§1715z–6. Supplemental loans for multifamily projects

(a) Authorization to insure; "supplemental loan" defined

With respect to a multifamily project, hospital, or group practice facility covered by a mortgage insured under any section or subchapter of this chapter or covered by a mortgage held by the Secretary, 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, hospital, or facility: Provided, That a loan involving a nursing home, hospital, or a group practice facility may also be made for the purpose of financing equipment to be used in the operation of such nursing home, hospital, or facility.

(b) Eligibility for insurance

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 subchapter pursuant to which the mortgage covering such project or facility is insured or an amount acceptable to the Secretary;

(2) have a maturity satisfactory to the Secretary;

(3) bear interest at such rate as may be agreed upon by the borrower and the financial institution;

(4) be secured in such manner as the Secretary may require;

(5) be governed by the labor standards provisions of section 1715c of this title that are applicable to the section or subchapter pursuant to which the mortgage covering the project or facility is insured or pursuant to which the original mortgage covering the project or facility was insured; and

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

(c) Applicability of other provisions of law

The provisions of subsections (d), (e), (g), (h), (i), (j), (k), (l), and (n) of section 1713 of this title 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 1715e of this title 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 1715z–1 of this title shall be insured under and shall be the obligation of the Special Risk Insurance Fund.

(d) Authorization to insure loans for improvements or additions; terms and conditions; limitation on amount

Notwithstanding the foregoing, the Secretary may insure a loan for improvements or additions to a multifamily housing project, or a group practice or medical practice facility or hospital or other health facility approved by the Secretary, which is not covered by a mortgage insured under this chapter, if he finds that such a loan would assist in preserving, expanding, or improving housing opportunities, or in providing protection against fire or other hazards. Such loans shall have a maturity satisfactory to the Secretary and shall meet such other conditions as the Secretary may prescribe. In no event shall such a loan be insured if it is for an amount in excess of the maximum amount which could be approved if the outstanding indebtedness, if any, covering the property were a mortgage insured under this chapter. At any sale under foreclosure of a mortgage on a project or facility which is not insured under this chapter but which is senior to a loan assigned to the Secretary pursuant to subsection (c) of this section, the Secretary is authorized to bid, in addition to amounts authorized under section 1713(k) of this title, any sum up to but not in excess of the total unpaid indebtedness secured by such senior mortgage, plus taxes, insurance, foreclosure costs, fees, and other expenses. In the event that, pursuant to subsection (c) of this section, the Secretary acquires title to, or is assigned, a loan covering a project or facility which is subject to a mortgage which is not insured under this chapter, the Secretary is authorized to make payments from the General Insurance Fund on the debt secured by such mortgage, and to take such other steps as the Secretary may deem appropriate to preserve or protect the Secretary's interest in the project or facility.

(e) Loan insurance for energy conserving improvements and solar energy systems

(1) Notwithstanding any other provision of this section, the Secretary may insure a loan for purchasing and installing energy conserving improvements (as defined in subparagraph (2) of the last paragraph of section 1703(a) of this title), for purchasing and installing a solar energy system (as defined in subparagraph (3) of the last paragraph of section 1703(a) of this title), and for purchasing or installing (or both) individual utility meters in a multifamily housing project if such meters are purchased or installed in connection with other energy conserving improvements or with a solar energy system or the project meets minimum standards of energy conservation established by the Secretary, without regard to whether the project is covered by a mortgage under this chapter.

(2) Notwithstanding the provisions of subsection (b) of this section, a loan insured under this subsection shall-

(A) not exceed an amount which the Secretary determines is necessary for the purchase and installation of individual utility meters plus an amount which the Secretary deems appropriate taking into account amounts which will be saved in operation costs over the period of repayment of the loan by reducing the energy requirements of the project as a result of the installation of energy conserving improvements or a solar energy system therein;

(B) be insured for 90 percent of any loss incurred by the person holding the note for the loan; except that, for cooperative multifamily projects receiving assistance under section 1715z–1 of this title or financed with a below market interest rate mortgage insured under section 1715l(d)(3) of this title, 100 percent of any such loss may be insured;

(C) bear an interest rate not to exceed an amount which the Secretary determines, after consulting with the Secretary of Energy, to be necessary to meet market demands;

(D) have a maturity satisfactory to the Secretary;

(E) be insured pursuant to a premium rate established on a sound actuarial basis to the extent practicable;

(F) be secured in such manner as the Secretary may require;

(G) be an acceptable risk in that energy conservation or solar energy benefits to be derived outweigh the risks of possible loss to the Federal Government; and

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

(3) The provisions of subsection (c) of this section shall apply to loans insured under this subsection.

