12 U.S.C. § 1715z–3: Special Risk Insurance Fund

Summary

Creates a Special Risk Insurance Fund and explains how certain FHA mortgage insurance programs work and how money is handled. Lenders with mortgages insured under 12 U.S.C. 1715z(i), 1715z(j)(4), 1715z–2, or 1715z–8 get insurance benefits under the same rules that apply to other FHA-insured loans, but with the Special Risk Insurance Fund taking the place of the Mutual Mortgage Insurance Fund. Lenders with mortgages insured under 1715z(j)(1) or 1715z–1 get benefits under rules tied to 1713, with the General Insurance Fund references read instead as the Special Risk Insurance Fund. The Secretary may, when he buys a loan, instead pay the lender the unpaid principal plus accrued interest and approved advances, following his rules. For some premiums the charge must be paid only in cash or in debentures of the Special Risk Insurance Fund. The Secretary must use the Special Risk Insurance Fund as a revolving fund for insurance under 1715n(e), 1715x(a)(2), 1715z, 1715z–1, 1715z–2, and 1715z–8. The Secretary may advance up to $20,000,000 from the General Insurance Fund to the Special Risk Insurance Fund; that advance must be repaid with interest on terms the Secretary sets. Fees, premiums, earnings, and other income go into the fund. Payments for claims, debenture principal and interest, property costs, and administrative expenses come out of the fund. Extra money can be kept with the U.S. Treasurer or invested in U.S. government obligations, and to the extent possible should support the residential mortgage market. With Treasury approval, the Secretary may buy the fund’s debentures on the open market at a competitive yield and cancel them. The Secretary may insure mortgages near military bases that do not meet normal rules if he finds the benefits outweigh the risk and the Secretary of Defense certifies no planned major cuts in personnel; those loans are covered by the Special Risk Insurance Fund. The Secretary sets premiums and rules for that program and must do an annual risk review and report the findings in the FHA Annual Management Report.

Title 12, §1715z–3

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(a)Entitlement to benefits; computation and payment of benefits to mortgagee

(1)Any mortgagee under a mortgage insured under section 1715z(i), (j)(4), 1715z–2, or 1715z–8 of this title shall be entitled to receive the benefits of the insurance as provided in section 1710(a) of this title with respect to mortgages insured under section 1709 of this title. The provisions of subsections (b), (c), (d), (g), (j), and (k) of section 1710 of this title shall be applicable to mortgages insured under section 1715z(i), (j)(4), 1715z–2, or 1715z–8 of this title, except that all references therein to the “Mutual Mortgage Insurance Fund” shall be construed to refer to the “Special Risk Insurance Fund”, and all references therein to section 1709 of this title shall be construed to refer to section 1715z(i), (j)(4), 1715z–2, or 1715z–8 of this title, as may be appropriate.

(2)Any mortgagee under a mortgage insured under section 1715z(j)(1) or 1715z–1 of this title shall be entitled to receive the benefits of insurance as provided in section 1713(g) of this title with respect to mortgages insured under section 1713 of this title. The provisions of subsections (d), (e), (h), (i), (j), (k), (l), and (n) of section 1713 of this title shall be applicable to mortgages insured under section 1715z(j)(1) or 1715z–1 of this title, except that all references therein to the “General Insurance Fund” shall be construed to refer to the “Special Risk Insurance Fund” and the premium charge provided in section 1713(d) of this title shall be payable only in cash or debentures of the Special Risk Insurance Fund.

(3)In lieu of the amount of insurance benefits computed pursuant to paragraph (1) or (2) of this subsection the Secretary, in his discretion and in accordance with such regulations as he may prescribe, may (with respect to any mortgage loan acquired by him) compute and pay insurance benefits to the mortgagee in a total amount equal to the unpaid principal balance of the loan plus any accrued interest and any advances approved by the Secretary and made previously by the mortgagee under the provisions of the mortgage.

(b)Creation of fund; authorization for advancements; repayment; crediting of charges and fees; payments from fund; authorization of appropriations for losses; deposits to fund; open-market purchases of debentures which are obligations of fund

There is hereby created a Special Risk Insurance Fund (hereinafter referred to as the “fund”) which shall be used by the Secretary as a revolving fund for carrying out the mortgage insurance obligations of section 1715n(e), 1715x(a)(2), 1715z, 1715z–1, 1715z–2,1 and 1715z–8 of this title, and the Secretary is hereby authorized to advance to the fund, at such times and in such amounts as he may determine to be necessary, a total sum of $20,000,000 from the General Insurance Fund established pursuant to the provisions of section 1735c of this title. Such advance shall be repayable at such times and at such rates of interest as the Secretary deems appropriate. Premium charges, adjusted premium charges, inspection and other fees, service charges, and any other income received by the Secretary under section 1715n(e), 1715x(a)(2), 1715z, 1715z–1, 1715z–2, and 1715z–8 of this title, together with all earnings on the assets of the fund, shall be credited to the fund. All payments made pursuant to claims of mortgagees with respect to mortgages insured under section 1715x(a)(2), 1715z, 1715z–1, 1715z–2, and 1715z–8 of this title or pursuant to section 1715n(e) of this title, cash adjustments, the principal of and interest paid on debentures which are the obligation of the fund, expenses incurred in connection with or as a consequence of the acquisition and disposal of property acquired under such sections, and all administrative expenses in connection with the mortgage insurance operations under such sections shall be paid out of the fund. Moneys in the fund not needed for current operations of the fund shall be deposited with the Treasurer of the United States to the credit of the fund or invested in bonds or other obligations of, or in bonds or other obligations guaranteed by, the United States or any agency of the United States: Provided, That such moneys shall to the maximum extent feasible be invested in such bonds or other obligations the proceeds of which will be used to directly support the residential mortgage market. The Secretary, with the approval of the Secretary of the Treasury, may purchase in the open market debentures which are the obligation of the fund. Such purchases shall be made at a price which will provide an investment yield of not less than the yield obtained from other investments authorized by this section. Debentures so purchased shall be canceled and not reissued.

