PRIA, Government Policy, Made Personal

Summary

The Secretary may make periodic interest-help payments to the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation for certain middle-income families with mortgages made after July 24, 1970. To get help, a family must be the borrower on a mortgage that is either insured under the program, guaranteed under veterans’ law, or a qualifying conventional loan. The Secretary can limit help to families whose income at purchase is no more than the area median, with adjustments for family size. Payments stop if the family no longer lives in the home, the investor no longer owns the mortgage, or the borrower’s actual interest rate reaches the mortgage rate. The subsidy helps when the borrower’s monthly payment is what it would be at a 7% effective interest rate (or higher up to the mortgage rate) and the borrower can pay at least 20% of their income toward home costs. Cooperative housing is also covered under special rules for coop members. The subsidy amount equals the difference between the investor’s actual interest earnings and what the investor would have earned based on its average borrowing cost plus a percentage set to cover expenses and a reasonable return. The Secretary must recertify family income every two years (or sooner if needed). The Secretary must also prevent sales prices from being raised above the appraised value used to set the maximum insured mortgage. Money is authorized as needed, but total contracts are limited by appropriations and payments are capped at $105,000,000 for the first contract year prior to July 1, 1971, with an additional $105,000,000 added on July 1, 1971 and again on July 1, 1972. No new subsidy payments may be made after June 30, 1973, except under contracts made on or before that date. Definitions: mortgagor = borrower (or coop member for cooperative projects); acquisition (for coops) = the family’s application for a unit. Loan limits and down payments: units must be single-family or certain new condo units; appraised value may not exceed $20,000 (can be increased by up to 50% in high-cost areas); down payment must be 3% of the first $15,000, 10% of value over $15,000 up to $25,000, and 20% of value above $25,000.

Title 12, §1715z–8

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(a)Whenever he determines such action to be necessary in furtherance of the purposes set forth in section 501 of the Emergency Home Finance Act of 1970, the Secretary is authorized to make, and to contract to make, periodic assistance payments on behalf of families of middle income. The assistance shall be accomplished through interest subsidy payments to the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (hereinafter referred to as “the investor”) with respect to mortgages meeting the special requirements specified in this section and made after July 24, 1970.

(b)To qualify for assistance payments a middle-income family shall be a mortgagor under a mortgage which is (1) insured under subsection (j) of this section, (2) guaranteed under chapter 37 of title 38, or (3) a conventional mortgage meeting the requirements of subsection (j)(3) of this section. In addition to the foregoing requirement, the Secretary may require that the mortgagor have an income, at the time of acquisition of the property, of not more than the median income for the area in which the property is located, as determined by the Secretary, with appropriate adjustments for smaller and larger families.

(c)The interest subsidy payments authorized by this section shall cease when (1) the mortgagor no longer occupies the property which secures the mortgage, (2) the mortgages are no longer held by the investor, or (3) the rate of interest paid by the mortgagor reaches the rate of interest specified on the mortgage.

(d)(1)Interest subsidy payments shall be on mortgages on which the mortgagor makes monthly payments towards principal and interest equal to an amount which would be required if the mortgage bore an effective interest rate of 7 per centum per annum including any discounts or charges in the nature of points or otherwise (but not including premiums, if any, for mortgage insurance) or such higher rate (not to exceed the rate specified in the mortgage), which the mortgagor could pay by applying at least 20 per centum of his income towards homeownership expenses. As used in this subsection, the term “monthly homeownership expense” includes the monthly payment for principal, interest, mortgage insurance premium, insurance, and taxes due under the mortgage.

(2)In addition to the mortgages eligible for assistance under paragraph (1) of this subsection, the Secretary is authorized to make periodic assistance payments on behalf of cooperative members of middle income. Such assistance payments shall be accomplished through interest subsidy payments to the investor with respect to mortgages insured (subsequent to July 24, 1970) under section 1715e of this title which are executed by cooperatives, the membership in which is limited to middle-income families. For purposes of this paragraph—

(A)the term “mortgagor”, when used in subsection (b) in the case of a mortgage covering a cooperative housing project, means a member of the cooperative;

(B)the term “acquisition of the property”, when used in subsection (b), means the family’s application for a dwelling unit; and

(C)in the case of a cooperative mortgagor, subsection (c) shall not apply and the interest subsidy payments shall cease when the mortgage is no longer held by the investor or the cooperative fails to limit membership to families whose incomes at the time of their application for a dwelling unit meets such requirements as are laid down by the Secretary pursuant to subsection (b).

