SPECIAL URBAN RENEWAL MORTGAGE INSURANCE PROGRAMS ADMINISTERED

BY THE FEDERAL HOUSING ADMINISTRATION 1/

EXCERPTS FROM THE NATIONAL HOUSING ACT, AS AMENDED

Public Law 479, 73d Congress
(48 Stat. 1246; 12 U.S.C. 1701)

REHABILITATION AND NEIGHBORHOOD CONSERVATION HOUSING INSURANCE

Sec. 220.2/ (a) The purpose of this section is to aid in the elimination

of slums and blighted conditions and the prevention of the deterioration of residential property by supplementing the insurance of mortgages under sections 203 and 207 of this title with a system of mortgage insurance designed to assist the financing required for the rehabilitation of existing dwelling accommodations and the construction of new dwelling accommodations where such dwelling accommodations are located in an area referred to in paragraph (1) of subsection (d) of this section.

(b) The Commissioner is authorized, upon application by the mortgagee, to insure, as hereinafter provided, any mortgage (including advances during construction on mortgages covering property of the character described in paragraph (3) (B) of subsection (d) of this section) which is eligible for insurance as hereinafter provided, and, upon such terms and conditions as he may prescribe, to make commitments for the insurance of such mortgages prior to the date of their execution or disbursement thereon.

The Federal Housing Administration is a constituent agency of the Housing and Home Finance Agency.

Other FHA programs (which are not included in this compilation) assist urban renewal also, although they are not designed specifically for urban renewal purposes as are sections 220 and 221. These other programs include FHA insurance of (1) loans for modernization and repair under title I of the National Housing Act, (2) mortgages for rehabilitation of multifamily housing under the regular rental housing provisions of section 207; (3) mortgages for the purchase of existing housing; and (4) "open end" mortgages whereby property owners may obtain additional funds for modernization or basic improvements and repay them as part of the existing mortgage without the expense of complete refinancing.

2/ Sec. 220 was added by sec. 123 of the Housing Act of 1954, Public Law 560, 83d Congress, approved August 2, 1954, 68 Stat. 590, 596.

(c) As used in this section, the terms "mortgage", "first mortgage", "mortgagee", "mortgagor", "maturity date", and "State" shall have the same meaning as in section 201 of this Act.

(d) To be eligible for insurance under this section a mortgage shall meet the following conditions:

(1) The mortgaged property shall

(A)/ be located in (i) the area of a slum clearance and urban

redevelopment project covered by a Federal-aid contract executed or
a prior approval granted, pursuant to title I of. the Housing Act of
1949 before the effective date of the Housing Act of 1954, or (ii)
an urban renewal area (as defined in title I of the Housing Act of
1949, as amended) in a community respecting which the Housing and
Home Finance Administrator has made the certification to the Com-
missioner provided for by section 101(c) of the Housing Act of
1949, as amended, or (iii) the area of an urban renewal project
assisted under section 111 of the Housing Act of 1949, as amended:
Provided, That, in the case of an area within the purview of clause
(i) or (ii) of this subparagraph, a redevelopment plan or an urban
renewal plan (as defined in title I of the Housing Act of 1949, as
amended), as the case may be, has been approved for such area by
the governing body of the locality involved and by the Housing and
Home Finance Administrator, and the Administrator has certified to
the Commissioner that such plan conforms to a general plan for the
locality as a whole and that there exist the necessary authority and
financial capacity to assure the completion of such redevelopment or
urban renewal plan: And provided further, That, in the case of an
area within the purview of clause (iii) of this subparagraph, an
urban renewal plan (as required for projects assisted under such
section 111) has been approved for such area by such governing body
and by the Administrator, and the Administrator has certified to
the Commissioner that such plan conforms to definite local objectives
respecting appropriate land uses, improved traffic, public trans-
portation, public utilities, recreational and community facilities,
and other public improvements, and that there exist the necessary
authority and financial capacity to assure the completion of such
urban renewal plan, and

(B) meet such standards and conditions as the Commissioner shall prescribe to establish the acceptability of such property for mortgage insurance under this section.

(2) The mortgaged property shall be held by -

(A) A mortgagor approved by the Commissioner, and the Commissioner may in his discretion require such mortgagor to be regulated or restricted as to rents or sales, charges, capital structure, rate of return and methods of operation, and for such purpose the Commissioner may make such contracts with and acquire for not to exceed

17 Amended to include areas of urban renewal projects in disaster areas by sec. 307(b) of the Housing Act of 1956, Public Law 1020, 84th Congress, approved August 7, 1956, 70 Stat. 1091, 1102.

