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insurance under this section: Provided further, That no such advance shall be insured under this section if the amount thereof plus the amount of the unpaid balance of the original principal obligation of the mortgage would exceed the amount of such original principal obligation unless the mortgagor certifies that the proceeds of such advance will be used to finance the construction of additional rooms or other enclosed space as a part of the dwelling: And provided further, That the insurance of "open-end" advances shall not be taken into account. in determining the aggregate amount of principal obligations of mortgages which may be insured under this Act.

FHA APPRAISAL AVAILABLE TO HOME BUYERS

SEC. 226. The Commissioner is hereby authorized and directed to require that, in connection with any property upon which there is located a dwelling designed principally for a single-family residence or a two-family residence and which is approved for mortgage insurance under section 203, 213 with respect to any property or project of a corporation or trust of the character described in paragraph numbered (2) of subsection (a) thereof, 220, 221, 222, 233,2 234,3 or 903, of this Act, the seller or builder or such other person as may be designated by the Commissioner shall agree to deliver, prior to the sale of the property, to the person purchasing such dwelling for his own occupancy, a written statement setting forth the amount of the appraised value of the property as determined by the Commissioner. This section shall not apply in any case where the mortgage involved was insured or the commitment for such insurance was issued prior to the effective date of the Housing Act of 1954. Notwithstanding the first sentence of this section, the Commissioner is authorized to require, in connection with any mortgage where the mortgage amount is computed on the basis of the Commissioner's estimate of the replacement cost of the property, or on the basis of any other estimates of the Commissioner, that a written statement setting forth such estimate or estimates, as the case may be, be furnished under this section in lieu of a written statement setting forth the amount of the appraised value of the property.

BUILDER'S COST CERTIFICATION

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SEC. 227.5 Notwithstanding any other provision of this Act, no mortgage covering new or rehabilitated multifamily housing or a

1 Sec. 226 was added by sec. 126 of the Housing Act of 1954, Public Law 560, 83d Congress, approved August 2, 1954, 68 Stat. 590, 607.

2 Section 233 (experimental housing mortgage insurance) added by sec. 103, Housing Act of 1961. Public Law 87-70, approved June 30, 1961, 75 Stat. 149, 158.

3 Section 234 (mortgage insurance for individually owned units in multifamily structures) added by sec. 104, Housing Act of 1961, Public Law 87-70, approved June 30, 1961, 75 Stat. 149, 160.

This sentence added by sec. 115 of the Housing Act of 1957, Public Law 85-104, approved July 12, 1957, 71 Stat. 294, 298 and amended by sec. 612(j) (2), Housing Act of 1961, Public Law 87-70, approved June 30, 1961, 75 Stat. 149, 182, to include estimates other than the estimate of the replacement cost of the property.

5 Sec. 227 was added by sec. 126 of the Housing Act of 1954, Public Law 560, S3d Congress, approved August 2, 1954, 68 Stat. 590, 607. Sec. 502 (b), Demonstration Cities and Metropolitan Development Act of 1966, Public Law 89-754, approved November 3, 1966, 80 Stat. 1255, 1277, inserted in the first sentence following "multifamily housing" the words "or a property or project described in title XI", thus requiring cost certification in the case of group practice facilities financed under the program authorizing mortgage insurance for such facilities.

property or project described in title XI shall be insured under this Act unless the mortgagor has agreed1 (a) to certify, upon completion of the physical improvements on the mortgaged property or project and prior to final endorsement of the mortgage, either (i) that the approved percentage of actual cost (as those terms are herein defined) equaled or exceeded the proceeds of the mortgage loan or (ii) the amount by which the proceeds of the mortgage loan exceeded such approved percentage of actual cost, as the case may be, and (b) to pay forthwith to the mortgagee, for application to the reduction of the principal obligation of such mortgage, the amount, if any, certified to be in excess of such approved percentage of actual cost. Upon the Commissioner's approval of the mortgagor's certification as required hereunder, such certification shall be final and incontestable, except for fraud or material misrepresentation on the part of the mortgagor. As used in this section

