PRIA, Government Policy, Made Personal

Summary

When a lender (the mortgagee) forecloses on a mortgage insured under section 1750b, or with the Secretary’s approval takes the property from the borrower after a default, the lender can get the mortgage insurance benefits if the lender promptly gives clear title to the Secretary and assigns all claims from the loan to the Secretary. After that, the lender no longer must pay insurance premiums and the Secretary will give the lender debentures and a certificate of claim. The “value” used to set the debentures equals the unpaid loan balance at the start of foreclosure (or at acquisition), plus payments the lender made for taxes, assessments, insurance, and mortgage insurance premiums, minus any money or rents the lender collected (after reasonable expenses). If less than 10% of the appraised value had been paid toward the loan principal, some foreclosure costs the lender actually paid may be added to the debentures up to limits: either up to 2% of the unpaid principal not exceeding $75, or up to two-thirds of the costs, whichever is larger. For debentures issued on or after September 2, 1964, with the lender’s consent the Secretary may include up to one-third of approved foreclosure and conveyance costs in the debentures. If certain military-service protections (sections 302 and 306 of the Soldiers’ and Sailors’ Civil Relief Act of 1940) apply to an insured mortgage, the Secretary may add an amount to cover losses from postponed foreclosure during service and three months after. Debentures come in multiples of $50, may be coupon or registered form, and include terms set by the Secretary with Treasury approval. If the debentures issued differ from the amount owed by up to $350, the difference is paid in cash. Debentures are dated as of foreclosure or default, bear interest (set when the mortgage was insured) not over 3% per year, pay interest Jan 1 and July 1, and mature in 20 years. They are paid from the General Insurance Fund, are exempt from most local taxes, and are fully guaranteed by the United States; if the Fund can’t pay, the Treasury will. The Secretary can manage, repair, rent, or sell any property taken and can pursue assigned claims. The Secretary may release a borrower from liability or release parts of the property from the mortgage lien under terms the Secretary sets. After the property or claims are conveyed to the Secretary, the lender or borrower has no rights to that property or claim and the Secretary owes them no duty about handling or selling it.

Title 12, §1750c

Banks and Banking, Source: USLM XML via OLRC

(a)Conveyance and assignment by mortgagee after foreclosure; debentures and certificates of claim; cost of foreclosure

In any case in which the mortgagee under a mortgage insured under section 1750b of this title shall have foreclosed and taken possession of the mortgaged property, in accordance with regulations of, and within a period to be determined by, the Secretary, or shall, with the consent of the Secretary, have otherwise acquired such property from the mortgagor after default, the mortgagee shall be entitled to receive the benefit of the insurance as hereinafter provided, upon (1) the prompt conveyance to the Secretary of title to the property which meets the requirements of rules and regulations of the Secretary in force at the time the mortgage was insured, and which is evidenced in the manner prescribed by such rules and regulations; and (2) the assignment to him of all claims of the mortgagee against the mortgagor or others, arising out of the mortgage transaction or foreclosure proceedings, except such claims as may have been released with the consent of the Secretary. Upon such conveyance and assignment the obligation of the mortgagee to pay the premium charges for insurance shall cease and the Secretary shall, subject to the cash adjustment hereinafter provided, issue to the mortgagee debentures having a total face value equal to the value of the mortgage and a certificate of claim, as hereinafter provided. For the purposes of this subsection, the value of the mortgage shall be determined, in accordance with rules and regulations prescribed by the Secretary, by adding to the amount of the original principal obligation of the mortgage which was unpaid on the date of the institution of foreclosure proceedings, or on the date of the acquisition of the property after default other than by foreclosure, the amount of all payments which have been made by the mortgagee for taxes, ground rents, and water rates, which are liens prior to the mortgage, special assessments which are noted on the application for insurance or which become liens after the insurance of the mortgage, insurance of the mortgaged property, and any mortgage insurance premiums and by deducting from such total amount any amount received on account of the mortgage after either of such dates and any amount received as rent or other income from the property, less reasonable expenses incurred in handling the property, after either of such dates: Provided, That with respect to mortgages which are foreclosed before there shall have been paid on account of the principal obligation of the mortgage a sum equal to 10 per centum of the appraised value of the property as of the date the mortgage was accepted for insurance, there may be included in the debentures issued by the Secretary, on account of the cost of foreclosure (or of acquiring the property by other means) actually paid by the mortgagee and approved by the Secretary an amount—

(1)not in excess of 2 per centum of the unpaid principal of the mortgage as of the date of the institution of foreclosure proceedings and not in excess of $75; or

