12 U.S.C. § 1715z–9 — Co-insurance of eligible mortgage, advance, or loan

(a) In addition to other insurance authority, the Secretary may, at a mortgagee's request and for a premium or other mortgagor charges no greater than otherwise applicable, insure or commit to insure an otherwise eligible mortgage, advance, or loan under a co-insurance contract. The mortgagee must: (1) take a percentage of any loss directly matching its co-insurance percentage, which cannot be below 10 percent, subject to reasonable limits for unusual or catastrophic losses; and (2) perform credit^* approval, appraisal, inspection, commitment, property-disposition, and other functions that regulations approve, with or without delegation or compensation and subject to audit, exception, or review. The contract must address actuarially sound premium sharing, mortgage reserves, benefit calculations, foreclosure, property handling before claim or settlement, assignee rights, and similar matters. A mortgagee in such a contract is not subject to State^* insurance-business laws merely because of the contract, its performance, or applicable Secretary regulations, including risk-retention rules on sale or assignment.

(b) For a dwelling or project approved for insurance before construction began, insurance cannot be granted unless construction inspection uses at least the standards and criteria used for other subchapter mortgage-insurance approvals.

(c) Repealed by Pub. L. 100–242, title IV, section 414(a), February 5, 1988, 101 Stat. 1907.

(d) Repealed by Pub. L. 100–242, title IV, section 401(a)(3), February 5, 1988, 101 Stat. 1898.

(e) The Secretary may not withdraw, deny, or delay insurance otherwise authorized under another chapter provision merely because this insurance is available. The Secretary may use this authority only if finding that continued use will not harm the flow of mortgage credit to older or declining neighborhoods or buyers of older, lower-cost housing.

(f)(1) For a multifamily project, the contract may require the mortgagee to take either all loss up to a fixed percentage of the mortgage's outstanding principal when the claim is made, or all losses in an approved portfolio up to a fixed percentage of the portfolio's outstanding principal when a portfolio claim is made, plus a share of loss above the applicable amount. (2) The Secretary may lend from the applicable insurance fund to public housing agencies concerning insured mortgages in default. (3) The Secretary may insure, under a co-insurance contract, a mortgage on a project assisted under the cited section 1715z–1 proviso, or a mortgage or mortgage advance made to a public housing agency for a project under construction that was not approved before construction. (4) “Public housing agency” has the meaning in 42 U.S.C. 1437a(b)(6); this section does not define it. (5) For a project mortgage made to a public housing agency, the Secretary may include authorized reserves and development costs in replacement cost, up to 5 percent of the otherwise allowable amount, if consistent with the agency's procedures and underwriting standards.

(g) Redesignated as subsection (f).

(h) For a mortgage insured under section 1715n(f) and secured by property to be rehabilitated or developed under 42 U.S.C. 1437o, co-insurance may provide: (1) benefits equal to 90 percent of the mortgage when foreclosure starts, or when the property is otherwise acquired after default, plus 90 percent of interest arrears when benefits are paid; (2) the mortgagee must remit 90 percent of property proceeds, including sale proceeds, after its actual reasonable property and security-enforcement costs, to the Secretary for the General Insurance Fund; (3) benefits are paid in cash unless the mortgagee asks in writing for debentures; and (4) the underwriter may reinsure 10 percent with a private or State mortgage-insurance agency.

(i) A mortgagee may assign its interest in a co-insured note or mortgage to a warehouse bank or other institution providing interim funding and retain the co-insurance risk, on terms set by the Secretary.

(i) [second subsection designation in the supplied text] By January 15 and July 15 each year, the Secretary must review mortgagee capital and other requirements, assess compliance, and, after an opportunity for hearing, adjust requirements as appropriate to improve the FHA funds' long-term financial soundness. Requirements must include minimum capital or net worth, the ratio between mortgagee capital and its co-insured mortgage volume, and other appropriate requirements. The Secretary must report the review, assessment, and reasons for adjustments to the Senate Banking, Housing, and Urban Affairs Committee and the House Banking, Finance and Urban Affairs Committee.