---
kind: "section"
citation: "12 U.S.C. § 1706c"
title: "12"
title_heading: "Banks and Banking"
number: "1706c"
heading: "Insurance of mortgages"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/1706c"
units:
  - "Chapter 13 — National Housing"
  - "Subchapter I — Housing Renovation and Modernization"
---

# §1706c. Insurance of mortgages

- (a) **Supplemental system; limitation on amount; termination of authority—** To assist in providing adequate housing for families of low and moderate income, particularly in suburban and outlying areas, this section is designed to supplement systems of [mortgage](/usc/12/1707.md?p=a) insurance under other provisions of this chapter by making feasible the insurance of [mortgages](/usc/12/1707.md?p=a) covering properties in areas where it is not practicable to obtain conformity with many of the requirements essential to the insurance of [mortgages](/usc/12/1707.md?p=a) on housing in built-up urban areas. The [Secretary](/usc/12/1715z–22a.md?p=4) is authorized, upon application by the [mortgagee](/usc/12/1707.md?p=b), to insure, as hereinafter provided, any [mortgage](/usc/12/1707.md?p=a) (as defined in [section 1707 of this title](/usc/12/1707.md)) offered to him which is eligible for insurance as hereinafter provided, and, upon such terms as the [Secretary](/usc/12/1715z–22a.md?p=4) may prescribe, to make commitments for the insuring of such [mortgages](/usc/12/1707.md?p=a) prior to the date of their execution or disbursement thereon: Provided, That the aggregate amount of principal obligations of all [mortgages](/usc/12/1707.md?p=a) insured under this section and outstanding at any one time shall not exceed $100,000,000, except that with the approval of the President such aggregate amount may be increased at any time or times by additional amounts aggregating not more than $150,000,000 upon a determination by the President, taking into account the general effect of any such increase upon conditions in the building industry and upon the national economy, that such increase is in the public interest: And provided further, That no [mortgage](/usc/12/1707.md?p=a) shall be insured under this section after August 2, 1954, except pursuant to a commitment to insure issued on or before such date.
- (b) **Eligibility conditions—** To be eligible for insurance under this section, a [mortgage](/usc/12/1707.md?p=a) shall—
  - (1) have been made to, and be held by, a [mortgagee](/usc/12/1707.md?p=b) approved by the [Secretary](/usc/12/1715z–22a.md?p=4) as responsible and able to service the [mortgage](/usc/12/1707.md?p=a) properly;
  - (2) involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the [Secretary](/usc/12/1715z–22a.md?p=4) shall approve) in an amount not to exceed $5,700, and not to exceed 95 per centum of the appraised value, as of the date the [mortgage](/usc/12/1707.md?p=a) is accepted for insurance, of a property upon which there is located a dwelling designed principally for a single-family residence, and which is approved for [mortgage](/usc/12/1707.md?p=a) insurance prior to the beginning of construction: Provided, That the [mortgagor](/usc/12/1707.md?p=b) shall be the owner and occupant of the property at the time of insurance and shall have paid on account of the property at least 5 per centum of the [Secretary](/usc/12/1715z–22a.md?p=4)’s estimate of the cost of acquisition in cash or its equivalent, or shall be the builder constructing the dwelling, in which case the principal obligation shall not exceed 85 per centum of the appraised value of the property or $5,100: Provided further, That the [Secretary](/usc/12/1715z–22a.md?p=4) finds that the project with respect to which the [mortgage](/usc/12/1707.md?p=a) is executed is an acceptable risk, giving consideration to the need for providing adequate housing for families of low and moderate income particularly in suburban and outlying areas: And provided further, That, where the [mortgagor](/usc/12/1707.md?p=b) is the owner and occupant of the property and establishes (to the satisfaction of the [Secretary](/usc/12/1715z–22a.md?p=4)) that his home, which he occupied as an owner or as a tenant, was destroyed or damaged to such an extent that reconstruction is required as a result of a flood, fire, hurricane, earthquake, storm or other catastrophe, which the President, pursuant to sections [5122(2)](/usc/42/5122.md?p=2) and [5170](/usc/42/5170.md) of title 42, has determined to be a major disaster, such maximum dollar limitation may be increased by the [Secretary](/usc/12/1715z–22a.md?p=4) from $5,700 to $7,000, and the percentage limitation may be increased by the [Secretary](/usc/12/1715z–22a.md?p=4) from 95 per centum to 100 per centum of the appraised value;
  - (3) have a maturity satisfactory to the [Secretary](/usc/12/1715z–22a.md?p=4) but not to exceed thirty years from the date of insurance of the [mortgage](/usc/12/1707.md?p=a);
  - (4) contain complete amortization provisions satisfactory to the [Secretary](/usc/12/1715z–22a.md?p=4) requiring periodic payments by the [mortgagor](/usc/12/1707.md?p=b) not in excess of his reasonable ability to pay as determined by the [Secretary](/usc/12/1715z–22a.md?p=4);
  - (5) bear interest (exclusive of premium charges for insurance and service charges, if any) at not to exceed 5 per centum per annum on the amount of the principal obligation outstanding at any time;
  - (6) provide, in a manner satisfactory to the [Secretary](/usc/12/1715z–22a.md?p=4), for the application of the [mortgagor](/usc/12/1707.md?p=b)’s periodic payments (exclusive of the amount allocated to interest and to the premium charge which is required for [mortgage](/usc/12/1707.md?p=a) insurance as hereinafter provided and to the service charge, if any) to amortization of the principal of the [mortgage](/usc/12/1707.md?p=a); and