(2)not in excess of two-thirds of such cost, whichever is the greater: Provided further, That with respect to any debentures issued on or after September 2, 1964, the Secretary may, with the consent of the mortgagee (in lieu of issuing a certificate of claim as provided in subsection (e)), include in debentures, in addition to amounts otherwise allowed for such costs, an amount not to exceed one-third of the total foreclosure, acquisition, and conveyance costs actually paid by the mortgagee and approved by the Secretary, but in no event may the total allowance for such costs exceed the amount actually paid by the mortgagee: And provided further, That with respect to mortgages to which the provisions of section 302 and 306 of the Soldiers’ and Sailors’ Civil Relief Act of 1940, as now or hereafter amended, apply and which are insured under section 1750b of this title, and subject to such regulations and conditions as the Secretary may prescribe, there shall be included in the debentures an amount which the Secretary finds to be sufficient to compensate the mortgagee for any loss which it may have sustained on account of interest on debentures and the payment of insurance premiums by reason of its having postponed the institution of foreclosure proceedings or the acquisition of the property by other means during any part or all of the period of such military service and three months thereafter.

(b)Consent to release of mortgagee or property

The Secretary may at any time, under such terms and conditions as he may prescribe, consent to the release of the mortgagor from his liability under the mortgage or the credit instrument secured thereby, or consent to the release of parts of the mortgaged property from the lien of the mortgage.

(c)Debentures; form and denomination

Debentures issued under this subchapter shall be in such form and denominations in multiples of $50, shall be subject to such terms and conditions, and shall include such provisions for redemption, if any, as may be prescribed by the Secretary with the approval of the Secretary of the Treasury, and may be in coupon or registered form. Any difference between the amount of debentures to which the mortgagee is entitled under this section or section 1750g of this title and the aggregate face value of the debentures issued, not to exceed $350, shall be adjusted by the payment of cash by the Secretary to the mortgagee from the General Insurance Fund.

(d)Debentures; execution; negotiability; terms; tax exemptions

The debentures issued under this section to any mortgagee shall be executed in the name of the General Insurance Fund as obligor, shall be signed by the Secretary by either his written or engraved signature, and shall be negotiable. All such debentures shall be dated as of the date foreclosure proceedings were instituted, or the property was otherwise acquired by the mortgagee after default, except that debentures issued pursuant to claims for insurance filed on or after September 2, 1964 shall be dated as of the date of default or as of such later date as the Secretary, in his discretion, may establish by regulation. The debentures shall bear interest from such date at a rate determined by the Secretary, with the approval of the Secretary of the Treasury, at the time the mortgage was accepted for insurance, but not to exceed 3 per centum per annum, payable semiannually on the 1st day of January and the 1st day of July of each year. Such debentures shall mature twenty years after the date thereof. Such debentures shall be exempt, both as to principal and interest, from all taxation (except surtaxes, estate, inheritance, or gift taxes) now or hereafter imposed by any Territory, dependency, or possession of the United States, or by the District of Columbia, or by any State, county, municipality, or local taxing authority, and shall be paid out of the General Insurance Fund, which shall be primarily liable therefor, and they shall be fully and unconditionally guaranteed as to principal and interest by the United States, and such guaranty shall be expressed on the face of the debentures. In the event that the General Insurance Fund fails to pay upon demand, when due, the principal of or interest on any debentures issued under this subchapter, the Secretary of the Treasury shall pay to the holders the amount thereof which is authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, and thereupon to the extent of the amount so paid the Secretary of the Treasury shall succeed to all the rights of the holders of such debentures.

(e)Certificate of claim; division of excess proceeds

The certificate of claim issued by the Secretary to any mortgagee under this section shall be for an amount determined in accordance with, and shall contain provisions and shall be paid in accordance with, the provisions of section 1710(e) and section 1710(f) of this title.

