12 U.S.C. § 1715z–18: Shared appreciation…

Summary

The Secretary may insure mortgages on buildings with five or more rental units that let the lender take a set percentage of the property’s future increase in value. The Secretary must write rules for these loans, including limits on interest and requirements lenders must follow. The lender’s share of the value is due when the loan ends, is paid off, or the property is sold or transferred. Loans must run at least 15 years. Monthly payments must be equal and set so the debt would pay off in no more than 30 years at the loan’s interest rate. If the loan won’t fully pay off in the term, the loan amount cannot exceed 85 percent of the property’s estimated value. Net appreciated value — the amount by which the sale price (after seller costs) is more than the project’s approved completed cost; if there’s no sale, an approved appraisal is used. If a borrower defaults, the lender may get insurance help but not the lender’s share of appreciation. The Secretary must set a maximum percentage of appreciation the lender can get and must require lenders to disclose key loan features to borrowers. State laws that limit increases in loan balances do not apply to these mortgages. No more than 5,000 dwelling units may be covered by these loans in any fiscal year.

Title 12, §1715z–18

Banks and Banking, Source: USLM XML via OLRC

(a)Five or more family units; requirements

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)Payment of mortgagee’s share of net appreciated value; term of mortgage; repayment; “net appreciated value” defined

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)Entitlement of mortgagee upon default

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)Maximum percentage of net appreciated value; disclosure requirements

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)Inapplicability of State constitution, statute, etc., limiting or prohibiting increases in outstanding loan balance

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)Number of dwelling units

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