(4) The Secretary shall provide that any person obligated on the note for any loan insured under this section be regulated or restricted, until the termination of all obligations of the Secretary under the insurance, by the Secretary as to rents or sales, charges, capital structure, rate of return, and methods of operations of the multifamily project to such an extent and in such manner as to provide reasonable rentals to tenants and a reasonable return on the investment.

(f) Insurance for second mortgage financing

(1) Notwithstanding any other provision of this section, the Secretary may, upon such terms and conditions as the Secretary may prescribe, make a commitment to insure and insure equity loans and acquisition loans made by financial institutions approved by the Secretary and State housing finance agencies that enter into risk-sharing agreements with the Secretary.

(2)(A) For purposes of this section, the term "equity loan" means a loan or advance of credit to the owner of eligible low income housing (as defined in section 229 of the Low-Income Housing Preservation and Resident Homeownership Act of 1990 [12 U.S.C. 4119]) who agrees to extend the low-income affordability restrictions on the housing pursuant to an approved plan of action under such Act [12 U.S.C. 4101 et seq.].

(B) To be eligible for insurance under this paragraph, an equity loan shall-

(i) be limited to an amount equal to the amount of rehabilitation costs required by the plan of action and related charges and the lesser of (I) 70 percent of the preservation equity in the project, as determined by the Secretary under such Act [12 U.S.C. 4101 et seq.], or (II) the amount the Secretary determines can be supported by the project on the basis of an 8 percent return on the preservation equity (assuming normal debt service coverages); and

(ii) provide for the lender to deposit (on behalf of the borrowing owner) 10 percent of the loan amount in an escrow account, controlled by the Secretary or a State housing finance agency approved by the Secretary, which shall be made available to the owner upon the expiration of the 5-year period beginning on the date the loan is made, subject to compliance with section 222(d) of such Act [12 U.S.C. 4112(d)]; ¹

(3)(A) For purposes of this section, the term "acquisition loan" means a loan or advance of credit to a qualified purchaser of eligible low-income housing (as defined in section 231 of the Low-Income Housing Preservation and Resident Homeownership Act of 1990 [12 U.S.C. 4121]) acquiring the housing under section 220 or 221 of such Act [12 U.S.C. 4110 or 4111] who agrees to extend the low-income affordability restrictions pursuant to an approved plan of action under such Act [12 U.S.C. 4101 et seq.].

(B) To be eligible for insurance under this paragraph, an acquisition loan shall be limited to 95 percent of the preservation equity of the housing determined under section 229(8) of the Low-Income Housing Preservation and Resident Homeownership Act of 1990 [12 U.S.C. 4119(8)] and the amount of rehabilitation costs required by the plan of action and related charges and,² except that the loan may include, if the qualified purchaser is a priority purchaser as defined under section 231 of such Act [12 U.S.C. 4121], any expenses associated with the acquisition, loan closing, and implementation of the plan of action, subject to approval by the Secretary.

(4) The provisions of subsections (d), (e), (g), (h), (i), (j), (k), (l), and (n) of section 1713 of this title shall be applicable to loans insured under this subsection, except that-

(A) all references to the term "mortgage" shall be construed to refer to the term "loan" as used in this subsection;

(B) loans involving projects covered by a mortgage insured under section 1715z–1 of this title shall be insured under and shall be the obligations of the Special Risk Insurance Fund; and

(C) with respect to any sale under foreclosure of a mortgage on the project that is senior to the equity loan insured under this subsection and when the equity loan is secured by a mortgage, the Secretary may-

(i) issue regulations providing that, in order to receive insurance benefits, the insured mortgagee shall either assign the equity or acquisition loan to the Secretary or bid the amount necessary to acquire the project and convey title to the project to the Secretary, in which case the insurance benefits paid by the Secretary shall include the amount bid by the mortgagee to satisfy the senior mortgage at the foreclosure sale; and

(ii) if the equity or acquisition loan has been assigned to the Secretary, bid, in addition to amounts authorized under section 1713(k) of this title, any sum not in excess of the total unpaid indebtedness secured by such senior mortgage and the equity or acquisition loan, plus taxes, insurance, foreclosure costs, fees, and other expenses.

