the Secretary must insure mortgages secured by properties that conserve land and energy. (12) When appropriate, an assisted mortgage must provide graduated payments under section 1715z–10. (13) The Secretary must allocate assistance fairly among regions, considering population, changes in building permits, housing-production needs, and other appropriate factors. This assistance is not subject to section 1439 of title 42. (14) When the homeowner disposes of assisted property or rents it for more than one year, the Secretary must recapture the lesser of: (A) assistance actually received, excluding paragraph (6) amounts; or (B) at least 50 percent of net appreciation. Net appreciation is the increase over original price minus reasonable sale and improvement costs and any mortgage-balance increase caused by section 1715z–10 insurance. The recapture rules must encourage marketable maintenance, and the recaptured amount is a property-secured debt to the extent provided. (15) Income must be recertified every two years, or more often if desirable, to adjust payments under paragraph (4) or (5).

(r) Refinancing. (1) On a mortgagee's application, the Secretary may insure a mortgage whose proceeds refinance a mortgage insured under this section. (2) The new mortgage must be made to a mortgagor meeting paragraph (3) and must: (A) be a first lien on fee-simple real estate or a leasehold lasting at least 99 renewable years or at least 10 years beyond the mortgage's maturity; (B) be made to and held by a Secretary-approved mortgagee; (C) not exceed the refinanced mortgage's outstanding principal plus unpaid interest; (D) have no longer maturity than the refinanced mortgage's unexpired term; (E) have an interest rate no higher than the rate needed for the market, considering primary and secondary yields, although the Secretary may raise it to compensate the mortgagee for amounts in (4)(A) and (B) not otherwise paid by the Secretary; and (F) meet the Secretary's refinancing criteria. (3) Despite subsection (h)(2), assistance may accompany this refinancing only for a family eligible for and receiving assistance on the mortgage being refinanced. (4) If appropriations provide, the Secretary may pay the mortgagor directly, through the mortgagee, or otherwise: (A) an approved refinancing incentive; and (B) approved refinancing costs, including discounts, origination fees, and closing costs. (5) Budget authority for assistance contracts on these mortgages must come from authority recaptured from contracts for mortgages being refinanced. For subsection (c)(3)(A), committed recaptured authority is not treated as unused. (6) The Secretary may identify and contact mortgagors to implement refinancing directly or by contract. Despite 5 U.S.C. § 552a(b), at an approved mortgagee's request the Secretary may disclose the name, address, unpaid principal balance, and interest rate of a qualifying mortgagor. (7) The Secretary must implement this subsection through a notice published in the Federal Register.