semiannual period shall be credited or charged to the General Surplus Account and/or the Participating Reserve Account in such manner and amounts as the Commissioner may determine to be in accord with sound actuarial and accounting practice.

(c) Upon termination of the insurance obligation of the Mutual Mortgage Insurance Fund by payment of any mortgage insured thereunder, the Commissioner is authorized to distribute to the mortgagor a share of the Participating Reserve Account in such manner and amount as the Commissioner shall determine to be equitable and in accordance with sound actuarial and accounting practice: Provided, That, in no event, shall any such distributable share exceed the aggregate scheduled annual premiums of the mortgagor to the year of termination of the insurance.

(d) No mortgagor or mortgagee of any mortgage insured under section 203 shall have any vested right in a credit balance in any such account or be subject to any liability arising out of the mutuality of the Fund and the determination of the Commissioner as to the amount to be paid by him to any mortgagor shall be final and conclusive.

INVESTMENT OF FUNDS

SEC. 206. Moneys in the Fund not needed for the current operations of the Federal Housing Administration shall be deposited with the Treasurer of the United States to the credit of the Fund, or invested in bonds or other obligations of, or in bonds or other obligations guaranteed as to principal and interest by, the United States. The Commissioner may, with the approval of the Secretary of the Treasury, purchase in the open market debentures issued under the provisions of section 204. Such purchases shall be made at a price which will provide an investment yield of not less than the yield obtainable from other investments authorized by this section. Debentures so purchased shall be canceled and not reissued, and the several group accounts to which such debentures have been charged shall be charged with the amounts used in making such purchases.

RENTAL HOUSING INSURANCE

SEC. 207. (a) As used in this section—

(1) The term "mortgage" means a first mortgage on real estate in fee simple, or on the interest of either the lessor or lessee thereof (A) under a lease for not less than ninety-nine years which is renewable or (B) under a lease having a period of not less than fifty years to run from the date the mortgage was executed, upon which there is located or upon which there is to be constructed a building or buildings designed principally for residential use or upon which there is located or to be constructed facilities for trailer coach mobile dwellings;1 and the term "first mortgage" means such classes of first liens as are commonly given to secure advances (including but not being limited to

1 The phrase "or upon which there is located or to be constructed facilities for trailer coach mobile dwellings" inserted by sec. 102(b) (1), Housing Amendments of 1955, Public Law 345, 84th Congress, approved August 11, 1955, 69 Stat. 635.

advances during construction) on, or the unpaid purchase price of, real estate under the laws of the State in which the real estate is located, together with the credit instrument or instruments, if any, secured thereby, and may be in the form of trust mortgages or mortgage indentures or deeds of trust securing notes, bonds, or other credit instruments.

(2) The term "mortgagee" means the original lender under a mortgage, and its successors and assigns, and includes the holders of credit instruments issued under a trust mortgage or deed of trust pursuant to which such holders act by and through a trustee therein named. (3) The term "mortgagor" means the original borrower under a mortgage and its successors and assigns.

(4) The term "maturity date" means the date on which the mortgage indebtedness would be extinguished if paid in accordance with the periodic payments provided for in the mortgage.

(5) The term "slum or blighted area" means any area where dwellings predominate which, by reason of dilapidation, overcrowding, faulty arrangement or design, lack of ventilation, light or sanitation facilities, or any combination of these factors, are detrimental to safety, health, or morals.

(6) The term "rental housing" means housing, the occupancy of which is permitted by the owner thereof in consideration of the payment of agreed charges, whether or not, by the terms of the agreement, such payment over a period of time will entitle the occupant to the ownership of the premises or space in a trailer court or park properly arranged and equipped to accommodate trailer coach mobile dwellings.1

(7) The term "State" includes the several States, and 2 Puerto Rico, the District of Columbia, Guam, and the Virgin Islands.