  - (7) contain such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, service charges, default reserves, delinquency charges, foreclosure proceedings, anticipation of maturity, and other matters as the [Secretary](/usc/12/1715z–22a.md?p=4) may in his discretion prescribe.
- (c) **Premium charge—** The [Secretary](/usc/12/1715z–22a.md?p=4) is authorized to fix a premium charge for the insurance of [mortgages](/usc/12/1707.md?p=a) under this section, but in the case of any [mortgage](/usc/12/1707.md?p=a), such charge shall not be less than an amount equivalent to one-half of 1 per centum per annum nor more than an amount equivalent to 1 per centum per annum of the amount of the principal obligation of the [mortgage](/usc/12/1707.md?p=a) outstanding at any time, without taking into account delinquent payments or prepayments. Such premium charges shall be payable by the [mortgagee](/usc/12/1707.md?p=b), either in cash or in debentures issued by the [Secretary](/usc/12/1715z–22a.md?p=4) under this section at par plus accrued interest, in such manner as may be prescribed by the [Secretary](/usc/12/1715z–22a.md?p=4): Provided, That the [Secretary](/usc/12/1715z–22a.md?p=4) may require the payment of one or more such premium charges at the time the [mortgage](/usc/12/1707.md?p=a) is insured, at such discount rate as he may prescribe not in excess of the interest rate specified in the [mortgage](/usc/12/1707.md?p=a). If the [Secretary](/usc/12/1715z–22a.md?p=4) finds, upon the presentation of a [mortgage](/usc/12/1707.md?p=a) for insurance and the tender of the initial premium charge or charges so required, that the [mortgage](/usc/12/1707.md?p=a) complies with the provisions of this section, such [mortgage](/usc/12/1707.md?p=a) may be accepted for insurance by endorsement or otherwise as the [Secretary](/usc/12/1715z–22a.md?p=4) may prescribe. In the event that the principal obligation of any [mortgage](/usc/12/1707.md?p=a) accepted for insurance under this section is paid in full prior to the [maturity date](/usc/12/1707.md?p=c), the [Secretary](/usc/12/1715z–22a.md?p=4) is further authorized, in his discretion, to require the payment by the [mortgagee](/usc/12/1707.md?p=b) of an adjusted premium charge in such amount as the [Secretary](/usc/12/1715z–22a.md?p=4) determines to be equitable, but not in excess of the aggregate amount of the premium charges that the [mortgagee](/usc/12/1707.md?p=b) would otherwise have been required to pay if the [mortgage](/usc/12/1707.md?p=a) had continued to be insured until such [maturity date](/usc/12/1707.md?p=c); and in the event that the principal obligation is paid in full as herein set forth, the [Secretary](/usc/12/1715z–22a.md?p=4) is authorized to refund to the [mortgagee](/usc/12/1707.md?p=b) for the account of the [mortgagor](/usc/12/1707.md?p=b) all, or such portion as he shall determine to be equitable, of the current unearned premium charges theretofore paid.
- (d) **Release of mortgagor—** The [Secretary](/usc/12/1715z–22a.md?p=4) may, at any time under such terms and conditions as he may prescribe, consent to the release of the [mortgagor](/usc/12/1707.md?p=b) from his liability under the [mortgage](/usc/12/1707.md?p=a) or the [credit](/usc/12/5481.md?p=7) instrument secured thereby, or consent to the release of parts of the mortgaged property from the lien of the [mortgage](/usc/12/1707.md?p=a).
- (e) **Conclusiveness of insurance contract as to eligibility—** Any contract of insurance executed by the [Secretary](/usc/12/1715z–22a.md?p=4) under this section shall be conclusive evidence of the eligibility of the [mortgage](/usc/12/1707.md?p=a) for insurance, and the validity of any contract of insurance so executed shall be incontestable in the hands of an approved [mortgagee](/usc/12/1707.md?p=b) from the date of the execution of such contract, except for fraud or misrepresentation on the part of such approved [mortgagee](/usc/12/1707.md?p=b).
- (f) **Rights of mortgagee upon foreclosure—** In any case in which the [mortgagee](/usc/12/1707.md?p=b) under a [mortgage](/usc/12/1707.md?p=a) insured under this section shall have foreclosed and taken possession of the mortgaged property in accordance with the regulations of, and within a period to be determined by, the [Secretary](/usc/12/1715z–22a.md?p=4) or shall, with the consent of the [Secretary](/usc/12/1715z–22a.md?p=4), have otherwise acquired such property from the [mortgagor](/usc/12/1707.md?p=b) after default, the [mortgagee](/usc/12/1707.md?p=b) shall be entitled to receive the benefits of the insurance as provided in [section 1710(a) of this title](/usc/12/1710.md?p=a) with respect to [mortgages](/usc/12/1707.md?p=a) insured under [section 203(b)(2)(D)](/usc/12/203.md) of this Act.
- (g) **Applicability of other sections—** Subsections [(c)](#c), [(d)](#d), [(e)](#e), [(f)](#f), [(g)](#g), (h),[^1] (j), and (k)[^1] of [section 1710 of this title](/usc/12/1710.md) shall be applicable to [mortgages](/usc/12/1707.md?p=a) insured under this section except that all references therein to the Mutual [Mortgage](/usc/12/1707.md?p=a) Insurance Funds or the Fund shall be construed to refer to the General Insurance Fund, and all references therein to [section 1709 of this title](/usc/12/1709.md) shall be construed to refer to this section: Provided, That debentures issued in connection with [mortgages](/usc/12/1707.md?p=a) insured under this section shall have the same tax exemption as debentures issued in connection with [mortgages](/usc/12/1707.md?p=a) insured under [section 1709 of this title](/usc/12/1709.md).