(5) Loans insured under this subsection shall-

(A)(i) in the case of equity loans, have a term not to exceed 40 years and amortization provisions which will, to the extent practicable, support the loan amount authorized under paragraph (2)(B); and

(ii) in the case of acquisition loans, have a term of not less than 40 years; and

(B) bear interest at such rate as may be agreed upon by the mortgagor and mortgagee and be secured in such manner as the Secretary may require; and

(C) contain such other terms, conditions, and restrictions as the Secretary may prescribe, including phased advances of equity loan proceeds to reflect project rent levels.

(6) When underwriting an equity or acquisition loan under this subsection, the Secretary may assume that the rental assistance provided in accordance with an approved plan of action under section 222 of the Cranston-Gonzalez National Affordable Housing Act [42 U.S.C. 12752] will be extended for the full term of the contract entered into under such Act. The Secretary may accelerate repayment of a loan under this subsection if rental assistance is not extended under section 222(b) of such Act or the Secretary is unable to develop a revised package of incentives to the owner comparable to those received under the original approved plan of action.

(7) If the Secretary is unable to extend the term of rental assistance for the full term of the contract entered into under section 222(b) of the Cranston-Gonzalez National Affordable Housing Act [42 U.S.C. 12752(b)], the Secretary may take such actions as the Secretary determines to be appropriate to avoid default, avoid disruption of the sound ownership and management of the housing, and otherwise minimize the cost to the Federal Government.

(8) A mortgagee approved by the Secretary may not withhold consent to an equity or acquisition loan on a property on which that mortgagee holds a mortgage.

(10) ³ The Secretary shall renegotiate and modify the terms of an equity loan insured under this subsection, at the request of the owner of the project for which the loan is made, if-

(1) the loan was made during the period beginning 30 days before October 28, 1992, and ending 90 days after October 28, 1992, under this subsection; and

(2) the loan was made pursuant to a plan of action under the provisions of the Emergency Low Income Housing Preservation Act of 1987 and accepted by the Secretary for processing in December 1991.

(g) Extension of rental assistance for term of loan

(1) When underwriting a rehabilitation loan under this section in connection with eligible multifamily housing, the Secretary may assume that any rental assistance provided for purposes of servicing the additional debt will be extended for the term of the rehabilitation loan. The Secretary shall exercise prudent underwriting practices in insuring rehabilitation loans under this section. For purposes of this subsection, the term "eligible multifamily housing" means any housing financed by a loan or mortgage that is-

(A) insured or held by the Secretary under section 1715l(d)(3) of this title and assisted under section 1701s of this title or section 1437f of title 42;

(B) insured or held by the Secretary and bears interest at a rate determined under the proviso of section 1715l(d)(5) of this title; or

(C) insured, assisted or held by the Secretary under section 1715z–1 of this title.

(2) A mortgagee approved by the Secretary may not withhold consent to a rehabilitation loan insured in connection with eligible multifamily housing on which that mortgagee holds a mortgage.

(June 27, 1934, ch. 847, title II, §241, as added Aug. 1, 1968, Pub. L. 90–448, title III, §307, 82 Stat. 508 ; amended Dec. 31, 1970, Pub. L. 91–609, title I, §111, 84 Stat. 1772 ; Aug. 22, 1974, Pub. L. 93–383, title III, §313, 88 Stat. 684 ; Aug. 3, 1976, Pub. L. 94–375, §5, 90 Stat. 1070 ; Oct. 31, 1978, Pub. L. 95–557, title III, §311(b), 92 Stat. 2098 ; Nov. 9, 1978, Pub. L. 95–619, title II, §247, 92 Stat. 3234 ; Dec. 21, 1979, Pub. L. 96–153, title III, §319, 93 Stat. 1119 ; Oct. 8, 1980, Pub. L. 96–399, title III, §314, 94 Stat. 1645 ; Nov. 30, 1983, Pub. L. 98–181, title IV, §404(b)(14), 97 Stat. 1210 ; Oct. 17, 1984, Pub. L. 98–479, title II, §204(a)(11), (12), 98 Stat. 2232 ; Feb. 5, 1988, Pub. L. 100–242, title II, §231, title IV, §429(c), 101 Stat. 1884 , 1918; Dec. 15, 1989, Pub. L. 101–235, title II, §§203(c), (d), 204(b), 103 Stat. 2038 , 2039; Nov. 28, 1990, Pub. L. 101–625, title VI, §602(a), 104 Stat. 4275 ; Oct. 28, 1992, Pub. L. 102–550, title III, §§316(a), (b), 317(c), 106 Stat. 3771 , 3772.)

