PRIA, Government Policy, Made Personal

Summary

The Secretary may insure mortgages for big housing projects that use modern, cost-saving building methods. Lenders and borrowers must be approved by the Secretary. The land must be for at least 25 single-family homes that the Secretary approves before building starts. A factory or storage plant for making or holding the houses or parts can be on the site during construction and the Secretary may allow it to be removed from the mortgage lien later. The mortgage can include advances during construction to pay for materials delivered and labor done on the site. Loans cannot be more than 85% of the Secretary’s estimate of the finished project value (not counting any on-site plant). Alternatively, the loan for each house cannot exceed $5,950 or 85% of its value, whichever is lower. The Secretary may add up to $850 for each bedroom over two, but each house’s limit cannot go above $7,650. Payments must fully pay off the loan over a term the Secretary sets, and interest may not exceed 4% a year (or 4.5% if the Secretary and the Treasury approve). Parts of the property can be released from the mortgage, and after the project is done the loan can be replaced by individual mortgages on each house, which may also be insured. Priority for occupancy must be given to World War II veterans, their immediate families, and hardship cases under rules the Secretary makes. Certain other rules in sections 1743 and 1739 also apply to these mortgages.

Title 12, §1746

Banks and Banking, Source: USLM XML via OLRC

(a)Additional authorization; encouragement of cost-reduction techniques; advances

In addition to mortgages insured under other sections of this subchapter, and in order to assist and encourage the application of cost-reduction techniques through large-scale modernized site construction of housing and the erection of houses produced by modern industrial processes, the Secretary is authorized to insure mortgages (including advances on such mortgages during construction) which are eligible for insurance as hereinafter provided.

(b)Eligibility requirements

To be eligible for insurance under this section, a mortgage shall—

(1)have been made to and be held by a mortgagee approved by the Secretary as responsible and able to service the mortgage properly;

(2)cover property, held by a mortgagor approved by the Secretary, upon which there is to be constructed or erected dwelling units for not less than twenty-five families consisting of a group of single-family dwellings approved by the Secretary for mortgage insurance prior to the beginning of construction: Provided, That during the course of construction there may be located upon the mortgaged property a plant for the fabrication or storage of such dwellings or sections or parts thereof, and the Secretary may consent to the removal or release of such plant from the lien of the mortgage upon such terms and conditions as he may approve;

(3)involve a principal obligation in an amount—

(A)not to exceed 85 per centum of the amount which the Secretary estimates will be the value of the completed property or project, exclusive of any plant of the character described in paragraph (2) of this subsection located thereon, and

(B)not to exceed a sum computed on the individual dwellings comprising the total project as follows: $5,950 or 85 per centum of the valuation, whichever is the lower amount, with respect to each single-family dwelling: Provided, That if the Secretary finds that it is not feasible, within the dollar amount limitation in this clause on the principal obligation of the mortgage, to construct dwellings containing three or four bedrooms without sacrifice of sound standards of construction, design, and livability, he may increase such dollar amount limitation by not exceeding $850 for each additional bedroom (as defined by the Secretary) in excess of two contained in each such dwelling if he finds that such dwelling meets sound standards of design and livability as a three-bedroom unit or a four-bedroom unit, as the case may be, but the amount computed under this clause for each such dwelling shall not exceed, in any event, $7,650.

With respect to the insurance of advances during construction, the Secretary is authorized to approve advances by the mortgagee to cover the cost of materials delivered upon the mortgaged property and labor performed in the fabrication or erection thereof;

(4)provide for complete amortization by periodic payments within such term as the Secretary shall prescribe and shall bear interest (exclusive of premium charges for insurance) as not to exceed 4 per centum per annum on the amount of the principal obligation outstanding at any time: Provided, That the Secretary with the approval of the Secretary of the Treasury, may prescribe by regulation a higher maximum rate of interest, not exceeding 4½ per centum per annum on the amount of the principal obligation outstanding at any time, if he finds that the mortgage market demands it. The Secretary may consent to the release of a part or parts of the mortgaged property from the lien of the mortgage upon such terms and conditions as he may prescribe and the mortgage may provide for such release, and the mortgage may provide that, upon the completion of the construction of the project, such mortgage may be replaced by individual mortgages covering each individual dwelling in the project. Each such individual mortgage may be insured under this section with the mortgagor being either the builder who constructed the dwellings or the owner and occupant of the dwelling at the time, and where the mortgagor is the owner and occupant, may involve a principal obligation in such amount and have such maturity and interest rate as a mortgage eligible for insurance under section 1709(b)(2)(D) of this title.

(c)Preferences in occupancy for veterans and hardship cases

Preference or priority of opportunity in the occupancy of the mortgaged property for veterans of World War II and their immediate families and for hardship cases as defined by the Secretary shall be provided under such regulations and procedures as may be prescribed by the Secretary.

(d)Applicability of other provisions

The provisions of subsections (c), (d), (e), and (f) of section 1743 of this title shall be applicable to mortgages insured under this section covering a project described in subsection (b) of this section, and the provisions of subsections (a) to (f), and (h) of section 1739 of this title shall be applicable to the individual mortgages insured pursuant to subsection (b)(4) of this section covering individual dwellings in the project.

Notes & Related Subsidiaries

Editorial Notes

References in Text

section 1709(b)(2)(D) of this title, referred to in subsec. (b)(4), is a reference to subsec. (b)(2)(D) of section 1709 prior to amendment by section 104 of act Aug. 2, 1954, ch. 649, 68 Stat. 590.

Amendments

1967—Pub. L. 90–19 substituted “Secretary” for “Commissioner” wherever appearing in subsecs. (a), (b), and (c). 1950—Act Apr. 20, 1950, § 122, substituted “Commissioner” for “Administrator” wherever appearing. Subsec. (b)(3). Act Apr. 20, 1950, § 121(1), (2), substituted “85” for “80” in cl. (A), and inserted entirely new material in cl. (B). Subsec. (b)(4). Act Apr. 20, 1950, § 121(2), inserted “, and the mortgage may provide that, upon the completion of the

Construction

of the project, such mortgage may be replaced by individual mortgages covering each individual dwelling in the project. Each such individual mortgage may be insured under this section with the mortgagor being either the builder who constructed the dwellings or the owner and occupant of the dwelling at the time, and where the mortgagor is the owner and occupant, may involve a principal obligation in such amount and have such maturity and interest rate as a mortgage eligible for insurance under section 1709(b)(2)(D) of this title”. Subsec. (d). Act Apr. 20, 1950, § 121(3), inserted “covering a project described in subsection (b) of this section, and the provisions of subsections (a) to (f), and (h) of section 1739 of this title shall be applicable to the individual mortgages insured pursuant to subsection (b)(4) of this section covering individual dwellings in the project”.

§1746 Insurance on Mortgages on Large-scale Housing Projects