of this Act, the Secretary is authorized, upon such terms and conditions as he may prescribe, to make commitments to insure, and to insure, supplemental loans (including advances during construction or improvement) made by financial institutions approved by the Secretary. As used in this section, "supplemental loan" means a loan, advance of credit, or purchase of an obligation representing a loan or advance of credit made for the purpose of financing improvements or additions to such project or facility: Provided, That a loan involving a nursing home covered by a mortgage insured under section 232 or a loan involving a group practice facility covered by a mortgage insured under title XI may also be made for the purpose of financing equipment to be used in the operation of such nursing home or facility. (b) To be eligible for insurance under this section, a supplemental

loan shall

(1) be limited to 90 per centum of the amount which the Secretary estimates will be the value of such improvements, additions, and equipment, except that such amount when added to the outstanding balance of the mortgage covering the project or facility, shall not exceed the maximum mortgage amount insurable under the section or title pursuant to which the mortgage covering such project or facility is insured;

(2) have a maturity satisfactory to the Secretary but not to exceed the remaining term of the mortgage;

(3) bear interest (exclusive of premium charges for insurance and service charges, if any) at not to exceed such per centum per annum (not in excess of 6 per centum), on the amount of the principal obligation outstanding at any time, as the Secretary finds necessary to meet market conditions;

(4) be secured in such manner as the Secretary may require; (5) be governed by the labor standards provisions of section 212 that are applicable to the section or title pursuant to which the mortgage covering the project or facility is insured; and

(6) contain such other terms, conditions, and restrictions as the Secretary may prescribe.

(c) The provisions of subsections (d), (e), (g), (h), (i), (j), (k), (1), and (n) of section 207 shall be applicable to loans insured under this section, except that (1) all references to the term "mortgage" shall be construed to refer to the term "loan" as used in this section, (2) loans involving projects covered by a mortgage insured under section 213 that is the obligation of the Cooperative Management Housing Insurance Fund shall be insured under and shall be the obligation of such fund, and (3) loans involving projects covered by a mortgage insured under section 236 shall be insured under and shall be the obligation of the Special Risk Insurance Fund.

MORTGAGE INSURANCE FOR NONPROFIT HOSPITALS

SEC. 242.1 (a) The purpose of this section is to assist the provision of urgently needed hospitals for the care and treatment of persons who

1 Sec. 1501, Housing and Urban Development Act of 1968, Public Law 90-448, approved Aug. 1, 1968, 82 Stat. 476, 599, added sec. 242.

are acutely ill or who otherwise require medical care and related services of the kind customarily furnished only (or most effectively) by hospitals.

(b) For the purposes of this section

(1) the term "hospital" means a facility—

(A) which provides community service for inpatient medical care of the sick or injured (including obstetrical care): (B) not more than 50 per centum of the total patient days of which during any year are customarily assignable to the categories of chronic convalescent and rest, drug and alcoholic, epileptic, mentally deficient, mental, nervous and mental, and tuberculosis; and

(C) which is owned and operated by one or more nonprofit corporations or associations no part of the net earnings of which inures, or may lawfully inure, to the benefit of any private shareholder or individual; and

(2) the terms "mortgage" and "mortgagor" shall have the meanings respectfully set forth in section 207 (a) of this Act. (c) The Secretary is authorized to insure any mortgage (including advances on such mortgage during construction) in accordance with the provisions of this section upon such terms and conditions as he may prescribe and to make commitments for insurance of such mortgage prior to the date of its execution or disbursement thereon.

(d) In order to carry out the purpose of this section, the Secretary is authorized to insure any mortgage which covers a new or rehabilitated hospital, including equipment to be used in its operation, subject to the following conditions:

(1) The mortgage shall be executed by a mortgagor approved by the Secretary. The Secretary may in his discretion require any such mortgagor to be regulated or restricted as to charges and methods of financing, and, in addition thereto, if the mortgagor is a corporate entity, as to capital structure and rate of return. As an aid to the regulation or restriction of any mortgagor with respect to any of the foregoing matters, the Secretary may make such contracts with and acquire for not to exceed $100 such stock or interest in such mortgagor as he may deem necessary. Any stock or interest so purchased shall be paid for out of the General Insurance Fund, and shall be redeemed by the mortgagor at par upon the termination of all obligations of the Secretary under the insurance.