(f)Handling and disposal of property; settlement of claims

Notwithstanding any other provision of law relating to the acquisition, handling, or disposal of real property by the United States, the Secretary shall have power to deal with, complete, rent, renovate, modernize, insure, make contracts or establish suitable agencies for the management of, or sell for cash or credit, in his discretion, any properties conveyed to him in exchange for debentures and certificates of claim as provided in this section; and, notwithstanding any other provision of law, the Secretary shall also have power to pursue to final collection, by way of compromise or otherwise, all claims against mortgagors assigned by mortgagees to the Secretary as provided in this subchapter: Provided, That section 6101 of title 41 shall not be construed to apply to any purchase or contract for services or supplies on account of such property if the amount thereof does not exceed $1,000. The power to convey and to execute in the name of the Secretary deeds of conveyances, deeds of release, assignments, and satisfactions of mortgages, and any other written instrument relating to real property or any interest therein heretofore or hereafter acquired by the Secretary pursuant to the provisions of this chapter, may be exercised by an officer appointed by him, without the execution of any express delegation of power or power of attorney: Provided, That nothing in this subsection shall be construed to prevent the Secretary from delegating such power by order or by power of attorney in his discretion, to any officer, agent, or employee he may appoint.

(g)Mortgagor’s or mortgagee’s interest in property or claim conveyed

No mortgagee or mortgagor shall have, and no certification of claim shall be construed to give to any mortgagee or mortgagor, any right or interest in any property conveyed to the Secretary or in any claim assigned to him; nor shall the Secretary owe any duty to any mortgagee or mortgagor with respect to the handling or disposal of any such property or the collection of any such claim.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The General Insurance Fund, referred to in text, was established by section 1735c of this title. section 302 and 306 of the Soldiers’ and Sailors’ Civil Relief Act of 1940, referred to in subsec. (a)(2), are section 302 and 306, respectively, of act Oct. 17, 1940, ch. 888, 54 Stat. 1178. That Act was amended generally and renamed the “Servicemembers Civil Relief Act” by Pub. L. 108–189, § 1, Dec. 19, 2003, 117 Stat. 2835. As so amended, provisions of the Servicemembers Civil Relief Act that are similar to those contained in former section 302 and 306 of act Oct. 17, 1940, are now contained in section 3953 and 3959 of Title 50. Codification In subsec. (f), “section 6101 of title 41” substituted for “section 3709 of the Revised Statutes” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.

Amendments

1984—Subsec. (d). Pub. L. 98–479 substituted “authorized” for “auhorized” in last sentence. 1967—Pub. L. 90–19 substituted “Secretary” for “Commissioner” wherever appearing in subsecs. (a), (a)(2), and (b) to (g). Subsec. (f). Pub. L. 90–19, § 1(d), substituted “an officer” for “the Commissioner or by any Assistant Commissioner”. 1965—Subsecs. (c), (d). Pub. L. 89–117, § 1108(y)(1), substituted “General Insurance Fund” for “National Defense Housing Insurance Fund”. Subsec. (e). Pub. L. 89–117, § 1108(y)(2), removed limitation which had rendered applicable to certificates of claim only those provisions of section 1710(e) and 1710(f) of this title which were applicable to mortgages insured under section 1713 of this title and struck out provision that reference in section 1710(f) of this title to the “Housing Insurance Fund” shall be deemed for the purpose of this section to be reference to the “National Defense Housing Insurance Fund”. 1964—Subsec. (a). Pub. L. 88–560, § 105(e)(1), (f), inserted “Provided further, That with respect to any debentures issued on or after

September 2, 1964, the Commissioner may, with the consent of the mortgagee (in lieu of issuing a certificate of claim as provided in subsection (e)), include in debentures, in addition to amounts otherwise allowed for such costs, an amount not to exceed one-third of the total foreclosure, acquisition, and conveyance costs actually paid by the mortgagee and approved by the Commissioner, but in no event may the total allowance for such costs exceed the amount actually paid by the mortgagee:” and struck out “paid after either of such dates” after “mortgage insurance premiums” in third sentence, respectively. Subsec. (c). Pub. L. 88–560, § 105(e)(2), increased limitation on difference between amount of debentures to which the mortgagee is entitled under this section or section 1750g of this title and aggregate face value of debentures issued from $50 to $350. Subsec. (d). Pub. L. 88–560, § 105(e)(3), substituted in second sentence “default, except that debentures issued pursuant to claims for insurance filed on or after

September 2, 1964 shall be dated as of the date of default or as of such later date as the Commissioner, in his discretion, may establish by regulation. The debentures” for “default, and”. 1954—Subsec. (d). Act Aug. 2, 1954, in third sentence, substituted a twenty-year period for the ten-year period, with respect to the maturity of debentures.

Statutory Notes and Related Subsidiaries

Effective Date

of 1954 AmendmentAmendment by act Aug. 2, 1954, as not applicable in any case where the mortgage involved was insured or the commitment for such insurance was issued prior to Aug. 2, 1954, see section 112(e) of that act, set out as a note under section 1710 of this title.

§1750c Mortgage Insurance Benefits