12 U.S.C. § 1738 — Insurance of mortgages

submitted 92 years ago by ch. 847 to r/title-12-BANKS-AND-BANKING · 1,575 words · no verdicts yet

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This section authorizes insurance for eligible mortgages, subject to limits on amounts, dates, property, loan terms, and premiums. It also sets preferences, refinancing rules, and rules making an issued insurance contract conclusive evidence of eligibility.

(a) Relief of housing shortage; eligibility; limitations on time and amount.—To help relieve the existing serious housing shortage and increase housing available to World War II veterans at prices they can reasonably afford, the Secretary may, on a mortgagee’s application, insure an eligible mortgage under this subchapter. The Secretary may also commit to insure a mortgage before it is signed or money is paid on it, on terms the Secretary sets. The total principal obligations of all mortgages insured under this subchapter may not exceed $6,150,000,000, unless the President approves an increase to no more than $6,650,000,000. No mortgage may be insured under this section after April 30, 1948, except under a commitment issued by that date or to refinance a mortgage already insured under this section, if the refinancing does not exceed the existing mortgage’s original principal or remaining term. No mortgage may be insured under section 1743 of this title after March 1, 1950, except under a commitment issued by that date or to refinance a mortgage insured under that section, if the refinancing does not exceed the existing mortgage’s original principal or remaining term. A mortgage under section 1743 also requires the mortgagor to swear that, when choosing tenants, the mortgagor will not discriminate against a family because it has children, and will not sell the property while insurance continues unless the buyer makes the same certification. The certifications must be filed with the Secretary. Violating one is a misdemeanor punishable by a fine of up to $500. The Secretary may also require insured properties to be available for rent, in the cases and for the periods the Secretary sets. Despite the first limit in this subsection, mortgages under sections 1744 and 1746 may be insured if their combined principal obligations, plus the principal obligations under section 1745, do not exceed section 1745’s aggregate limit. Despite the second limit, an otherwise eligible section 1743 mortgage may be insured if its application reached the Department of Housing and Urban Development by March 1, 1950; for this purpose, the authorized section 1743 insurance limit is increased by up to $500,000,000. (b) Eligibility requirements.—A mortgage qualifies for insurance under this section only if— (1) it was made to and is held by a mortgagee the Secretary approved as responsible and able to service it properly; (2) its principal obligation, including approved initial service, appraisal, inspection, and other fees, is no more than 90 percent of the Secretary’s estimated property value when the mortgage is accepted for insurance. For applications received by March 31, 1948, it may instead be no more than 90 percent of the Secretary’s estimate of necessary current cost, including land and approved initial charges and fees. The property may be urban, suburban, or rural and must have a dwelling principally for residential use by no more than four families, approved for mortgage insurance before construction begins. The principal may never exceed $5,400 for one family, $7,500 for two, $9,500 for three, or $12,000 for four. If the Secretary finds that those limits make construction infeasible in a particular time or area without sacrificing sound construction, design, or livability, the Secretary may set higher limits by regulation or otherwise, up to $8,100 for one family, $12,500 for two, $15,750 for three, or $18,000 for four; (3) its maturity satisfies the Secretary but is no more than 25 years from insurance; (4) it fully amortizes the loan under provisions satisfactory to the Secretary; (5) its interest, excluding insurance premiums, is no more than 4 percent per year on the outstanding principal; (6) it satisfactorily applies the mortgagor’s periodic payments, excluding interest and the required insurance premium, to reducing principal; and (7) it contains terms the Secretary prescribes about insurance, repairs, alterations, taxes, default reserves, late charges, foreclosure, early maturity, additional or junior liens, and other matters. (c) Premium charges; payments; acceptance; preferences; adjustments and refunds.—The Secretary may set the insurance premium. For any mortgage, it must equal at least one-half of 1 percent per year and no more than 1½ percent per year of outstanding principal, without counting late payments or prepayments. The mortgagee must pay the premiums in cash or in the Secretary’s debentures issued under this subchapter, at face value plus accrued interest, as the Secretary directs. The Secretary may require one or more premiums when insurance begins, using a discount rate no higher than the mortgage’s interest rate. After the mortgage is presented and the initial premium and any required charges are offered, the Secretary may accept it for insurance by endorsement or another prescribed method if it complies with this subchapter. The Secretary may not accept it unless the related project is an acceptable risk in light of the housing shortage described here. If the mortgage’s principal is paid in full before maturity, the Secretary may require an equitable adjusted premium, not greater than the total premiums that otherwise would have been due through maturity. The Secretary may also refund to the mortgagee for the mortgagor all or an equitable part of current unearned premiums already paid. The Secretary must set procedures giving World War II veterans, their immediate families, and hardship cases as the Secretary defines a preference or priority to buy or rent insured properties. (d) Conclusive insurance contract.—An insurance contract the Secretary has executed, whether before or after this section, conclusively proves that the mortgage was eligible. An approved mortgagee may not contest the contract’s validity from the date it was executed, except for fraud or misrepresentation by that mortgagee.

