§1715z–10. Graduated payment and indexed mortgages

(a) Criteria; principal obligation limitation; termination date

The Secretary may insure under any provision of this subchapter mortgages and loans with provisions of varying rates of amortization corresponding to anticipated variations in family income or with monthly payments and outstanding balances adjusted by a percentage change in a selected price index to the extent he determines such mortgages or loans (1) have promise for expanding housing opportunities or meet special needs, (2) can be developed to include any safeguards for mortgagors or purchasers that may be necessary to offset special risks of such mortgages, and (3) have a potential for acceptance in the private market. Notwithstanding any other provision of this subchapter, except as provided in subsections (b) and (c) of this section, the principal obligation (including all interest to be deferred and added to principal) of a mortgage insured pursuant to this subsection may not exceed 97 per centum of the appraised value of the property covered by the mortgage as of the date the mortgage is accepted for insurance, or if the mortgagor is a veteran and the mortgage is to be insured in accordance with the provisions of section 1709 of this title, such higher percentage of appraised value as is provided for purposes of determining the maximum mortgage amount eligible for insurance under section 1709(b)(2) of this title in the case of veterans.

(b) Inapplicability of principal obligation limitations

Notwithstanding the provisions of subsection (a) of this section, the Secretary may insure under any provision of this subchapter a mortgage or loan which meets the requirements of the first sentence of subsection (a) of this section and which has provisions for varying rates of amortization if the Secretary determines-

(1) the mortgagor could not reasonably afford to purchase the dwelling unit by means of a mortgage insured under subsection (a) of this section or any other mortgage insurance program under this subchapter;

(2) the principal obligation of the mortgage or loan initially does not exceed the percentage of the initial appraised value of the property specified in section 1709(b) of this title as of the date the mortgage or loan is accepted for insurance;

(3) the principal obligation of the mortgage or loan thereafter (including all interest to be deferred and added to principal) will not at any time be scheduled to exceed 97 per centum, or, if the mortgagor is a veteran, such higher percentage as is provided under section 1709(b)(2) of this title for veterans, of the projected value of the property; and

(4) the principal obligation of the mortgage thereafter will not exceed 113 per centum of the initial appraised value of the property.

Mortgage insurance under this subsection shall be limited to mortgages executed by mortgagors who, as determined by the Secretary, have not owned dwelling units within the preceding three years. For the purpose of this subsection, the projected value of the property shall be calculated by the Secretary by increasing the initial appraised value of the property at a rate not in excess of 2½ per centum per annum. The number of mortgages which are insured in accordance with this subsection in any fiscal year may not exceed (A) that number of mortgages the aggregate initial principal obligation of which equals 10 per centum of the aggregate amount of the initial principal obligation of all mortgages secured by properties improved by one- to four-family residences which are insured under this subchapter during the preceding fiscal year, or (B) 50,000 mortgages, whichever is greater. No loan or mortgage may be insured under this subsection after February 5, 1988, except pursuant to a commitment to insure entered into on or before February 5, 1988.

(c) Mortgages with monthly adjustments based on selected price index; priority; regulations; number

Notwithstanding the provisions of subsection (a) of this section, the Secretary may insure under any provision of this subchapter a mortgage or loan that meets the requirements of the first sentence of subsection (a) of this section and that has provisions permitting adjustment of monthly payments and outstanding principal according to changes or percentages of changes in a selected price index if the Secretary determines-

(1) the principal obligation of the mortgage or loan initially does not exceed the percentage of the initial appraised value of the property specified in section 1709(b) of this title as of the date the mortgage or loan is accepted for insurance; and

(2) the monthly payments and principal obligation of the mortgage or loan thereafter will not at any time be increased at a rate greater than the percentage change in the price index stipulated in the initial mortgage or loan contract.

In carrying out this subsection, the Secretary shall give a priority to mortgages executed by mortgagors who, as determined by the Secretary, have not owned dwelling units within the preceding 3 years. The Secretary shall, not later than March 31, 1984, prescribe regulations establishing guidelines governing mortgages and loans described in this subsection and shall, to the extent practicable, conduct a demonstration program to insure mortgages and loans in accordance with this subsection during fiscal years 1984 and 1985. The aggregate number of mortgages and loans insured under this subsection and section 1715z–17 of this title in any fiscal year may not exceed 10 percent of the aggregate number of mortgages and loans insured by the Secretary under this subchapter during the preceding fiscal year.

(d) Multifamily housing

(1) The Secretary may insure, under any provision of this subchapter relating to multifamily housing projects, mortgages and loans with provisions of varying rates of amortization corresponding to anticipated variations in project income, to the extent the Secretary determines such mortgages or loans (A) have promise for expanding housing opportunities or meet special needs; (B) can be developed to include any safeguards for mortgagors, tenants, or purchasers that may be necessary to offset special risks of such mortgages; and (C) have a potential for acceptance in the private market.