(2) The mortgage shall involve a principal obligation in an amount not to exceed $25,000,000, and not to exceed 90 per centum of the estimated replacement cost of the property or project, including equipment to be used in the operation of the hospital, when the proposed improvements are completed and the equipment is installed. (3) The mortgage shall

(A) provide for complete amortization by periodic payments within such terms as the Secretary shall prescribe, and

(B) bear interest (exclusive of premium charges for insurance and service charges, if any) at not to exceed such per centum per annum (not in excess of 6 per centum), on the amount of the prin

cipal obligation oustanding at any time, as the Secretary finds necessary to meet the mortgage market.

(4) The Secretary shall not insure any mortgage under this section unless he has received, from the State agency designated in accordance with section 604 (a) (1) of the Public Health Service Act for the State in which is located the hospial covered by the mortgage, a certification that (A) there is a need for such hospital, and (B) there are in force in such State or the political subdivision of the State in which the proposed hospital would be located reasonable minimum standards of licensure and methods of operation for hospitals. No such mortgage shall be insured under this section unless the Secretary has received such assurance as he may deem satisfactory from the State agency that such standards will be applied and enforced with respect to any hospital located in the State for which mortgage insurance is provided

under this section.

(e) The Secretary may consent to the release of a part or parts of the mortgaged property or project from the lien of any mortgage insured under this section upon such terms and conditions as he may prescribe.

(f) The activities and functions provided for in this section shall be carried out by the agencies involved so as to encourage programs that undertake responsibility to provide comprehensive health care, including outpatient and preventive care, as well as hospitalization, to a defined population.

(g) (1) Notwithstanding any of the other provisions of this title, the Secretary may insure under this section a mortgage which provides permanent financing or refinancing of existing mortgage indebtedness in the case of a hospital whose permanent financing is presently lacking, if the construction of such hospital was completed between January 1, 1966, and the date of the enactment of this Act.

(2) The aggregate principal balance of all mortgages insured under paragraph (1) and outstanding at any one time shall not exceed $20,000,000.

(h) The provisions of subsections (d), (e), (g), (h), (i), (j), (k), (1), and (n) of section 207 shall apply to mortgages insured under this section and all references therein to section 207 shall be deemed to refer to this section.

TITLE III-NATIONAL MORTGAGE ASSOCIATIONS See page 199.

TITLE IV-INSURANCE OF SAVINGS AND LOAN

ACCOUNTS

This title created the Federal Savings and Loan Insurance Corporation and authorized the Corporation to insure the accounts of saving and loan associations. It is administered by the Corporation under the general direction and supervision of the Federal Home Loan Bank Board, which is not in the Department of Housing and Urban Development. Title IV is therefore not set forth in this compilation. See 12 U.S.C. 1724 et seq. for the provisions of title IV.

SEC. 501.1

SEC. 502.1

TITLE V-MISCELLANEOUS

SEC. 503.1

SEC. 504.2

SEC. 505.

SEC. 506.

SEC. 507.1

SEC. 508.1

SEC. 509.1

SEC. 510.5

SEC. 511.R

PENALTIES

SEC. 512. Notwithstanding any other provision of law, the Secretary is authorized to refuse the benefits of participation (either directly as an insured lender or as a borrower, or indirectly as a builder, contractor, or dealer, or salesman or sales agent for a builder, contractor or dealer) under title I, II, VI, VII, VIII, IX, X, or XI3 of this Act to any person or firm (including but not limited to any individual, partnership, association, trust, or corporation) if the Secretary has determined that such person or firm (1) has knowingly or willfully violated any provision of this Act or of title III of the Servicemen's Readjustment Act of 1944, as amended, or of chapter 37 of title 38, United States Code, or of any regulation issued by the Secretary under this Act or by the Administrator of Veterans' Affairs under said title III, or chapter 37, or (2) has, in connection with any construction, alteration, repair or improvement work financed with assistance under this Act or under said title III, or chapter 37, or in connection with contracts or financing relating to such work, violated any Federal or State penal statute, or (3) has failed materially to properly carry out contractual obligations with respect to the completion of construction, alteration, repair, or improvement work financed with assistance under this Act or under title III of the Servicemen's Readjustment Act of 1944, as amended, or of chapter 37 of title 38, United States Code. Before any such determination is made any person or firm with respect to whom such a determination is proposed

1 Amended the Federal Home Loan Bank Act, 12 U.S.C. 1421 et seq.

2 Added sec. 86a, to the Farm Credit Act of 1933 to authorize production credit associations to make loans eligible for title I FHA insurance and to avail themselves of the benefit of such FHA insurance.