## Footnotes

[^1]: See References in Text note below.

## Source credit

(June 27, 1934, ch. 847, title I, § 8, as added Apr. 20, 1950, ch. 94, title I, § 102, 64 Stat. 48; amended Aug. 3, 1951, ch. 293, § 1, 65 Stat. 173; June 30, 1953, ch. 170, § 2, 67 Stat. 121; Aug. 2, 1954, ch. 649, title I, § 103, 68 Stat. 591; Pub. L. 86–372, title I, § 116(a), Sept. 23, 1959, 73 Stat. 664; Pub. L. 89–117, title XI, § 1108(b), Aug. 10, 1965, 79 Stat. 504; Pub. L. 90–19, § 1(a)(3), (4), May 25, 1967, 81 Stat. 17; Pub. L. 91–606, title III, § 301(b), Dec. 31, 1970, 84 Stat. 1758; Pub. L. 93–288, title VII, § 702(b), formerly title VI, § 602(b), May 22, 1974, 88 Stat. 163, renumbered title VII, § 702(b), Pub. L. 103–337, div. C, title XXXIV, § 3411(a)(1), (2), Oct. 5, 1994, 108 Stat. 3100; Pub. L. 100–707, title I, § 109(e)(1), Nov. 23, 1988, 102 Stat. 4708.)