(2) Notwithstanding any other provision of this subchapter, the principal obligation of a mortgage or loan insured pursuant to this subsection-

(A) may not exceed initially the percentage of the initial appraised value or replacement cost of the property involved that is required by the provision of this subchapter under which such property is insured; and

(B) thereafter (including all interest to be deferred and added to principal) may not at any time be scheduled to exceed 100 percent of the projected value of such property.

(3) For purposes of this subsection, the projected value of a property shall be calculated by the Secretary by increasing the initial appraised value of such property at a rate not in excess of 2.5 percent per annum.

(e) Inapplicability of State constitution, etc., provision limiting interest or requiring minimum amortization of principal

Any mortgage or loan insured pursuant to this section which contains or sets forth any graduated mortgage provisions (including but not limited to provisions for adding deferred interest to principal) which are authorized under this section and applicable regulations, or which have been insured on the basis of their being so authorized, shall not be subject to any State constitution, statute, court decree, common law, or rule or public policy (1) limiting the amount of interest which may be charged, taken, received, or reserved, or the manner of calculating such interest (including but not limited to prohibitions against the charging of interest on interest), if such constitution, statute, court decree, common law, or rule would not apply to the mortgage or loan in the absence of such graduated payment mortgage provisions, or (2) requiring a minimum amortization of principal under the mortgage or loan.

(June 27, 1934, ch. 847, title II, §245, as added Pub. L. 93–383, title III, §308, Aug. 22, 1974, 88 Stat. 680 ; amended Pub. L. 94–375, §7, Aug. 3, 1976, 90 Stat. 1071 ; Pub. L. 95–128, title III, §§301(g), 310, Oct. 12, 1977, 91 Stat. 1131 , 1136; Pub. L. 95–406, §1(g), Sept. 30, 1978, 92 Stat. 879 ; Pub. L. 95–557, title III, §301(g), Oct. 31, 1978, 92 Stat. 2096 ; Pub. L. 95–630, title XV, §1503, Nov. 10, 1978, 92 Stat. 3713 ; Pub. L. 96–71, §1(g), Sept. 28, 1979, 93 Stat. 501 ; Pub. L. 96–105, §1(g), Nov. 8, 1979, 93 Stat. 794 ; Pub. L. 96–153, title III, §§301(g), 311(b), Dec. 21, 1979, 93 Stat. 1112 , 1115; Pub. L. 96–372, §1(g), Oct. 3, 1980, 94 Stat. 1363 ; Pub. L. 96–399, title III, §301(g), Oct. 8, 1980, 94 Stat. 1638 ; Pub. L. 97–35, title III, §331(g) Aug. 13, 1981, 95 Stat. 413 ; Pub. L. 97–289, §1(g), Oct. 6, 1982, 96 Stat. 1230 ; Pub. L. 98–35, §1(g), May 26, 1983, 97 Stat. 197 ; Pub. L. 98–109, §1(g), Oct. 1, 1983, 97 Stat. 745 ; Pub. L. 98–181, title IV, §§401(f), 441, 442, Nov. 30, 1983, 97 Stat. 1208 , 1223, 1224; Pub. L. 99–120, §1(f), Oct. 8, 1985, 99 Stat. 502 ; Pub. L. 99–156, §1(f), Nov. 15, 1985, 99 Stat. 815 ; Pub. L. 99–219, §1(f), Dec. 26, 1985, 99 Stat. 1730 ; Pub. L. 99–267, §1(f), Mar. 27, 1986, 100 Stat. 73 ; Pub. L. 99–272, title III, §3007(f), Apr. 7, 1986, 100 Stat. 105 ; Pub. L. 99–289, §1(b), May 2, 1986, 100 Stat. 412 ; Pub. L. 99–345, §1, June 24, 1986, 100 Stat. 673 ; Pub. L. 99–430, Sept. 30, 1986, 100 Stat. 986 ; Pub. L. 100–122, §1, Sept. 30, 1987, 101 Stat. 793 ; Pub. L. 100–154, Nov. 5, 1987, 101 Stat. 890 ; Pub. L. 100–170, Nov. 17, 1987, 101 Stat. 914 ; Pub. L. 100–179, Dec. 3, 1987, 101 Stat. 1018 ; Pub. L. 100–200, Dec. 21, 1987, 101 Stat. 1327 ; Pub. L. 100–242, title IV, §§401(a)(4), 408(b), 415(b)(1), Feb. 5, 1988, 101 Stat. 1898 , 1903, 1907.)

Amendments

1988-Subsec. (a). Pub. L. 100–242, §401(a)(4), struck out at end "A mortgage or loan may not be insured pursuant to this subsection after March 15, 1988, except pursuant to a commitment entered into prior to such date."

