§1715z–18 — Title 12 Banks and Banking | U.S. Code

Summary

The Secretary can insure mortgages on buildings with 5 or more family units that let the lender get a set share of any future increase in the property’s value. The loans must follow rules the Secretary makes, including limits on interest rates. The lender’s share is paid when the loan ends, is paid off, or the property is sold or transferred—whichever happens first. Loan terms must be at least 15 years with equal monthly payments sized so the loan would be paid off in no more than 30 years at the fixed rate. If the loan won’t fully amortize in that time, the loan principal can’t be more than 85 percent of the property’s estimated value. “Net appreciated value” means how much the sale price (after selling costs) exceeds the project’s completed cost as approved by the Secretary; if there’s no sale, an approved appraisal sets the price. If the borrower defaults, the lender can get insurance benefits but not the shared appreciation amount, and that shared amount isn’t counted as the original principal for insurance purposes. The Secretary must set the maximum share percentage and require lenders to disclose terms to borrowers. These insured loans are not subject to state limits on increasing a loan balance after signing. No more than 5,000 dwelling units may be covered by these mortgages in any fiscal year.

Title 12, §1715z–18

Banks and Banking — Source: USLM XML via OLRC

(a)Notwithstanding any provision of this subchapter that is inconsistent with this section, the Secretary may insure, under any provision of this subchapter providing for insurance of mortgages on properties including 5 or more family units, a mortgage secured by a first lien on the property that (1) provides for the mortgagee to share in a predetermined percentage of the property’s net appreciated value; and (2) meets such other conditions, including limitations on the rate of interest which may be charged, as the Secretary may require by regulation.

(b)The mortgagee’s share of a property’s net appreciated value shall be payable upon maturity or upon payment in full of the loan or sale or transfer (as defined by the Secretary) of the property, whichever occurs first. The term of the mortgage shall not be less than 15 years, and shall be repayable in equal monthly installments of principal and fixed interest during the mortgage term in an amount which would be sufficient to retire a debt with the same principal and fixed interest rate over a period not exceeding 30 years. In the case of a mortgage which will not be completely amortized during the mortgage term, the principal obligation of the mortgage may not exceed 85 percent of the estimated value of the property or project. For purposes of this section, the term “net appreciated value” means the amount by which the sales price of the property (less the mortgagor’s selling costs) exceeds the actual project cost after completion, as approved by the Secretary. If there has been no sale or transfer at the time the mortgagee’s share of net appreciated value becomes payable, the sales price for purposes of this section shall be determined by means of an appraisal conducted in accordance with procedures approved by the Secretary and provided for in the mortgage.

(c)In the event of a default, the mortgagee shall be entitled to receive the benefits of insurance in accordance with section 1713 of this title, but such insurance benefits shall not include the mortgagee’s share of net appreciated value. The term “original principal face amount of the mortgage” as used in section 1713 of this title shall not include the mortgagee’s share of net appreciated value.

(d)The Secretary shall establish by regulation the maximum percentage of net appreciated value which may be payable to a mortgagee as the mortgagee’s share. The Secretary shall also establish disclosure requirements applicable to mortgagees making mortgage loans pursuant to this section, to assure that mortgagors are informed of the characteristics of such mortgages.

(e)Mortgages insured pursuant to this section which contain provisions for sharing appreciation or which otherwise require or permit increases in the outstanding loan balance which are authorized under this section or under applicable regulations shall not be subject to any State constitution, statute, court decree, common law, rule, or public policy limiting or prohibiting increases in the outstanding loan balance after execution of the mortgage.

(f)The number of dwelling units included in properties covered by mortgages insured pursuant to this section in any fiscal year may not exceed 5,000.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1988—Subsec. (b). Pub. L. 100–242, § 429(j)(1), substituted “For purposes of this section, the term ‘net appreciated value’ means the amount by which the sales price of the property (less the mortgagor’s selling costs) exceeds the actual project cost after completion, as approved by the Secretary” for “For purposes of this section, the term ‘net appreciated value’ means the amount by which the sales price of the property (less the mortgagor’s selling costs) exceeds the value (or replacement cost, as appropriate) of the property at the time the commitment to insure is issued (with adjustments for capital improvements stipulated in the loan contract)”. Subsec. (c). Pub. L. 100–242, § 429(j)(2), (3), substituted “in accordance with section 1713 of this title” for “in accordance with section 1710 of this title” and “The term ‘original principal face amount of the mortgage’ as used in section 1713 of this title shall not include the mortgagee’s share of net appreciated value” for “The term ‘original principal obligation of the mortgage’ as used in section 1710(a) of this title shall not include the mortgagee’s share of net appreciated value”.

§1715z–18 Shared appreciation mortgages for multifamily housing

Summary

Title 12, §1715z–18

Notes & Related Subsidiaries

Editorial Notes

Amendments

Citations & Metadata