(c)Mortgage insurance for military impacted areas; criteria; obligation of Special Risk Insurance Fund; establishment of premiums and other charges

(1)Notwithstanding the provisions of this chapter or any other Act, and without regard to limitations upon eligibility contained in any section of this subchapter, the Secretary is authorized, upon application by the mortgagee, to insure under any section of this subchapter a mortgage executed in connection with the construction, repair, rehabilitation, or purchase of property located near any installation of the Armed Forces of the United States in federally impacted areas in which the conditions are such that one or more of the eligibility requirements applicable to the section under which insurance is sought could not be met, if (A) the Secretary finds that the benefits to be derived from such use outweigh the risk of probable cost to the Government, and (B) the Secretary of Defense certifies that there is no intention insofar as can reasonably be foreseen to curtail substantially the personnel assigned or to be assigned to such installation. The insurance of a mortgage pursuant to this subsection shall be the obligation of the Special Risk Insurance Fund.

(2)The Secretary is authorized (A) to establish such premiums and other charges as may be necessary to assure that the mortgage insurance program pursuant to this subsection is made available on a basis which, in the Secretary’s judgment, is designed to be actuarially sound and likely to maintain the fiscal integrity of such program, and (B) to prescribe such terms and conditions relating to insurance pursuant to this subsection as may be found by the Secretary to be necessary and appropriate, and which are to the maximum extent possible, consistent with provisions otherwise applicable to mortgage insurance and payment of insurance benefits.

(3)The Secretary shall undertake an annual assessment of the risks associated with each of the insurance programs comprising the Special Risk Insurance Fund, and shall present findings from such review to the Congress in the FHA Annual Management Report.

Notes & Related Subsidiaries

Editorial Notes

References in Text

Subsection (k) of section 1710 of this title, referred to in subsec. (a)(1), was repealed by Pub. L. 105–276, title VI, § 601(c), Oct. 21, 1998, 112 Stat. 2673. section 1715z–2 of this title, referred to in subsecs. (a)(1) and (b), was repealed by Pub. L. 110–289, div. B, title I, § 2120(a)(6),

July 30, 2008, 122 Stat. 2835. This chapter, referred to in subsec. (c)(1), was in the original “this Act”, meaning act

June 27, 1934, ch. 847, 48 Stat. 1246, which is classified principally to this chapter (§ 1701 et seq.). For complete classification of this Act to the Code, see Tables.

Amendments

1994—Subsec. (b). Pub. L. 103–233, § 105(a), struck out after fourth sentence “There is authorized to be appropriated such sums as may be needed from time to time to cover losses sustained by the fund in carrying out the mortgage insurance obligations of section 1715n(e), 1715x(a)(2), 1715z, 1715z–1, 1715z–2, and 1715z–8 of this title.” Subsec. (c)(3). Pub. L. 103–233, § 103(g)(1), added par. (3). 1977—Subsec. (c). Pub. L. 95–128 substituted provisions of pars. (1) and (2) respecting mortgage insurance for military impacted areas, criteria therefore, and establishment of premiums and other charges for prior subsec. (c), which had authorized use of the Special Risk Insurance Fund to carry out mortgage insurance obligations of section 1709 and 1713 of this title to provide housing for military personnel, Federal civilian employees, and Federal contractor employees assigned to duty or employed at or in connection with any installation of the Armed Forces in federally impacted areas where in the judgment of the Secretary (1) the residual housing requirements for persons not associated with such installations were insufficient to sustain the housing market in the event of substantial curtailment of employment of personnel assigned to such installations, and (2) the benefits to be derived from such use outweighed the risk of possible cost to the Government. 1974—Subsec. (c). Pub. L. 93–383 added subsec. (c). 1970—Subsec. (a)(1). Pub. L. 91–351, § 503(1), inserted references to section 1715z–8 of this title wherever appearing. Subsec. (b). Pub. L. 91–609 provided for guarantee as to principal and interest by any agency of the United States and for investment of moneys in bonds or other obligations the proceeds of which will be used to directly support the residential mortgage market. Pub. L. 91–351, § 503(2), inserted references to section 1715z–8 of this title wherever appearing. 1969—Subsec. (b). Pub. L. 91–152 increased from $5,000,000 to a total sum of $20,000,000, at such times and in such amounts as he may determine to be necessary, the amount authorized to be advanced by the Secretary to the Fund.

§1715z–3 Special Risk Insurance Fund