References in Text

The Low-Income Housing Preservation and Resident Homeownership Act of 1990, referred to in subsec. (f)(2), (3), is title II of Pub. L. 100–242, Feb. 5, 1988, 101 Stat. 1877 , as amended, which is classified principally to chapter 42 (§4101 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note set out under section 4101 of this title and Tables.

The Cranston-Gonzalez National Affordable Housing Act, referred to in subsec. (f)(6), is Pub. L. 101–625, Nov. 28, 1990, 104 Stat. 4079 . For complete classification of this Act to the Code, see Short Title note set out under section 12701 of Title 42, The Public Health and Welfare, and Tables.

The Emergency Low Income Housing Preservation Act of 1987, referred to in subsec. (f)(10)(2), is title II of Pub. L. 100–242, Feb. 5, 1988, 101 Stat. 1877 , which, as amended by Pub. L. 101–625, is known as the Low-Income Housing Preservation and Resident Homeownership Act of 1990. Subtitles A and B of title II, which were formerly set out as a note under section 1715l of this title and which amended this section, were amended generally by Pub. L. 101–625 and are classified to subchapter I (§4101 et seq.) of chapter 42 of this title. Subtitles C and D of title II amended section 1715z–15 of this title and sections 1437f, 1472, 1485, and 1487 of Title 42. Another subtitle C of title II of Pub. L. 100–242, as added by Pub. L. 102–550, is classified generally to subchapter II (§4141 et seq.) of chapter 42 of this title. For complete classification of this Act to the Code, see Short Title note set out under section 4101 of this title and Tables.

Amendments

1992-Subsec. (f)(2)(B)(i). Pub. L. 102–550, §316(a)(1), inserted "the amount of rehabilitation costs required by the plan of action and related charges and" after "equal to".

Subsec. (f)(2)(B)(ii). Pub. L. 102–550, §317(c)(1), struck out "and" at end.

Subsec. (f)(3)(B). Pub. L. 102–550, §316(a)(2), inserted "and the amount of rehabilitation costs required by the plan of action and related charges and" after "1990".

Subsec. (f)(5)(A). Pub. L. 102–550, §316(a)(3)(B), added subpar. (A) and struck out former subpar. (A) which read as follows: "have a maturity and provisions for amortization satisfactory to the Secretary, bear interest at such rate as may be agreed upon by the mortgagor and mortgagee, and be secured in such manner as the Secretary may require; and".

Subsec. (f)(5)(B), (C). Pub. L. 102–550, §316(a)(3), added subpar. (B) and redesignated former subpar. (B) as (C).

Subsec. (f)(6). Pub. L. 102–550, §317(c)(2), which directed the substitution of "acquisition loan" for "acquisiton loan" in par. (7), was executed by making the substitution in par. (6) to reflect the probable intent of Congress and the intervening redesignation of par. (7) as (6) by Pub. L. 102–550, §316(a)(5). See below.

Pub. L. 102–550, §316(a)(4), (5), redesignated par. (7) as (6) and struck out former par. (6) which read as follows: "The Secretary may provide for combination of loans insured under subsection (d) of this section with equity and acquisition loans insured under this subsection."

Subsec. (f)(7) to (9). Pub. L. 102–550, §316(a)(5), redesignated pars. (7) to (9) as (6) to (8), respectively.

Subsec. (f)(10). Pub. L. 102–550, §316(b), added par. (10).

1990-Subsec. (f). Pub. L. 101–625 amended subsec. (f) generally, substituting present provisions for provisions relating to insurance of "equity loans" under the Emergency Low Income Housing Preservation Act of 1987, providing for eligibility for such insurance, providing that a qualified nonprofit organization or limited equity tenant cooperative corporation may constitute an owner of housing for purposes of receiving an insured loan, providing for applicability of certain provisions of section 1713 of this title, and providing that an approved mortgagee may not withhold consent to an equity loan on property on which mortgagee holds a mortgage.