the actual law source: uscode.house.gov ↗public domain

(a) Relief of housing shortage; eligibility; limitations on time and amount

In order to assist in relieving the acute shortage of housing which now exists and to increase the supply of housing accommodations available to veterans of World War II at prices within their reasonable ability to pay, the Secretary is authorized, upon application by the mortgagee, to insure as hereinafter 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 aggregate amount of principal obligations of all mortgages insured under this subchapter shall not exceed $6,150,000,000 except that with the approval of the President such aggregate amount may be increased to not to exceed $6,650,000,000: Provided further, That no mortgage shall be insured under this section after April 30, 1948, except (A) pursuant to a commitment to insure issued on or before April 30, 1948, or (B) a mortgage given to refinance an existing mortgage insured under this section and which does not exceed the original principal amount and unexpired term of such existing mortgage, and no mortgage shall be insured under section 1743 of this title after March 1, 1950, except (i) pursuant to a commitment to insure issued on or before March 1, 1950, or (ii) a mortgage given to refinance an existing mortgage insured under section 1743 of this title and which does not exceed the original principal amount and unexpired term of such existing mortgage: Provided further, That no mortgage shall be insured under section 1743 of this title unless the mortgagor certifies under oath that in selecting tenants for the 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 insurance is in effect unless the purchaser so certifies, such certifications to be filed with the Secretary; and violation of any such certification shall be a misdemeanor punishable by a fine of not to exceed $500: And provided further, That the Secretary shall, in his discretion, have power to require the availability for rental purposes of properties covered by mortgages insured under this subchapter, in such instances and for such periods of time as he may prescribe.

Notwithstanding the first proviso of this subsection, mortgages may be insured under sections 1744 and 1746 of this title if the aggregate amounts of principal obligations of mortgages insured under said sections plus the aggregate amount of principal obligations of mortgages insured under section 1745 of this title do not exceed the limitation contained in said section 1745 upon the aggregate amount of principal obligations of mortgages insured pursuant to said section.

Notwithstanding the second proviso of this subsection, mortgages otherwise eligible for insurance under section 1743 of this title may be hereafter insured thereunder if the application for such insurance was received by the Department of Housing and Urban Development on or before March 1, 1950, and for such purpose the aggregate amount of principal obligations authorized to be insured under section 1743 of this title is increased by not to exceed $500,000,000.

(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 responsible and able to service the mortgage properly;

(2)

involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Secretary shall approve) in an amount not to exceed 90 per centum of the Secretary’s estimate of the value (as of the date the mortgage is accepted for insurance), except that as to applications received by the Secretary on or before March 31, 1948, the mortgage may involve a principal obligation in an amount not to exceed 90 per centum of the Secretary’s estimate of the necessary current cost (including the land and such initial service charges and such appraisal, inspection, and other fees as the Secretary shall approve); of a property, urban, suburban, or rural, upon which there is located a dwelling designed principally for residential use for not more than four families in the aggregate, which is approved for mortgage insurance prior to the beginning of construction. The principal obligation of such mortgage shall in no event, however, exceed—

(A)

$5,400 if such dwelling is designed for a single-family residence, or

(B)

$7,500 if such dwelling is designed for a two-family residence, or

(C)

$9,500 if such dwelling is designed for a three-family residence, or

(D)

$12,000 if such dwelling is designed for a four-family residence:

Provided, That the Secretary may, if he finds that at any time or in any particular geographical area it is not feasible, within such limitations of maximum mortgage amounts, to construct dwellings without sacrifice of sound standards of construction, design, or livability, prescribe by regulation or otherwise higher maximum mortgage amounts not to exceed—

(A)

$8,100 if such dwelling is designed for a single-family residence, or

(B)

$12,500 if such dwelling is designed for a two-family residence, or

(C)

$15,750 if such dwelling is designed for a three-family residence, or

(D)

$18,000 if such dwelling is designed for a four-family residence.

(3)

have a maturity satisfactory to the Secretary but not to exceed twenty-five 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 4 per centum per annum on the amount of the principal obligation outstanding at any time;

(6)

provide, in a manner satisfactory to the Secretary, for the application of the mortgagor’s periodic payments (exclusive of the amount allocated to interest and to the premium 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, payment 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.

