OF THE FEDERAL HOUSING COMMISSIONER GOVERNING PROPERTY IMPROVEMENT LOANS UNDER TITLE I OF THE NATIONAL HOUSING ACT

REGULATION I

CITATION

These regulations may be cited as the "Regulations of the Federal Housing Commissioner Governing Property Improvement Loans effective July 1, 1947.”

REGULATION II

DEFINITIONS

As used in these Regulations the term

1. "Act" means the National Housing Act, as amended.

2. "Administration" means the Federal Housing Administration. 3. "Commissioner" means the Federal Housing Commissioner or his duly authorized representative.

4. "Contract of Insurance" includes all of the provisions of these Regulations and of the applicable provisions of the Act.

5. "Insured" means a financial institution holding a Contract of Insurance under Title I of the Act.

6. "Loan" means an advance of funds or credit or the purchase of an obligation evidenced by a note.

7. "Note" includes a note, bond, mortgage, or other evidence of indebtedness.

8. "Payment" includes a deposit to an account or fund which represents the full or partial repayment of a loan.

9. "Borrower" means one who applies for and receives a loan in reliance upon the provisions of the Act and whose interest in the property to be improved is (1) a fee title, or (2) a life estate, or (3) an equitable interest under an instrument of trust or contract, or (4) a lease having a fixed term, expiring not less than six calendar months after the maturity of the loan.

1 Part II governs Class 3 new home loans. Authority to insure such loans expired April 20, 1950.

10. "Class 1 (a) Loan” means a loan, other than a loan defined in Section 11 of this Regulation as a "class 1 (b) loan,” which is for the purpose of financing the repair, alteration, or improvement of an existing structure or of the real property in connection therewith, exclusive of the building of new structures. The term "existing structure" means a completed building that has or had a distinctive functional use.

11. "Class 1 (b) Loan" means a loan which is made for the purpose of financing the alteration, repair, improvement, or conversion of an existing structure used or to be used as an apartment house or a dwelling for two or more families.

12. "Class 2 (a) Loan" means a loan which is for the purpose of financing the construction of a new structure which is to be used exclusively for other than residential or agricultural purposes.

13. "Class 2 (b) Loan" means a loan which is for the purpose of financing the construction of a new structure for use in whole or in part for agricultural purposes, exclusive of residential

purposes.

14. “Class 1 Loan" includes both "class 1 (a)" and "class 1 (b)” loans as defined in sections 10 and 11 of this Regulation. 15. "Class 2 Loan" includes both "class 2 (a)" and "class 2 (b)” loans as defined in sections 12 and 13 of this Regulation.

REGULATION III

ELIGIBLE NOTES

1. Validity. The note shall bear the genuine signature of the borrower as maker, shall be valid and enforceable against the borrower or borrowers as defined in Regulation II, section 9, and shall be complete and regular on its face. The signatures of all parties to the note must be genuine. If the note is executed for and on behalf of a corporation or in a representative capacity, the note must create a binding obligation of the principal. 2. Acceleration clause.-The note shall contain a provision for acceleration of maturity, either automatic or at the option of the holder, in the event of default in the payment of any installment upon the due date thereof.

3. Payments. The note shall be payable in equal monthly, semimonthly, or weekly installments. The first installment or the final installment may be more or less than the other installments provided that it is not less than one-half or more than one and one-half times the amount of a regular installment.1 A note may

1 As amended October 28, 1953.

not provide for a first payment less than 6 days nor more than 2 calendar months from the date of the note. However, if 51 percent or more of the income of the borrower is derived directly from the sale of agricultural crops, commodities, or livestock produced by him, a note may be made payable in installments corresponding to income periods shown on the Credit Application. In such cases, the first payment must be made within 12 months of the date of the note and at least one payment shall be made in each 12 months thereafter, provided that no two payments shall be more than 12 months apart, and the proportion of total principal to be paid in later years shall not exceed the proportion of total principal payable in earlier years. In lieu of an installment note payable in equal periodic installments a loan may be evidenced by a series of notes provided each is of an equal amount as provided in this Regulation and that each note indicates on its face that it is one of a series signed by the same borrower.

4. Maturity. (a) Minimum—The note shall not have a final maturity of less than 6 calendar months from the date of the note. (b) Maximum-The maximum permissible maturity of a note evidencing:

(1) A class 1 (a) or a class 2 (a) loan is 3 years and 32 days from the date of the note.

(2) A class 1 (b) loan is 7 years and 32 days from the date of the note.

(3) A class 2 (b) loan is 7 years and 32 days from the date of the note, except that if a class 2 (b) loan is secured by a first mortgage, first deed of trust, or other security instrument constituting a first lien upon the improved property, the loan may have a final maturity not in excess of 15 years and 32 days from the date of the note.

(4) A combination of any of the above classes of loans shall be no greater than the maximum maturity governing that component part of the loan having the shortest maturity if made alone.

5. Late charges.-The note may provide for a late charge, not to exceed 5 cents for each $1 of each installment more than 15 days in arrears. No late charge on a past due installment may be accrued in excess of $5. In lieu of late charges, notes may provide for interest on past due installments at a rate not in excess of the contract rate in the jurisdiction in which the note is drawn. The borrower must be billed for the penalties collected as such, and evidence of such billing must be in the file if claim is made under the Contract of Insurance.

REGULATION IV

MAXIMUM AMOUNT OF LOANS

1. Class 1 (a) loan.-A class 1 (a) loan shall not involve a principal amount, exclusive of financing charges to the borrower, in excess of $2,500.

2. Class 1 (b) loan.—A class 1 (b) loan shall not involve a principal amount, exclusive of financing charges to the borrower, in excess of $10,000.

3. Class 2 loan.-A class 2 loan shall not involve a principal amount, exclusive of financing charges to the borrower, in excess of $3,000.

REGULATION V

FINANCING CHARGES

1. Maximum charge.-The maximum permissible financing charges, exclusive of fees and charges as provided by section 2 of this Regulation, which may be paid by the borrower for interest, discount, and fees of all kinds in connection with the transaction, shall be computed as follows:

(a) Class 1 loans having a principal amount not in excess of $2,500 shall not have a financing charge in excess of an amount equivalent to $5 discount per $100 original face amount of a 1-year note, to be paid in equal monthly installments calculated from the date of the note.

(b) Class 1 loans having a principal amount in excess of $2,500 shall not have a financing charge in excess of an amount equivalent to $4 discount per $100 original face amount of a one year note, to be paid in equal monthly installments calculated from the date of the note.

(c) Class 2 loans shall not have a financing charge in excess of an amount equivalent to $5 discount per $100 original face amount of a 1-year note, to be paid in equal monthly installments calculated from the date of the note, except that class 2 (b) loans having a maturity in excess of 7 years and 32 days shall not have a financing charge in excess of an amount equivalent to $3.50 discount per $100 original face amount of a 1-year note, to be paid in equal monthly installments calculated from the date of the note.

Such charges correctly based on tables of calculations issued by the Federal Housing Commissioner are deemed to comply with this Regulation.