1989-Subsec. (f)(2). Pub. L. 101–235, §203(c)(1), inserted at end "When underwriting an equity loan under this subsection, the Secretary may assume that the rental assistance provided in accordance with an approved plan of action under section 225(b) of the Emergency Low Income Housing Preservation Act of 1987 will be extended for the full term of the contract entered into under section 225(c) of that Act. The Secretary may accelerate repayment of a loan under this section in the event rental assistance is not extended under section 225(c) of that Act or the Secretary is unable to develop a revised package of incentives to the owner comparable to those received under the original approved plan of action."

Subsec. (f)(3). Pub. L. 101–235, §203(c)(2), inserted "public entity," after "A".

Subsec. (f)(6). Pub. L. 101–235, §203(d), added par. (6).

Subsec. (g). Pub. L. 101–235, §204(b), added subsec. (g).

1988-Subsec. (b)(3). Pub. L. 100–242, §429(c), substituted "borrower and the financial institution" for "mortgagor and the mortgagee".

Subsec. (f). Pub. L. 100–242, §231, added subsec. (f).

1984-Subsec. (a). Pub. L. 98–479, §204(a)(11), substituted "to make" for "to made".

Subsec. (b)(1). Pub. L. 98–479, §204(a)(12), substituted "or facility" for "of facility" before "is insured".

1983-Subsec. (b)(3). Pub. L. 98–181 substituted provision that the interest rate be such a rate as agreed upon by the mortgagor and the mortgagee for provision that the interest rate, exclusive of premium charges for insurance and service charges, not 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.

1980-Subsec. (e)(1). Pub. L. 96–399 inserted provisions respecting requirements for purchase or installation in connection with other energy conserving improvements, etc.

1979-Subsec. (b)(2). Pub. L. 96–153 struck out "but not to exceed the remaining term of the mortgage" after "the Secretary".

1978-Subsec. (d). Pub. L. 95–557 inserted provision relating to the amounts the Secretary is authorized to bid at any sale under foreclosure of a mortgage on a project or facility which is not insured under this chapter but which is senior to a loan assigned to the Secretary pursuant to subsection (c), and such other steps the Secretary is authorized to take to preserve or protect his interest in the project or facility.

Subsec. (e). Pub. L. 95–619 added subsec. (e).

1976-Subsec. (a). Pub. L. 94–375 inserted ", hospital," after "multifamily project", "additions to such project", "involving a nursing home", and "of such nursing home".

1974-Subsec. (d). Pub. L. 93–383 added subsec. (d).

1970-Subsec. (a). Pub. L. 91–609, §111(1), (2), inserted in first sentence "or covered by a mortgage held by the Secretary" after "this chapter" and substituted in proviso "a nursing home or a group practice facility" for "a nursing home covered by a mortgage insured under section 1715w of this title or a loan involving a group practice facility covered by a mortgage insured under subchapter IX–B of this chapter", respectively.

Subsec. (b)(1). Pub. L. 91–609, §111(3), inserted "or an amount acceptable to the Secretary" before semicolon at end.

Subsec. (b)(5). Pub. L. 91–609, §111(4), inserted "or pursuant to which the original mortgage covering the project or facility was insured" before semicolon at end.

Effective Date of 1988 Amendment

Amendment by section 231 of Pub. L. 100–242 applicable to any project that is eligible low income housing on or after Nov. 1, 1987, see section 235 of Pub. L. 100–242.

Regulations

Section 316(c) of Pub. L. 102–550 provided that: "Not later than the expiration of the 45-day period beginning on the date of the enactment of this Act [Oct. 28, 1992], the Secretary shall issue regulations implementing section 241(f)(1) of the National Housing Act [12 U.S.C. 1715z–6(f)(1)]. The regulations shall not be subject to the requirements of subsections (b) and (c) of section 553 of title 5, United States Code."

Delegation of Processing of Mortgage Insurance

Secretary of Housing and Urban Development to implement system of mortgage insurance for mortgages insured under this section that delegates processing functions to selected approved mortgagees, with Secretary to retain authority to approve rents, expenses, property appraisals, and mortgage amounts and to execute firm commitments, see section 328 of Pub. L. 101–625, set out as a note under section 1713 of this title.

Section Referred to in Other Sections

This section is referred to in sections 1715z–19, 4109, 4110, 4112, 4119 of this title; title 42 section 4822.

¹ So in original. The semicolon probably should be a period.

² So in original. The word "and" probably should not appear.

³ So in original. Probably should be "(9)".