Title 12, Banks and BankingRelease 119-110
§1735b Expenditures to Correct or Reimburse for Structural or Other Major Defects in Mortgaged Homes
Title 12 › CHAPTER 13 — NATIONAL HOUSING › SUBCHAPTER V — MISCELLANEOUS › § 1735b
Summary
The Secretary of Housing and Urban Development can pay to fix or reimburse owners for major structural defects in condos or one- to four-family homes that were approved for mortgage insurance before construction, or were under one year old when insured and had an acceptable warranty plan. HUD can pay to repair the problem, pay the owner’s claims, or take the property title. The owner must ask for help within four years (or a shorter time HUD sets) after the mortgage was insured, and the mortgage must have been insured after September 2, 1964. For mortgages insured between August 1, 1968 and January 1, 1973, and for certain mortgages insured between January 1, 1973 and August 3, 1976, HUD may pay to fix defects that seriously threaten life or safety in homes more than one year old at the insurance commitment date, if the owner asks within the law’s deadlines and the defect existed when the insurance commitment was issued and could have been found by a proper inspection. HUD may require the seller to agree to repay these payments, must use the insurance fund tied to the mortgage to pay costs, may get additional appropriations if needed, and must write rules for payments. HUD’s decisions about payments are final and cannot be reviewed by courts. The Secretary must study and report to Congress by March 1, 1977 on a program to protect home buyers from hidden defects. The study must look at a national inspection and warranty plan run by the federal government, paid by fees from the buyer and spread over two years, plus other program options, costs, financing, and steps to tell buyers what repairs are likely in the next two years.
Full Legal Text
Title 12, §1735b
Banks and Banking, Source: USLM XML via OLRC
(a)Prior to beginning of construction
(1)The Secretary is authorized to make expenditures under this subsection with respect to any property that—
(A)is a condominium unit (including common areas) or is improved by a one-to-four family dwelling;
(B)was approved, before the beginning of construction, for mortgage insurance under this chapter or for guaranty, insurance, or direct loan under chapter 37 of title 38 or was less than a year old at the time of insurance of the mortgage and was covered by a consumer protection or warranty plan acceptable to the Secretary; and
(C)the Secretary finds to have structural defects.
(2)Expenditures under this subsection may be made for (A) correcting such defects, (B) paying the claims of the owner of the property arising from such defects, or (C) acquiring title to the property: Provided, That such authority of the Secretary shall exist only (A) if the owner has requested assistance from the Secretary not later than four years (or such shorter time as the Secretary may prescribe) after insurance of the mortgage, and (B) if the property is encumbered by a mortgage which is insured under this chapter after September 2, 1964.
(b)Mortgages insured on or after August 1, 1968, but prior to January 1, 1973; requirements; reimbursement from seller; insurance fund chargeable
The Secretary is authorized to make expenditures to correct, or to reimburse the owner for the correction of, structural or other major defects which so seriously affect use and livability as to create a serious danger to the life or safety of inhabitants of any one, two, three, or four family dwelling which is covered by a mortgage insured under section 1715z of this title or which is located in an older, declining urban area and is covered by a mortgage insured under section 1709 or 1715l of this title on or after August 1, 1968, but prior to January 1, 1973, and which is more than one year old on the date of the issuance of the insurance commitment, if (1) the owner requests assistance from the Secretary not later than one year after the insurance of the mortgage, or, in the case of a dwelling covered by a mortgage insured under section 1709 or 1715l of this title the insurance commitment for which was issued on or after August 1, 1968, but prior to January 1, 1973, not more than four months after August 3, 1976, and (2) the defect is one that existed on the date of the issuance of the insurance commitment and is one that a proper inspection could reasonably be expected to disclose. The Secretary may require from the seller of any such dwelling an agreement to reimburse him for any payments made pursuant to this subsection with respect to such dwelling. Expenditures pursuant to this subsection shall be made from the insurance fund chargeable for insurance benefits on the mortgage covering the structure to which the expenditures relate. There are hereby authorized to be appropriated such sums as may be necessary to cover the costs of such expenditures not otherwise provided for.
(c)Regulations; finality of decision
The Secretary shall by regulations prescribe the terms and conditions under which expenditures and payments may be made under the provisions of this section, and his decisions regarding such expenditures or payments, and the terms and conditions under which the same are approved or disapproved, shall be final and conclusive and shall not be subject to judicial review.
