12 U.S.C. § 1715z–8 — Mortgage assistance payments for middle-income families

(a) When the Secretary decides it is needed to advance the purposes of section 501 of the Emergency Home Finance Act of 1970, the Secretary may make, and contract to make, periodic assistance payments for middle-income families. The assistance consists of interest-subsidy payments to the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, called “the investor,” for mortgages made after July 24, 1970 that meet this section's special requirements.

(b) A middle-income family qualifies if it is the mortgagor under a mortgage that is (1) insured under subsection (j), (2) guaranteed under title 38, chapter 37, or (3) a conventional mortgage meeting subsection (j)(3). The Secretary may also require that, when the family acquired the property, the mortgagor's income was no more than the area's median income as the Secretary determines it, adjusted for smaller and larger families.

(c) Subsidy payments stop when (1) the mortgagor stops occupying the property securing the mortgage, (2) the investor no longer holds the mortgage, or (3) the interest rate paid by the mortgagor reaches the rate stated in the mortgage.

(d)(1) Subsidies apply to mortgages on which the mortgagor's monthly principal-and-interest payment equals the payment required by an effective annual interest rate of 7 percent, including discounts and points or similar charges but excluding mortgage-insurance premiums, or a higher rate up to the rate stated in the mortgage. The mortgagor must be able to make that payment by applying at least 20 percent of income to homeownership expenses. “Monthly homeownership expense” includes monthly principal, interest, mortgage-insurance premium, insurance, and taxes due under the mortgage.

(2) The Secretary may also make periodic assistance payments for middle-income cooperative members. These are interest subsidies to the investor for mortgages insured after July 24, 1970 under section 1715e and executed by cooperatives limited to middle-income families. For this paragraph: (A) “mortgagor” in subsection (b), for a cooperative-housing-project mortgage, means a cooperative member; (B) “acquisition of the property” in subsection (b) means the family's application for a dwelling unit; and (C) subsection (c) does not apply to a cooperative mortgagor. For that mortgagor, payments stop when the investor no longer holds the mortgage or the cooperative stops limiting membership to families whose income at application meets the Secretary's subsection (b) requirements.

(e) Each subsidy equals the difference, as the Secretary determines it, between the investor's total interest received during a calendar quarter on assisted mortgages it bought and the interest it would have received if the mortgages' yield equaled the sum of (1) its average annual-percentage cost of all borrowed money outstanding in the immediately preceding quarter and (2) the annual percentage needed for its administrative and other expenses and a reasonable economic return, as the Secretary finds necessary and appropriate to provide middle-income families with additional mortgage credit^* at reasonable rates.

(f) The Secretary must adopt procedures to recertify mortgagor income every two years, or more often if the Secretary considers that desirable, so payments under subsection (d) can be adjusted.

(g) The Secretary must issue regulations needed to ensure that the sales price or other consideration paid when a homeowner buys the property is not higher than the appraised value used to calculate the maximum mortgage the Secretary will insure.

(h)(1) Congress may appropriate amounts needed for the Secretary's subsidies. Total contracts for those payments may not exceed amounts approved in appropriation Acts. Payments under those contracts may not exceed $105,000,000 during the first year of contracts entered into before July 1, 1971. That amount increases by another $105,000,000 during the first year of additional contracts entered into on July 1 of 1971 and 1972.

(2) No subsidy may be paid after June 30, 1973, except under a contract entered into on or before that date.

(i) Family income includes income from every source of every household family member, but the Secretary must exclude income earned by a minor.

(j)(1) On a mortgagee's application, the Secretary may insure a mortgage made by a mortgagor who meets subsection (b)'s assistance requirements. The Secretary may issue an insurance commitment before the mortgage is executed or money is disbursed, on terms and conditions the Secretary sets.

(2) The mortgage must meet section 1715l(d)(2) or 1715y(c), as modified by this subsection. In the Secretary's discretion, up to 25 percent of this section's authority may be used for existing housing.

(3) The mortgage must: (i) cover a single-family home approved before construction began, or a one-family condominium unit released from a multifamily project completed within two years before the assistance application, with no previous occupant other than the mortgagor; (ii) cover a home appraised at no more than $20,000, with an increase of no more than 50 percent in a geographic area where the Secretary authorizes it after finding that costs require it; and (iii) be made to a mortgagor who paid cash or its equivalent toward the property equal to 3 percent of the first $15,000 of appraised value, 10 percent of the value over $15,000 through $25,000, and 20 percent of value over $25,000.