$100 stock or interest in any such mortgagor as the Commissioner may deem necessary to render effective such restriction or regulations. Such stock or interest shall be paid for out of the Section 220 Housing Insurance Fund and shall be redeemed by the mortgagor at par upon the termination of all obligations of the Commissioner under the insurance; or

(B) by 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.

(3) The mortgage shall

(A) (1) involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Commissioner shall approve) in an amount not to exceed $20,000 in the case of property upon which there is located a dwelling designed principally for a one- or two-family residence; or $27,500 in the case of a three-family residence; or $35,000 in the case of a four-family residence; or in the case of a dwelling designed principally for residential use for more than four families (but not exceeding such additional mumber of family units as the Commissioner may prescribe) $35,000 plus not to exceed $7,000 for each additional family unit in excess of four located on such property; and not to exceed an amount equal to the sum of (1) 97 per centum (but, in any case where the dwelling is not approved for mortgage insurance prior to the beginning of construction, unless the construction of the dwelling was completed more than one year prior to the application for mortgage insyrance, 90 per centum) of $10,000 of the Commissioner's estimate of replacement cost of the property, as of the date the mortgage is accepted for insurance, (2) 85 per centum

1 Sec. 102 of the Housing Act of 1957, Public Law 85-104, 85th Congress, approved July 12, 1957, 71 Stat. 294, 295, amended subsection (d)(3)(A) to read as set forth in the text thereby increasing the maximum mortgage amounts on urban renewal sales housing based on ratio of loan to replacement cost and lowering down payments on the housing. Prior to this amendment subsection (d)(3)(A) read as follows:

"(3) The mortgage shall involve a principal obligation (including such initial service charges, appraisal, inspection and other fees as the Commissioner shall approve) in an amount-(A) not to exceed $20,000 in the case of property upon which there is located a dwelling designed principally for one- or two-family residence; or $27,500 in the case of a three-family residence; or $35,000 in the case of a four-family residence; or in the case of a dwelling designed principally for residential use for more than four families (but not exceeding such additional number of family units as the Commissioner may prescribe) $35,000 plus not to exceed $7,000 for each additional family unit in excess of four located on such property; and not to exceed an amount equal to the sum of (1) 95 per centum (but, in any case where the dwelling is not approved for mortgage insurance prior to the beginning of construction, 90 per centum) of $9,000 of the amount which the Commissioner estimates will be the replacement cost (as of the date the mortgage is accepted for insurance), and (11) 75 per centum of such cost in excess of $9,000, except that the President may increase such dollar amounts up to not to exceed $10,000 if, after taking into consideration the general effect of such higher dollar amounts upon conditions in the building industry and upon the national economy, he determines such action to be in the public interest: Provided, That if the mortgagor is not the occupant of the property the principal obligation of the mortgage shall not exceed an amount equal to 85 per centum of the amount computed under the foregoing provisions of this paragraph: And provided further, That in the case of properties other than new construction, the foregoing limitations upon the amount of the mortgage shall be based upon appraised value rather than upon the Commissioner's estimate of the replacement cost (A); or",

2/ Section 102(g) of the Housing Amendments of 1955, Public Law 345, 84th Congress, approved August 11, 1955, 69 Stat. 635, 636, amended this subsection to provide that the maximum amount of the mortgage should be determined on the basis of "replacement cost" rather than "estimated value" where the housing is newly constructed housing.

of such replacement cost in excess of $10,000 but not in excess of $16,000, (3) 70 per centum of such replacement cost in excess of $16,000: Provided, That in the case of properties other than new construction, the foregoing limitations upon the amount of the mortgage shall be based upon apprasied value rather than upon the Commissioner's estimate of the replacement cost;

(ii) in the case of a mortgagor who is not the occupant of the property, have a principal obligation not in excess of an amount equal to 85 per centum of the amount computed under the provisions of clause (1); or

(B) (1) not exceed $12,500,0001/ or, if executed by a mortgagor coming within the provisions of paragraph (2) (B) of this subsection (a), not exceed $50,000,000; and

(11) not exceed 90 percentum of the amount which the Commissioner estimates will be the replacement cost of the property or project when the proposed improvements are completed (the replacement cost of the property or project may include the land, the proposed physical improvements, utilities within the boundaries of the property or project, architect's fees, taxes, and interest during construction, and other miscellaneous charges incident to construction and approved by the Commissioner, and shall include an allowance for builder's and sponsor's profit and risk of 10 per centum of all of the foregoing items except the land unless the Commissioner, after certification that such allowance is unreasonable, shall by regulation prescribe a lesser percentage): Provided, That in the case of properties other than new construction, the foregoing limitation upon the amount of the mortgage shall be based upon appraised value rather than upon the Commissioner's estimate of the replacement cost; and