(a) The term "new or rehabilitated multifamily housing" means a project or property approved for mortgage insurance prior to the construction or the repair and rehabilitation involved and covered by a mortgage insured or to be insured (i) under section 207, (ii) under section 213 with respect to any property or project of a corporation or trust of the character described in paragraph numbered (1) of subsection (a) thereof or with respect to any property or project of a mortgagor of the character described in paragraph (3) of subsection (a) thereof, (iii) under section 220 if the mortgage meets the requirements of paragraph (3) (B) of subsection (d) thereof, (iv) under section 221 if the mortgage meets the requirements of paragraph (3) or paragraph (4) of subsection (d) thereof, (v) under section 231, (vi) under section 233 if the mortgage meets the requirements of subsection (b), (vii) under section 810 if the mortgage meets the requirements of subsection (f), or (viii) under section 234(d);

(b) The term "approved percentage" means the percentage figure which, under applicable provisions of this Act, the Commissioner is authorized to apply to his estimate of value, cost,5 or replacement cost, as the case may be, of the property or project in determining the maximum insurable mortgage amount; except that if the mortgage is to assist the financing of repair or rehabilitation and no part of the proceeds will be used to finance the purchase of the land or structure involved, the approved percentage shall be 100 per centum; and

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(c) The term "actual cost" has the following meaning: (i) in case the mortgage is to assist the financing of new construction, the term

1 See also sec. 814 of the Housing Act of 1954, which provides that no mortgage covering new or rehabilitated multifamily housing as defined in section 227 of the National Housing Act shall be insured unless the mortgagor certifies that he will keep such records as are prescribed by FHA and that they will be kept in such form as to permit a speedy and effective audit.

2 Immediately prior to amendment by sec. 112(a), Housing Act of 1959, Public Law 86372, approved September 23, 1959, 73 Stat. 654, 661, clauses (iv), (v), and (vi) read as follows:

"(iv) under section 221 if the mortgage meets the requirements of paragraph (3) of subsection (d) thereof, (v) under section 803, or (vi) under sections 903 and 908".

3 Immediately prior to amendment by sec. 612(k) (1), Housing Act of 1961, Public Law 87-70, approved June 30, 1961, 75 Stat. 149, 183, clause (vi) read as follows: "or (vi) under section 810 if the mortgage meets the requirements of subsection (f);".

4 Sec. 119 (c), Housing Act of 1964, Public Law 88-560, approved September 2, 1964, 78 Stat. 769, 782, inserted or (viii) under section 234 (d)".

5 Sec. 612(k) (2), Housing Act of 1961, Public Law 87-70, approved June 30, 1961, 75 Stat. 149, 183, inserted "cost".

This clause added by sec. 109. Housing Act of 1956, Public Law 1020, 84th Congress, approved August 7, 1956, 70 Stat. 1091, 1095.