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 equivalent to one-half of 1 per centum per annum nor more than an amount equivalent to 1½ per centum 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, either in cash, or in debentures issued by the Secretary 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 insured, 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 presentation of a mortgage for insurance and the tender of the initial premium charge and such other charges as the Secretary may require, 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 shortage of housing referred to in this section. In the event that the principal obligation of any mortgage accepted for insurance under this subchapter is paid in full prior to the maturity date, the Secretary is further authorized in his discretion to require the payment by the mortgagee of an adjusted premium charge in such amount as the Secretary determines to be equitable, 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 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 unearned premium charges theretofore paid. The Secretary shall prescribe such procedures as in his judgment are necessary to secure to veterans of World War II, and their immediate families, and to hardship cases as defined by the Secretary, preference or priority of opportunity to purchase or rent properties covered by mortgages insured under this subchapter.

(d) Conclusiveness of insurance contract as to eligibility

Any contract of insurance heretofore or hereafter executed by the Secretary under this subchapter 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.

Source credit: (June 27, 1934, ch. 847, title VI, § 603, as added Mar. 28, 1941, ch. 31, § 1, 55 Stat. 56; amended Sept. 2, 1941, ch. 410, 55, Stat. 686; May 26, 1942, ch. 319, §§ 1–4, 14(b), 56 Stat. 301, 305; Mar. 23, 1943, ch. 21, § 1, 57 Stat. 42; Oct. 15, 1943, ch. 259, § 1, 57 Stat. 571; June 30, 1944, ch. 334, 58 Stat. 648; Mar. 31, 1945, ch. 48, § 1, 59 Stat. 47; May 22, 1946, ch. 268, § 10(a)–(d), 60 Stat. 212, 213; June 30, 1947, ch. 163, title I, § 2, 61 Stat. 193; Aug. 5, 1947, ch. 495, § 1, 61 Stat. 777; Dec. 27, 1947, ch. 525, § 1, 61 Stat. 945; Mar. 31, 1948, ch. 165, § 1(a)–(c), 62 Stat. 101; Aug. 10, 1948, ch. 832, title I, § 101(a), (k)(2), 62 Stat. 1268, 1273; Mar. 30, 1949, ch. 42, title III, § 304, 63 Stat. 29; July 15, 1949, ch. 338, title II, § 201(3), 63 Stat. 421; Aug. 30, 1949, ch. 524, 63 Stat. 681; Oct. 25, 1949, ch. 729, § 1(4), 63 Stat. 905; Apr. 20, 1950, ch. 94, title I, §§ 119, 122, 64 Stat. 57, 59; Pub. L. 90–19, § 1(a)(1), (3), (4), (n), May 25, 1967, 81 Stat. 17, 19.)

history & why it existsrecord from the source credit

1934Enacted · Act of June 27, 1934, ch. 847 · 55 Stat. 56
1941Amended · Act of Sept. 2, 1941, ch. 410
1942Amended · Act of May 26, 1942, ch. 319 · 56 Stat. 301, 305
1943Amended · Act of Mar. 23, 1943, ch. 21 · 57 Stat. 42
1943Amended · Act of Oct. 15, 1943, ch. 259 · 57 Stat. 571
1944Amended · Act of June 30, 1944, ch. 334 · 58 Stat. 648
1945Amended · Act of Mar. 31, 1945, ch. 48 · 59 Stat. 47
1946Amended · Act of May 22, 1946, ch. 268 · 60 Stat. 212, 213
1947Amended · Act of June 30, 1947, ch. 163 · 61 Stat. 193
1947Amended · Act of Aug. 5, 1947, ch. 495 · 61 Stat. 777
1947Amended · Act of Dec. 27, 1947, ch. 525 · 61 Stat. 945
1948Amended · Act of Mar. 31, 1948, ch. 165 · 62 Stat. 101
1948Amended · Act of Aug. 10, 1948, ch. 832 · 62 Stat. 1268, 1273
1949Amended · Act of Mar. 30, 1949, ch. 42 · 63 Stat. 29
1949Amended · Act of July 15, 1949, ch. 338 · 63 Stat. 421
1949Amended · Act of Aug. 30, 1949, ch. 524 · 63 Stat. 681
1949Amended · Act of Oct. 25, 1949, ch. 729 · 63 Stat. 905
1950Amended · Act of Apr. 20, 1950, ch. 94 · 64 Stat. 57, 59
1967Amended · Pub. L. 90-19 · 81 Stat. 17, 19

A history note hasn’t been published yet. The record shows enactment by ch. 847 on 1934-06-27.

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