Amended sec. 24 of the Federal Reserve Act to remove certain restrictions by the Act on the amounts of loans made by member banks of the Federal Reserve System, in the case of title II FHA insured loans.

4 Amended the Home Owners' Loan Act of 1933, 12 U.S.C. 1461.

"Amended the Act entitled "An Act relating to contracts and agreements under the Agricultural Adjustment Act," approved January 25, 1934.

Amended sec. 22 of the Interstate Commerce Act, as amended, to add a provision that nothing in that Act should prevent carriers from giving reduced rates for the transportation of commodities with the object of improving housing standards and providing employment if the rates had been authorized by the Interstate Commerce Commission.

Provisions of sec. 512 as set forth in the text enacted by sec. 132 of the Housing Act of 1954, Public Law 560, 83d Congress, approved August 2, 1954, 68 Stat. 590, 610. Previous penalty provisions of sec. 512 had been repealed by Public Law 772, 80th Congress, approved June 25, 1948, 62 Stat. 683, which revised and codified these provisions. See title 18, United States Code, secs. 1010, 403, 657 and 709 for the criminal provisions formerly set forth in sec. 512. See also secs. 433, 1006, 1008, and 1009 of title 18, United States Code. Sec. 512 appears at 12 U.S.C. 1731(a).

*Sec. 1020 (e), Demonstration Cities and Metropolitan Development Act of 1966, Public Law 89-754, approved November 3, 1966, 80 Stat. 1255, 1296, added titles X (Land Development) and XI (Group Practice Facilities).

shall be notified in writing by the Secretary and shall be entitled, upon making a written request to the Secretary to a written notice specifying charges in reasonable detail and an opportunity to be heard and to be represented by counsel. Determinations made by the Secretary under this section shall be based on the preponderance of the evidence. For the purposes of compliance with this section the Secretary's notice of a proposed determination under this section shall be considered to have been received by the interested person or firm if the notice is properly mailed to the last known address of such person or firm.

SEC. 513.2 (a) The Congress hereby declares that it has been its intent since the enactment of the National Housing Act that housing built with the aid of mortgages insured under that Act is to be used principally for residential use; and that this intent excludes the use of such housing for transient or hotel purposes while such insurance on the mortgage remains outstanding.

(b) Notwithstanding any other provisions of this Act, no new, existing, or rehabilitated multifamily housing with respect to which a mortgage is insured under this Act shall be operated for transient or hotel purposes unless (1) on or before May 28, 1954, the Secretary has agreed in writing to the rental of all or a portion of the accommodations in the project for transient or hotel purposes (in which case no accommodations in excess of the number so agreed to by the Secretary shall be rented on such basis), or (2) the project covered by the insured mortgage is located in an area which the Secretary determines to be a resort area, and the Secretary finds that prior to May 28, 1964, a portion of the accommodations in the project had been made available for rent for transient or hotel purposes (in which case no accommodations in excess of the number of which had been made available for such use shall be rented on such basis).

(c) Notwithstanding any other provisions of this Act, no mortgage with respect to multifamily housing shall be insured under this Act (except pursuant to a commitment to insure issued prior to the effective date of the Housing Act of 1954), and (except as to housing coming within the provisions of clause (1) or clause (2) of the preceding subsection) no mortgage with respect to multifamily housing shall be insured for an additional term, unless (1) the mortgagor certifies under oath that while such insurance remains outstanding he will not rent, or permit the rental of, such housing or any part thereof for transient or hotel purposes, and (2) the Secretary has entered into such contract with, or purchased such stock of, the mortgagor as the Secretary deems necessary to enable him to prevent or terminate any use of such property or project for transient or hotel purposes while the mortgage insurance remains outstanding.

(d) The Secretary is hereby authorized and directed to enforce the provisions of this section by all appropriate means at his disposal, as to all existing multifamily housing with respect to which a mortgage was insured under this Act prior to the effective date of the Housing Act of 1954 as well as to all multifamily housing with respect to which

1 Sec. 119, Housing Act of 1959, Public Law 86-372, approved September 23, 1959, 73 Stat. 654, 665, added this sentence. Sec. 513 added by sec. 132, Housing Act of 1954, Public Law 560, 83d Congress, approved August 2, 1954, 68 Stat. 590, 610.