means the actual cost to the mortgagor of such construction, including amounts paid for labor, materials, construction contracts, off-site public utilities, streets, organizational and legal expenses, such allocations of general overhead items as are acceptable to the Commissioner, and other items of expense approved by the Commissioner, plus (1) a reasonable allowance for builder's profit if the mortgagor is also the builder as defined by the Commissioner, and (2) an amount equal to the Commissioner's estimate of the fair market value of any land (prior to the construction of the improvements built as a part of the project) in the property or project owned by the mortgagor in fee (or, in case the land in the property or project is held by the mortgagor under a leasehold or other interest less than a fee, such amount as the mortgagor paid for the acquisition of such leasehold or other interest but, in no event, in excess of the fair market value of such leasehold or other interest exclusive of the proposed improvements), but excluding the amount of any kickbacks, rebates, or trade discounts received in connection with the construction of the improvements, or (ii) in case the mortgage is to assist the financing of repair or rehabilitation, the term means the actual cost to the mortgagor of such repair or rehabilitation, including the amounts paid for labor, materials, construction contracts, off-site public utilities, streets, organization and legal expenses, such allocations of general overhead items as are acceptable to the Commissioner, and other items of expense approved by the Commissioner, plus (1) a reasonable allowance for builder's profit if the mortgagor is also the builder as defined by the Commissioner, and (2) an additional amount equal to (A) in case the land and improvements are to be acquired by the mortgagor and the purchase price thereof is to be financed with part of the proceeds of the mortgage, the purchase price of such land and improvements prior to such repair or rehabilitation, or (B) in case the land and improvements are owned by the mortgagor subject to an outstanding indebtedness to be refinanced with part of the proceeds of the mortgage, the amount of such outstanding indebtedness secured by such land and improvements, but excluding (for the purposes of this clause (ii)) the amount of any kickbacks, rebates, or trade discounts received in connection with the construction of the improvements: Provided, That such additional amount under (A) of this clause (ii) shall in no event exceed the Commissioner's estimate of the fair market value of such land and improvements prior to such repair or rehabilitation, and such additional amount under (B) of this clause (ii) shall in no event exceed the approved percentage of the Commissioner's estimate of the fair market value of such land and improvements prior to such repair or rehabilitation. In the case of a mortgage insured under section 220, section 221(d) (3),1 section 221(d) (4), section 231, or section 233 (b) (2), where the mortgagor is also the builder as defined by the Commissioner, there shall be included in the actual cost, in lieu of the allowance for builder's profit under clause (i) or (ii) of the preceding sentence, an allowance for builder's and sponsor's profit and risk of 10 per centum (unless the Commissioner, after finding that such allowance is unreasonable, shall by regulation prescribe a lesser percentage)

1 Sec. 612(k) (3), Housing Act of 1961, Public Law 87-70, approved June 30, 1961, 75 Stat. 149. 183, amended this sentence to include mortgages insured under sections 221(d) (3) and 233 (b) (2) in addition to mortgages insured under sections 220, 221 (d) (4), and 231.

of all other items entering into the term "actual cost" except land or amounts paid for a leasehold and amounts included under either (A) or (B) of clause (ii) of the preceding sentence. In the case of a mortgage insured under section 220, section 221(d) (3),1 section 221 (d) (4), section 231, or section 233 (b) (2), where the mortgagor is not also the builder as defined by the Commissioner, there shall be included in the actual cost an allowance for sponsor's profit and risk of the said 10 per centum or lesser percentage of all other items entering into the term "actual cost" except land or amounts paid for a leasehold, amounts included under either (A) or (B) of the said clause (ii), and amounts paid by the mortgagor under a general construction contract. SEC. 228. Repealed.2

VOLUNTARY TERMINATION OF INSURANCE

SEC. 229. Notwithstanding any other provision of this Act and with respect to any loan or mortgage heretofore or hereafter insured under this Act, except under section 2, the Commissioner is authorized to terminate any insurance contract upon request by the borrower or mortgagor and the financial institution or mortgagee and upon payment of such termination charge as the Commissioner determines to be equitable, taking into consideration the necessity of protecting the various insurance Funds. Upon such termination, borrowers and mortgagors and financial institutions and mortgagees shall be entitled to the rights, if any, to which they would be entitled under this Act if the insurance contract were terminated by payment in full of the insured loan or mortgage.

ACQUISITION OF MORTGAGES TO AVOID FORECLOSURE

SEC. 230. Upon receiving notice of the default of any mortgage covering a one-, two-, three-, or four-family residence heretofore or hereafter insured under this Act, the Commissioner, in his discretion and for the purpose of avoiding foreclosure of the mortgage, and notwithstanding the fact that he has previously approved a request of the mortgagee for an extension of the time for curing the default and of the time for commencing foreclosure proceedings or for otherwise acquiring title to the mortgaged property, or has approved a modification

1 Sec. 612(k) (3), Housing Act of 1961, Public Law 87-70, approved June 30, 1961, 75 Stat. 149, 183, amended this sentence to include mortgages insured under secs. 221 (d) (3) and 233(b)(2) in addition to mortgages insured under secs. 220, 221(d)(4), and 231. 2 Repealed by sec. 12(c), Public Law 94, 84th Congress, approved June 28, 1955, 69 Stat. 172, 182.