(b) In addition to mortgages insured under section 203, the Commissioner is authorized to insure mortgages as defined in this section (including advances on such mortgages during construction) which cover property held by

(1) Federal or State instrumentalities, municipal corporate instrumentalities of one or more States, or limited dividend or redevelopment or housing corporations restricted by Federal or State laws or regulations of State banking or insurance departments as to rents, charges, capital structure, rate of return, or methods of operation; or

(2)3 any other mortgagor approved by the Commissioner which,

1 Language after the word "premises" inserted by sec. 102(b) (2), Housing Amendments of 1955, Public Law 345, 84th Congress, approved August 11, 1955, 69 Stat. 635.

2 Sec. 10(a), Alaska Omnibus Act, Public Law 86-70, approved June 25, 1959, 73 Stat. 141, 142, deleted "Alaska," and sec. 6, Hawaii Omnibus Act, Public Law 86-624, approved July 12, 1960, 74 Stat. 411, deleted "Hawaii,".

Immediately prior to amendment by sec. 607 (1), Housing Act of 1964, Public Law 87-70, approved June 30, 1961, 75 Stat. 149, 178, this paragraph read as follows: "(2) Private corporations, associations, cooperative societies which are legal agents of owner-occupants, or trusts formed or created for the purpose of rehabilitating slum or blighted areas, or providing housing for rent or sale, and which possess powers necessary therefor and incidental thereto, and which, until the termination of all obligations of the Commissioner under such insurance, are regulated or restricted by the Commissioner as to rents or sales, charges, capital structure, rate of return, and methods of operation to such extent and in such manner as to provide reasonable rentals to tenants and a reasonable return on the investment. The Commissioner may make such contracts with, and acquire for not to exceed $100 such stock or interest in, any such corporation, association, coopera. tive society, or trust as he may deem necessary to render effective such restriction or regulation. Such stock or interest shall be paid for out of such Housing Fund, and shall be redeemed by the corporation, association, cooperative society, or trust at par upon the termination of all obligations of the Commissioner under this insurance."

Sec. 1108 (e), Housing and Urban Development Act of 1965, 79 Stat. 451, 504, substituted "the General Insurance Fund" for "the Housing Fund".

until the termination of all obligations of the Commissioner under the insurance and during such further period of time as the Commissioner shall be the owner, holder, or reinsurer of the mortgage, is regulated or restricted by the Commissioner as to rents or sales, charges, capital structure, rate of return, and methods of operation to such extent and in such manner as to provide reasonable rentals to tenants and a reasonable return on the investment. The Commissioner may make such contracts with and acquire, for not to exceed $100, such stock or interest in the mortgagor as he may deem necessary to render effective the regulations or restrictions. The stock or interest acquired by the Commissioner 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 Commissioner under the insurance.

The insurance of mortgages under this section is intended to facilitate particularly the production of rental accommodations, at reasonable rents, of design and size suitable for family living. The Commissioner, is therefore, authorized and directed in the administration of this section to take action, by regulation or otherwise, which will direct the benefits of mortgage insurance hereunder primarily to those projects which make adequate provision for families with children, and in which every effort has been made to achieve moderate rental charges.

Notwithstanding any other provisions of this section, no mortgage shall be insured hereunder 2 unless the mortgagor certifies under oath in selecting tenants for the property covered by the mortgage he will not discriminate against any family by reason of the fact that there are children in the family, and that he will not sell the property while the insurance is in effect unless the purchaser so certifies, such certification to be filed with the Commissioner. Violation of any such certification shall be a misdemeanor punishable by a fine of not to exceed $500.

(c) To be eligible for insurance under this section a mortgage on any property or project shall involve a principal obligation in an amount

(1) not to exceed $20,000,000,3 or, if executed by a mortgagor coming within the provisions of paragraph numbered (b)(1) of this section, not to exceed $50,000,000;

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(2) not to exceed 90 per centum of the estimated value of the property or project (when the proposed improvements are completed): Provided, That this limitation shall not apply to mortgages on housing in ® Alaska, or in Guam,' but such a mortgage may involve a principal

6

1 Sec. 104 (e) (1), Housing Act of 1959, Public Law 86-372, approved September 23, 1959, 73 Stat. 654, 655, deleted "(except provisions relating to housing for elderly persons)".