## Notes

### Editorial Notes

### References in Text

This chapter, referred to in subsec. (a), was in the original “this Act”, meaning act June 27, 1934, ch. 847, 48 Stat. 1246, which is classified principally to this chapter (§ 1701 et seq.). For complete classification of this Act to the Code, see Tables.

Section 203(b)(2)(D) of this Act, referred to in subsec. (f), which was formerly classified to section 1709(b)(2)(D) of this title, was repealed by act Aug. 2, 1954, ch. 649, title I, § 104, 68 Stat. 591.

Subsection (h) of section 1710 of this title, referred to in subsec. (g), was redesignated subsec. (i) by Pub. L. 105–276, title VI, § 602(1), Oct. 21, 1998, 112 Stat. 2674.

Subsection (k) of section 1710 of this title, referred to in subsec. (g), was repealed by Pub. L. 105–276, title VI, § 601(c), Oct. 21, 1998, 112 Stat. 2673.

The General Insurance Fund, referred to in subsec. (g), was established by section 1735c of this title.

### Amendments

1988—Subsec. (b)(2). Pub. L. 100–707 substituted “5170 of title 42” for “5141 of title 42”.

1974—Subsec. (b)(2). Pub. L. 93–288 substituted “sections 5122(2) and 5141 of title 42” for “section 4402(1) of title 42”.

1970—Subsec. (b)(2). Pub. L. 91–606 substituted reference to section “4402(1)” for “1855a(a)” of title 42.

1967—Pub. L. 90–19, § 1(a)(3), substituted “Secretary” for “Commissioner” wherever appearing in subsecs. (a), (b)(1) to (4), (6), (7), and (c) to (f).

Subsec. (b)(2). Pub. L. 90–19, § 1(a)(4), substituted “Secretary’s” for “Commissioner’s”.

1965—Subsec. (g). Pub. L. 89–117, § 1108(b)(1), substituted “General Insurance Fund” for “Title I Housing Insurance Fund”.

Subsec. (h). Pub. L. 89–117, § 1108(b)(2), repealed subsec. (h) which created the Title I Housing Insurance Fund.

Subsec. (i). Pub. L. 89–117, § 1108(b)(2), repealed subsec. (i) which dealt with the disposition of surplus funds of the Title I Housing Insurance Fund, purchase of debentures, and credits and charges to fund.

1959—Subsec. (g). Pub. L. 86–372 inserted reference to subsecs. (j) and (k) of section 1710 of this title.

1954—Subsec. (a). Act Aug. 2, 1954, inserted proviso prohibiting the insurance of mortgages under this section after Aug. 2, 1954, except pursuant to commitments to insure issued on or before such date.

1953—Subsec. (b)(2). Act June 30, 1953, raised the maximum mortgage, where the mortgagor is the owner-occupant, from $4,750, not exceeding 95 per centum of value, to $5,700, not exceeding 95 per centum of value; and raised the maximum mortgage, where the builder is the mortgagor, from $4,250, not exceeding 85 per centum of value, to $5,100, not exceeding 85 per centum of value.

1951—Subsec. (b)(2). Act Aug. 3, 1951, permitted more liberal mortgage insurance for those building low-cost homes to replace their homes lost in a flood or other major disaster.

### Statutory Notes and Related Subsidiaries

### Effective Date of 1974 Amendment

Amendment by Pub. L. 93–288 effective Apr. 1, 1974, see section 605 of Pub. L. 93–288, formerly set out as an Effective Date note under section 5121 of Title 42, The Public Health and Welfare.

### Effective Date of 1970 Amendment

Amendment by Pub. L. 91–606 effective Dec. 31, 1970, see section 304 of Pub. L. 91–606, set out as a note under section 165 of Title 26, Internal Revenue Code.

### Repayment to Treasury on Capital Account of Title I Insurance Fund

Act Mar. 10, 1953, ch. 5, § 2, 67 Stat. 5, directed the Federal Housing Commissioner to pay out of the capital account of the Title I Insurance Fund to the Secretary of the Treasury, prior to June 30, 1954, the sum of $8,333,313.65 either in one lump sum or in installments, except that the first payment was to be made on July 1, 1953.