(111) not exceed, for such part of such property or project as may be attributable to dwelling use, $2,250 per room (or $8,100 per family unit if the mumber of rooms in such property or project is less than four per family unit): Provided, That as to projects to consist of elevator-type structures, the Commissioner may, in his discretion, increase the dollar amount limitation of $2,250 per room to not to exceed $2,700 per room and the dollar amount limitation of $8,100 per family unit to not to exceed $8,400 per family unit, as the case may be, to compensate for the structures of sound

higher costs incident to the construction of elevator-that the Commissioner may,

standards of construction and design: Provided further,

by regulation, increase any of the foregoing dollar amount limitations by not to exceed $1,000 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: And provided further, That nothing contained in this paragraph (B) shall preclude the Insurance of mortgages covering existing multi-family dwellings to be rehabilitated or reconstructed for the purposes set forth in subsection (a) of this section.

(4) The mortgage shall provide for complete amortization by periodic payments within such terms as the Commissioner may prescribe, but as to mortgages coming within the provisions of paragraph (3) (A) of this subsection (d) not to exceed the maximum maturity prescribed by the provisions of section 203 (b) (3). The mortgage shall bear interest (exclusive of premium charges for insurance and service charge, if any) at not to exceed 5 per centum per annum on the amount of the principal obligation outstanding at any time, or not to exceed such per

Section 102(e) of the Housing Amendments of 1955, Public Law 345, 84th Congress, approved August 11, 1955, 69 Stat. 635, substituted "$12,500,000" for "$5,000,000".

2/ Provision for allowance for builder's and sponsor's profit and risk inserted by sec. 107(a) of the Housing Act of 1956, Public Law 1020, 84th Congress, approved August 7, 1956, 70 Stat. 1091, 1094.

3/ Proviso amended by sec. 107(b) of the Housing Act of 1956, Public Law 1020, 84th Congress, approved August 7, 1956, 70 Stat. 1091, 1094, to make it clear that increases in mortgage amounts permitted for high-cost areas apply to garden-type as well as elevator-type projects. Sec. 3 of Public Law 85-10, 85th Congress, approved March 27, 1957, 71 Stat. 7, 8, substituted without regard to the number of rooms being less than four, or four or more, for "or per family unit, as the case may be," in order to make the high-cost area allowance applicable without regard to the mumber of rooms in a unit.

centum per anmm not in excess of 6 per centum as the Commissioner finds necessary to meet the mortgage market; contain such terms and provisions with respect to the application of the mortgagor's periodic payment to amortization of the principal of the mortgage, insurance, repairs, alterations, payment of taxes, default reserves, delinquency charges, foreclosure proceedings, anticipation of maturity, additional and secondary liens, and other matters as the Commissioner may in his discretion prescribe.

(e) The Commissioner may at any time, under such terms and conditions as he may prescribe, consent to the release of the mortgagor from his liability under the mortgage or the credit instrument secured thereby, or consent to the release of parts of the mortgaged property from the lien of the mortgage.

(f) The mortgagee shall be entitled to receive the benefits of the insurance as hereinafter provided

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(1) as to mortgages meeting the requirements of paragraph (3) (A) of subsection (a) of this section, as provided in section 204 (a) of this Act with respect to mortgages insured under section 203; and the provisions of subsections (b), (c), (d), (e), (f), (g), and (h) of section 204 of this Act shall be applicable to such mortgages insured under this section, except that all references therein to the Mutual Mortgage Insurance Fund or the Fund shall be construed to refer to the Section 220 Housing Insurance Fund and all references therein to section 203 shall be construed to refer to this section; or

(2) as to mortgages meeting the requirements of paragraph (3) (B) of subsection (d) of this section, as provided in section 207 (g) of this Act with respect to mortgages insured under said section 207, and the provisions of subsections (h), (1), (j), (k), and (1) of section 207 of this Act shall be applicable to such mortgages insured under this section, and all references therein to the Housing Insurance Fund or the Housing Fund shall be construed to refer to the Section 220 Housing Insurance Fund.

(g) There is hereby created a Section 220 Housing Insurance Fund which shall be used by the Commissioner as a revolving fund for carrying out the provisions of this section, and the Commissioner is hereby authorized to transfer to such Fund the sum of $1,000,000 from the War Housing Insurance Fund established pursuant to the provisions of section 602 of this Act. General expenses of operation of the Federal Housing Administration under this section may be charged to the Section 220 Housing Insurance Fund.

Moneys in the Section 220 Housing Insurance Fund not needed for the current operations of the Federal Housing Administration under this section shall be deposited with the Treasurer of the United States to the credit of such 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 this section. 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.

Premium charges, adjusted premium charges, and appraisal and other