Subsec. (b). Pub. L. 100–242, §408(b), inserted at end "No loan or mortgage may be insured under this subsection after February 5, 1988, except pursuant to a commitment to insure entered into on or before such date."

Subsec. (c). Pub. L. 100–242, §415(b)(1), struck out reference to section 1715z–16 of this title in last sentence.

1987-Subsec. (a). Pub. L. 100–200 substituted "March 15, 1988" for "December 16, 1987".

Pub. L. 100–179 substituted "December 16, 1987" for "December 2, 1987".

Pub. L. 100–170 substituted "December 2, 1987" for "November 15, 1987".

Pub. L. 100–154 substituted "November 15, 1987" for "October 31, 1987".

Pub. L. 100–122 substituted "October 31, 1987" for "September 30, 1987".

1986-Subsec. (a). Pub. L. 99–430 substituted "September 30, 1987" for "September 30, 1986".

Pub. L. 99–345 substituted "September 30, 1986" for "June 6, 1986".

Pub. L. 99–289 substituted "June 6, 1986" for "April 30, 1986".

Pub. L. 99–272 made amendment identical to Pub. L. 99–219. See 1985 Amendment note below.

Pub. L. 99–267 substituted "April 30, 1986" for "March 17, 1986".

1985-Subsec. (a). Pub. L. 99–219 substituted "March 17, 1986" for "December 15, 1985".

Pub. L. 99–156 substituted "December 15, 1985" for "November 14, 1985".

Pub. L. 99–120 substituted "November 14, 1985" for "September 30, 1985".

1983-Subsec. (a). Pub. L. 98–181, §441(a), inserted "or with monthly payments and outstanding balances adjusted by a percentage change in a selected price index" after "family income" and substituted "subsections (b) and (c) of this section" for "subsection (b) of this section".

Pub. L. 98–181, §401(f), substituted "September 30, 1985" for "November 30, 1983".

Pub. L. 98–109 substituted "November 30, 1983" for "September 30, 1983".

Pub. L. 98–35 substituted "September 30, 1983" for "May 20, 1983".

Subsecs. (c) to (e). Pub. L. 98–181, §§441(b), 442, added subsecs. (c) and (d) and redesignated former subsec. (c) as (e).

1982-Subsec. (a). Pub. L. 97–289 substituted "May 20, 1983" for "September 30, 1982".

1981-Subsec. (a). Pub. L. 97–35 substituted "1982" for "1981".

1980-Subsec. (a). Pub. L. 96–399 substituted "September 30, 1981" for "October 15, 1980".

Pub. L. 96–372 substituted "October 15, 1980" for "September 30, 1980".

1979-Subsec. (a). Pub. L. 96–153, §§301(g), 311(a)(1)–(4), designated existing provisions as subsec. (a) and struck out provisions that mortgages or loans insured pursuant to this section which contained or set forth graduated mortgage provisions shall not be subject to local usury laws and laws requiring a minimum amortization of principal or otherwise relating to amortization of principal under the mortgage or loan, and substituted "September 30, 1980" for "November 30, 1979".

Pub. L. 96–105 substituted "November 30, 1979" for "October 31, 1979".

Pub. L. 96–71 substituted "October 31, 1979" for "September 30, 1979".

Subsecs. (b), (c). Pub. L. 96–153, §311(5), added subsecs. (b) and (c).

1978-Pub. L. 95–630 inserted "(1)" before "limiting the amount of interest" and ", or (2) requiring a minimum amortization of principal or otherwise relating to the amortization of principal under the mortgage or loan" after "payment mortgage provisions".

Pub. L. 95–557 substituted "September 30, 1979" for "October 31, 1978".

Pub. L. 95–406 substituted "October 31, 1978" for "September 30, 1978".

1977-Pub. L. 95–128 substituted "September 30, 1978" for "September 30, 1977", struck out "on an experimental basis" after "may insure", substituted provision respecting limitation of principal obligation for prior provision respecting limitation of outstanding aggregate principal amount of mortgages authorized, and made any State law interest limitation inapplicable to graduated mortgage provisions.

1976-Pub. L. 94–375 substituted "September 30, 1977" for "June 30, 1976".

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–35 effective Oct. 1, 1981, see section 371 of Pub. L. 97–35, set out as an Effective Date note under section 3701 of this title.

Effective Date of 1978 Amendment

Amendment by Pub. L. 95–630 effective Nov. 10, 1978, see section 1505 of Pub. L. 95–630, set out as a note under section 27 of this title.

Short Title of 1979 Amendment

For short title of section 311 of Pub. L. 96–153, which amended this section, as the "Homeownership Opportunity Act of 1979", see section 311(a) of Pub. L. 96–153, set out as a note under section 1701 of this title.

Section Referred to in Other Sections

This section is referred to in sections 1709, 1715n, 1715z, 1715z–14, 1715z–17 of this title.