(e)The interest subsidy payments shall be in an amount equal to the difference, as determined by the Secretary, between the total amount of interest per calendar quarter received by the investor on mortgages assisted under this section and purchased by it and the total amount of interest which the investor would have received if the yield on such mortgages was equal to the sum of (1) the average costs (expressed as an annual percentage rate) to it of all borrowed funds outstanding in the immediately preceding calendar quarter, and (2) such per centum per annum as will provide for administrative and other expenses of the investor and a reasonable economic return, as determined by the Secretary to be necessary and appropriate taking into account the purpose of this section to provide additional mortgage credit at reasonable rates of interest to middle-income families.

(f)Procedures shall be adopted by the Secretary for recertifications of the mortgagor’s income at intervals of two years (or at shorter intervals where the Secretary deems it desirable) for the purpose of adjusting the amount of the mortgagor’s payments pursuant to subsection (d).

(g)The Secretary shall prescribe such regulations as he deems necessary to assure that the sales price of, or other consideration paid in connection with, the purchase by a homeowner of the property with respect to which assistance payments are to be made is not increased above the appraised value on which the maximum mortgage which the Secretary will insure is computed.

(h)(1)There are authorized to be appropriated such sums as may be necessary to enable the Secretary to make interest subsidy payments under contracts entered into under this section. The aggregate amount of contracts to make such payments shall not exceed amounts approved in appropriation Acts, and payments pursuant to such contracts shall not exceed $105,000,000 during the first year of such contracts prior to July 1, 1971, which amount shall be increased by an additional $105,000,000 during the first year of an additional number of such contracts on July 1 of each of the years 1971 and 1972.

(2)No interest subsidy payments under this section shall be made after June 30, 1973, except pursuant to contracts entered into on or before such date.

(i)In determining the income of any family for the purposes of this section, income from all sources of each member of the family in the household shall be included, except that the Secretary shall exclude income earned by any minor person.

(j)(1)The Secretary is authorized, upon application by the mortgagee, to insure a mortgage executed by a mortgagor who meets the eligibility requirements for assistance payments prescribed by the Secretary under subsection (b). Commitments for the insurance of such mortgages may be issued by the Secretary prior to the date of their execution or disbursement thereon, upon such terms and conditions as the Secretary may prescribe.

(2)To be eligible for insurance under this subsection, a mortgage shall meet the requirements of section 1715l(d)(2) or 1715y(c) of this title, except as such requirements are modified by this subsection: Provided, however, That in the discretion of the Secretary 25 per centum of the authority conferred by this section and subject to all the terms thereof may be used for mortgages on existing housing.

(3)A mortgage to be insured under this section shall—

(i)involve a single-family dwelling which has been approved by the Secretary prior to the beginning of construction, or a one-family unit in a condominium project (together with an undivided interest in the common areas and facilities serving the project) which is released from a multifamily project, the construction of which has been completed within two years prior to the filing of the application for assistance payments with respect to such family unit and the unit shall have had no previous occupant other than the mortgagor;

(ii)involve a single-family dwelling whose appraised value, as determined by the Secretary, is not in excess of $20,000 (which amount may be increased by not more than 50 per centum in any geographical area where the Secretary authorizes an increase on the basis of a finding that the cost level so requires); and

(iii)be executed by a mortgagor who shall have paid in cash or its equivalent on account of the property (A) 3 per centum of the first $15,000 of the appraised value of the property, (B) 10 per centum of such value in excess of $15,000 but not in excess of $25,000, and (C) 20 per centum of such value in excess of $25,000.

Notes & Related Subsidiaries

Editorial Notes

References in Text

section 501 of the Emergency Home Finance Act of 1970, referred to in subsec. (a), is section 501 of Pub. L. 91–351, which is set out as a note below.

Amendments

1984—Subsec. (d)(2). Pub. L. 98–479, § 204(a)(14), redesignated subpars. (1), (2), and (3) as subpars. (A), (B), and (C), respectively. Subsec. (j)(3)(ii). Pub. L. 98–479, § 204(a)(15), substituted “; and” for period at end.

Statutory Notes and Related Subsidiaries

Congressional Findings and Declaration of Purpose Pub. L. 91–351, title V, § 501, July 24, 1970, 84 Stat. 458, provided that: “The Congress finds that—“(1) periodic episodes of monetary stringency and high interest rates make it extremely difficult for families of middle income to obtain mortgage credit at rates which they can afford to pay; “(2) periods of monetary stringency and high interest rates are directly related to the Government’s monetary and fiscal policies; “(3) a disproportionate share of the burden of sustaining these anti-inflationary policies of the Government falls on families of middle income who are buyers or prospective buyers of homes; and “(4) the Government has a responsibility to lessen the disproportionate burden which such families bear as a result of such policies. It is the purpose of this title [enacting this section, and amending section 1715z–3 and 1719 of this title] to provide, during periods of high mortgage interest rates, a source of mortgage credit for such families which is within their financial means.”

§1715z–8 Mortgage Assistance Payments for Middle-income Families