(d)Mortgages insured on or after January 1, 1973, but prior to August 1, 1976; requirements; reimbursement from seller; insurance fund chargeable
The Secretary is authorized to make expenditures to correct or to reimburse the owner for the correction of structural or other major defects which so seriously affect use and liveability as to create a serious danger to the life or safety of inhabitants of any one-, two-, three-, or four-family dwelling which is more than one year old on the date of issuance of the insurance commitment, is located in an older, declining urban area, and is covered by a mortgage insured under section 1709 or 1715l of this title on or after January 1, 1973, but prior to August 3, 1976, if (1) the owner requests assistance from the Secretary not more than one year after August 3, 1976, and (2) the defect is one that existed on the date of the issuance of the insurance commitment and is one that a proper inspection could reasonably have been expected to have disclosed. The Secretary may require from the seller of any such dwelling an agreement to reimburse him for any payments made pursuant to this subsection with respect to such dwelling. Expenditures pursuant to this subsection shall be made from the insurance fund chargeable for insurance benefits on the mortgage covering the structure to which the expenditures relate. There are hereby authorized to be appropriated such sums as may be necessary to cover the costs of such expenditures not otherwise provided for.
(e)Report to Congress on effective program for protecting home buyers
The Secretary of Housing and Urban Development is authorized and directed to conduct a full and complete investigation and study and report to Congress, with recommendations, not later than March 1, 1977, with respect to an effective program for protecting home buyers from hidden or undisclosed defects seriously affecting the use and livability of the home, which would be applicable to existing homes financed with mortgages insured under this chapter. In the study and report the Secretary shall particularly investigate the need for, cost and feasible structure of, a national home inspection and warranty program, with respect to such homes, to be operated by the Federal Government out of fees assessed on the home buyer and amortized over a period of two years. The Secretary’s report shall also present an analysis of alternative Federal programs to meet these needs, and the cost and means of financing such programs. In the report the Secretary shall also outline administrative steps which can be taken to provide disclosure to purchasers of existing homes financed with mortgages insured under this chapter of the actual condition of the home and the types of repairs or replacements likely to be needed within a period of two years, such as repairs or replacement of furnace, roof or major appliances, based on age and useful life expectancy of such appurtenances.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
1992—Subsec. (a). Pub. L. 102–550 substituted par. (1) and “(2) Expenditures under this subsection may be made for” for “The Secretary is authorized, with respect to any property improved by a one- to four-family dwelling that, before the beginning of
Construction
, was approved for mortgage insurance under this chapter or for guaranty, insurance, or a direct loan under chapter 37 of title 38 and that the Secretary finds to have structural defects, to make expenditures for” and redesignated former cls. (1) to (3) appearing before proviso as cls. (A) to (C), respectively, of par. (2). 1983—Subsec. (a). Pub. L. 98–181 substituted “that, before the beginning of
Construction
, was approved for mortgage insurance under this chapter or for guaranty, insurance, or a direct loan under chapter 37 of title 38 and that the Secretary finds” for “approved for mortgage insurance prior to the beginning of
Construction
which he finds”. 1976—Subsec. (b). Pub. L. 94–375, § 9(a), substituted “not more than four months after
August 3, 1976” for “not more than 19 months after
August 22, 1974”, and provision requiring expenditures be made from the insurance fund chargeable for insurance benefits on the mortgage covering the structure and appropriating sums for expenditures not otherwise covered for provision requiring expenditures be made from the Special Risk Insurance Fund. Subsecs. (d), (e). Pub. L. 94–375, § 9(b), added subsecs. (d) and (e). 1975—Subsec. (b). Pub. L. 94–50 substituted “one, two, three, or four” for “one or two”, and “not more than 19 months” for “not more than one year”. 1974—Subsec. (b). Pub. L. 93–383 substituted provisions relating to authorization of the Secretary to make expenditures to correct, or to reimburse the owner for the correction of structural or other major defects of covered one or two family dwellings, for provisions relating to the authorization of the Secretary to make expenditures to correct, or to compensate the owner for, structural or other defects of covered single-family dwellings. 1970—Subsecs. (b), (c). Pub. L. 91–609 added subsec. (b) and redesignated former subsec. (b) as (c). 1967—Subsecs. (a), (b). Pub. L. 90–19 substituted “Secretary” for “Commissioner” wherever appearing.
Reference
Citations & Metadata
Citation
12 U.S.C. § 1735b
Title 12, Banks and Banking
Last Updated
Sep 22, 2026
Release point: 119-110