2 Sec. 104 (e) (1), Housing Act of 1959, Public Law 86-372, approved September 23, 1959, 73 Stat. 654, 655, deleted (except with respect to housing designed for elderly persons, with occupancy preference therefor, as provided in the paragraph following paragraph (3) of subsection (c))".

3 Sec. 104 (a), Housing Act of 1959. Public Law 86-372, approved September 23, 1959, 73 Stat. 654, 655, substituted "$20,000,000" for "$12,500,000".

4 Sec. 108 (a), Housing Act of 1956, Public Law 1020. 84th Congress, approved August 7, 1956, 70 Stat. 1091, 1092, substituted "90 per centum" for "80 per centum".

5 Sec. 106. Housing Act of 1964, Public Law 88-560 approved September 2, 1964. 78 Stat. 769, 774, deleted a proviso at this point which limited the amount of the mortgage to the cost of the physical improvements on the property.

Sec. 10(b), Alaska Omnibus Act. Public Law 86-70, approved June 25, 1959, 73 Stat. 141, 142, deleted "the Territory of" at the point indicated.

7 The words "or in Guam" were added by sec. 115(2) of the Housing Act of 1954, Public Law 560, 83d Congress, approved August 2, 1954, 68 Stat. 590, 595.

obligation in an amount not to exceed 90 per centum of the amount which the Commissioner estimates will be the replacement cost of the property or project when the proposed improvements are completed (the value of the property or project as such term is used in this paragraph may include the land, the proposed physical improvements, utilities within the boundaries of the property or project, architect's fees, taxes, and interest accruing during construction, and other miscellaneous charges incident to construction and approved by the Commissioner). And provided further,1 That nothing contained in this section shall preclude the insurance of mortgages covering existing construction located in slum or blighted areas, as defined in paragraph numbered (5) of subsection (a) of this section, and the Commissioner may require such repair or rehabilitation work to be completed as is, in his discretion, necessary to remove conditions detrimental to safety, health, or morals; and

3

(3) not to exceed, for such part of the property or project as may be attributable to dwelling use (excluding exterior land improvements as defined by the Commissioner), $9,000 per family unit without a bedroom, $12,500 per family unit with one bedroom, $15,000 per family unit with two bedrooms, $18,500 per family unit with three bedrooms, and $21,000 per family unit with four or more bedrooms, or not to exceed $1,800 per space or $500,000 per mortgage for trailer courts or parks; except that as to projects to consist of elevator-type structures the Commissioner may, in his discretion, increase the dollar amount limitations per family unit to not to exceed $10,500 per family unit without a bedroom, $15,000 per family unit with one bedroom, $18,000 per family unit with two bedrooms, $22,500 per family unit with three bedrooms, and $25,500 per family unit with four or more bedrooms, as the case may be, to compensate for the higher costs incident to the construction of elevator-type structures of sound standards of construction and design; and except that the Commissioner may, by regulation, increase any of the foregoing dollar amount limitations contained in this paragraph by not to exceed 45 per centum in any geographical area where he finds that cost levels so require.

1 This proviso added by sec. 115(1) of the Housing Act of 1954, Public Law 560, 83d Congress, approved August 2, 1954, 68 Stat. 590, 594.