3 Immediately prior to amendment by sec. 612(1), Housing Act of 1961, Public Law 87-70, approved June 30, 1961, 75 Stat. 149, 183, section 229 read as follows:

"SEC. 229. Notwithstanding any other provision of this Act and with respect to any mortgage covering a one-, two-, three, or four-family residence heretofore or hereafter insured under this Act, the Commissioner is authorized to terminate any mortgage insurance contract upon request by the mortgagor and mortgagee and upon payment of such termination charge as the Commissioner determines to be equitable, taking into consideration the necessity of protecting the various insurance funds. Upon such termination mortgagors and mortgagees shall be entitled to the rights, if any, to which they would be entitled under this Act if the insurance contract were terminated by payment in full of the insured mortgage."

Sec. 114(a), Housing Act of 1959, Public Law 86-372, approved September 23, 1959, 73 Stat. 654, 662, added sec. 230.

Sec. 104(b), Housing Act of 1964, Public Law 88-560, approved September 2, 1964, 78 Stat. 79, 769, 770, amended the first sentence of section 230 to make it clear that the Federal Housing Commissioner can accept assignment of a mortgage in default even though the lender had previously granted forbearance relief to the mortgagor. In addition, the payment of insurance benefits to the lender in such cases may include not only the unpaid interest on the mortgage but also such costs and attorneys' fees as are properly incurred by the lender in making the assignment.

of the mortgage for the purpose of changing the amortization provisions by recasting the unpaid balance, may acquire the loan and security therefor upon payment of the insurance benefits in an amount equal to the unpaid principal balance of the loan plus any unpaid mortgage interest plus reimbursement for such costs and attorney's fees as the Commissioner finds were properly incurred in connection with the defaulted mortgage and its assignment to the Commissioner, and for any proper advances theretofore made by the mortgagee under the provisions of the mortgage. After the acquisition of such mortgage by the Commissioner, the mortgagee shall have no further rights, liabilities, or obligations with respect thereto. The provisions of section 204 relating to the issuance of debentures incident to the acquisition of foreclosed properties shall apply with respect to debentures issued under this subsection, and the provisions of section 204 relating to the rights, liabilities, and obligations of a mortgagee shall apply with respect to the Commissioner when he has acquired an insured mortgage under this section, in accordance with and subject to regulations (modifying such provisions to the extent necessary to render their application for such purposes appropriate and effective) which shall be prescribed by the Commissioner.

HOUSING FOR ELDERLY PERSONS

SEC. 231.1 (a) The purpose of this section is to assist in relieving the shortage of housing for elderly persons and to increase the supply of rental housing for elderly persons.

For the purposes of this section

(1) the term "housing" means eight or more new or rehabilitated living units, not less than 50 per centum of which are specially designed for the use and occupancy of elderly persons;

(2) the term "elderly person" means any person, married or single, who is sixty-two years of age or over; and

(3) the terms "mortgage," "mortgagee," "mortgagor," and "maturity date" shall have the meanings respectively set forth in section 207 of this Act.

(b) The Commissioner is authorized to insure any mortgage (including advances on mortgages 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 mortgages prior to the date of their execution or disbursement thereon. (c) To be eligible for insurance under this section, a mortgage to provide housing for elderly persons shall

(1) involve a principal obligation in an amount not to exceed $12,500,000 or, if executed by Federal or State instrumentalities, municipal corporate instrumentalities of one or more States, or nonprofit development 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, not to exceed $50,000,000;

1 Sec. 201 (a), Housing Act of 1959, Public Law 86-372, approved September 23, 1959, 73 Stat. 654, 665, added sec. 231.

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