2 Sec. 107(a), Housing Act of 1964, Public Law 88-560, approved September 2, 1964, 78 Stat. 769, 774, deleted the previous per room limits in this paragraph (3) on the amount of a mortgage and substituted dollar amount limitations based on the number of family units in the project with the dollar amount limitations varying according to the number of bedrooms in each unit. Prior to this amendment paragraph (3) read as follows:

"(3) Not to exceed, for such part of such property or project as may be attributable to dwelling use (excluding exterior land improvements as defined by the Commissioner), $2,500 per room (or $9,000 per family unit if the number of rooms in such property or project is less than four per family unit) or not to exceed $1,800 per space or $500,000 per mortgage for trailer courts or parks: Provided, That as to projects to consist of elevator-type structures, the Commissioner may, in his discretion, increase the dollar amount limitation of $2,500 per room to not to exceed $3,000 per room and the dollar amount limitation of $9,000 per family unit to not to exceed $9,400 per family unit, as the case may be, to compensate for the higher costs incident to the construction of elevator-type structures of sound standards of construction and design; except that the Commissioner may, by regulation, increase any of the foregoing dollar amount limitations contained in this paragraph by not to exceed $1,250 per room without regard to the number of rooms being less than four, or four or more, in any geographical area where he finds that cost levels so require."

Sec. 107 (g), Housing Act of 1964, permits the Federal Housing Commissioner to apply to projects under consideration at the time of its enactment (September 2, 1964) the dollar limitations per room existing prior to enactment of the Act if he determines that it would be inequitable to apply the new limitations.

3 This dollar limitation applicable to family units with four or more bedrooms added by sec. 207 (a), Housing and Urban Development Act of 1965, Public Law 89-117, approved August 10, 1965, 79 Stat. 451, 467.

1

The mortgage shall provide for complete amortization by periodic payments within such term as the Commissioner shall prescribe, and shall bear interest (exclusive of premium charges for insurance) at not to exceed 541 per centum per annum on the amount of the principal obligation outstanding at any time. The Commissioner 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. No mortgage shall be accepted for insurance under this section or section 210 unless the Commissioner finds that the property or project, with respect to which the mortgage is executed, is economically sound. Such property or project may include eight or more family units and may include such commercial and community facilities as the Commissioner deems adequate to serve the occupants.

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(d) The Commissioner shall collect a premium charge for the insurance of mortgages under this section which shall be payable annually in advance by the mortgagee, either in cash or in debentures issued by the Commissioner under any title and section of this Act, except debentures of the Mutual Mortgage Insurance Fund, or of the Cooperative Management Housing Insurance Fund, at par plus accrued interest. In addition to the premium charge herein provided for, the Commissioner is authorized to charge and collect such amounts as he may deem reasonable for the appraisal of a property or project offered for insurance and for the inspection of such property or project during construction: Provided, That such charges for appraisal and inspection shall not aggregate more than 1 per centum of the original principal face amount of the mortgage.

(e) In the event that the principal obligation of any mortgage accepted for insurance under this section is paid in full prior to the maturity date, the Commissioner is authorized in his discretion to require the payment by the mortgagee of an adjusted premium charge in such amount as the Commissioner determines to be equitable, but not in excess of the aggregate amount of the premium charges that the mortgagee would otherwise have been required to pay if the mortgage had continued to be insured until such maturity date.

(f) 3

(g) The failure of the mortgagor to make any payment due under or provided to be paid by the terms of a mortgage insured under this section shall be considered a default under such mortgage and, if such default continues for a period of thirty days, the mortgagee shall be entitled to receive the benefits of the insurance as hereinafter provided, upon assignment, transfer, and delivery to the Commissioner, within a period and in accordance with rules and regulations to be prescribed by the Commissioner of (1) all rights and interests arising under the mortgage so in default; (2) all claims of the mortgagee against the mortgagor or others, arising out of the mortgage transactions; (3) all policies of title or other insurance or surety bonds or

1 Sec. 104 (c), Housing Act of 1959, Public Law 86-372, approved September 23, 1959, 73 Stat. 654, 655, substituted "54" for "42".

2 The phrase "may include eight or more family units and" inserted by sec. 102(b) (5) of the Housing Amendments of 1955, Public Law 345, 84th Congress, approved August 11, 1955, 69 Stat. 635.

3 Deleted by sec. 1108 (e) (3), Housing and Urban Development Act of 1965, Public Law 89-117, approved August 10, 1965, 79 Stat. 451, 504.