"ELIGIBILITY FOR MEDICAL FACILITY MORTGAGE INSURANCE

"SEC. 706. (a) The Surgeon General is authorized and it shall be his duty to insure mortgages (including advances on such mortgages during construction) provided such mortgage shall—

"(1) have been made to secure a loan made by any national bank, State bank, private bank, building or loan association, insurance company, credit union or mortgage loan company, that is subject to examination and supervision by an agency of the United States or of any State, or any other responsible lending institution or source of private capital;

"(2) have been made to secure a loan for the purpose of financing the construction, improving or equipping of a medical facility;

"(3) have been made by a mortgagor approved by the Surgeon General as responsible and able to repay the obligation secured by the mortgage; in making his determination of the mortgagor's financial responsibilty and ability to repay the obligation, the Suregon General may rely upon recommendations of the mortgagee;

"(4) cover property acquired, constructed, or held or to be acquired, constructed, or held, by a nonprofit private agency, a health service association, or any group, partnership, or other association of physicians, or any other other organization or individual for use as a medical facility;

"(5) have been made to and be held by a mortgage approved by the Surgeon General as responsible and able to service the mortgage properly; "(6) involve a principal obligation (including such initial charges, appraisal, inspection, and other fees as the Surgeon General shall approve) in an amount

"(A) not to exceed $5,000,000; and

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'(B) not to exceed 90 per cent of the amount which the Surgeon General estimates will be the value of the property or project, including initial equipment, when the improvement or construction is completed: Provided, That such mortgage shall not exceed the amount which the Surgeon General estimates will be the cost of the completed physical improvements including initial equipment, on the property or project exclusive of the off-site public utilities and streets and organization and legal expenses. The value of the property or project as such term is used in this section may include the land, the proposed physical improvements, utilities within the boundaries of the property or project, architects' fees, taxes, and interest, accruing during construction and other miscellaneous charges incident to construction and approved by the Surgeon General.

"(b) No such mortgage shall be insured unless it shall

"(1) have a mauturity satisfactory to the Surgeon General, but not to exceed forty years from the date of the insurance of the mortgage; "(2) contain complete amortization provisions satisfactory to the Surgeon General requiring periodic payments by the mortgagor not in excess of his reasonable ability to pay as determined by the Surgeon General;

"(3) bear interest (exclusive of premium charges for insurance) at not to exceed 6 per centum per annum on the amount of the principal obligation outstanding at any time, or not to exceed 61⁄2 per cent per annum if the Surgeon General finds that in certain areas or under special circumstances the mortgage market demands it;

"(4) provide, in a manner satisfactory to the Surgeon General, for the application of the mortgagor's periodic payments (exclusive of the amount allocated to interest and to the premium charge which is required for mortage insurance as hereinafter provided) to amortization of the principal of the mortgage; and

"(5) conform to all requirements of State law.

"(c) No mortgage shall be accepted for insurance under this title unless the property or project, with respect to which the mortgage is executed, conforms to and satisfies all requirements of applicable State law with respect to standards of construction and equipment.

"(d) No mortgage shall be accepted for insurance under this title unless the mortgagor shall certify, in form satisfactory to the Surgeon General, that the mortgagor has entered into an agreement the effect of which is to require that not less than 60 per cent of the medical facility, with respect to which the mortgage is executed, will be available to serve subscribers to group practice pre

payment health service plans: Provided, That no facility shall exclude any person in an emergency because of this subsection or such requirement, and such agreement may so provide.

"TECHNICAL MORTGAGE INSURANCE PROVISIONS

"SEC. 707. (a) CONCLUSIVENESS OF CONTRACTS.-Any contract of insurance executed by the Surgeon General under this title shall be conclusive evidence of the eligibility of the mortgage for insurance, and the validity of any contract of insurance so executed shall be incontestable in the hands of an approved mortgagee from the date of the execution of such contract, except for fraud or misrepresentation on the part of such approved mortgagee.

"(b) RELEASE OF PROPERTY FROM MORTGAGE. The Surgeon General 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.

(c) PREMIUM CHARGES.-The Surgeon General is authorized to fix a premium charge for the insurance of mortgages under this title but in the case of any mortgage such charge shall not be more than an amount equivalent to 11⁄2 per centum per annum of the amount of the principal obligation of the mortgage outstanding at any time, without taking into account delinquent payments or prepayments. Such premium charges shall be payable by the mortgagee, either in cash, or in debentures issued by the Surgeon General under this part at par plus accrued interest, in such manner as may be prescribed by the Surgeon General: Provided, That the Surgeon General may require the payment of one or more such premium charges at the time the mortgage is insured, at such discount rate as he may prescribe not in excess of the interest rate specified in the mortgage. If the Surgeon General finds, upon the presentation of a mortgage for insurance and the tender of the initial premium charge or charges so required, that the mortgage complies with the provisions of this title, such mortgage may be accepted for insurance by indorsement or otherwise as the Surgeon General may prescribe. In the event that the principal obligation of any mortgage accepted for insurance under this title is paid in full prior to the maturity date, the Surgeon General is further authorized in his discretion to require the payment by the mortgagee of an adjusted premium charge in such amount as the Surgeon General determines to be equitable, but not in excess of the aggregate amount of the premium charges that the mortgagee would otherwise have been required to pay if the mortgage had continued to be insured under this title until such maturity date; and in the event that the principal obligation is paid in full as herein set forth, the Surgeon General is authorized to refund to the mortgagee for the account of the mortgagor all, or such portion as he shall determine to be equitable, of the current unearned premium charges theretofore paid.

"(d) DEFAULT BY MORTGAGCR; RIGHTS OF MORTGAGEE.-The failure of the mortgagor to make any payment due under or provided to be paid by the terms of a mortgage insured under this title shall be considered a default under such mortgage, and, if such default continues for a period of thirty days, the mortgagee shall be entitled to receive the benefits of the insurance as heerinafter provided, upon assignment, transfer and delivery to the Surgeon General, within a period and in accordance with rules and regulations to be prescribed by the Surgeon General of (1) all rights and interests arising under the mortgage so in default; (2) all claims of the mortgagee against the mortgagors or others, arising out of the mortgage transactions; (3) all policies of title or other insurance or surety bonds or other guaranties and any and all claims thereunder; (4) any balance of the mortgage loan not advanced to the mortgagor; (5) any cash or property held by the mortgagee, or to which it is entitled, as deposits made for the account of the mortgagor and which have not been applied in reduction of the principal of the mortgage indebtedness; and (6) all records, documents, books, papers, and accounts relating to the mortgage transaction. Upon such assignment, transfer, and delivery, the obligation of the mortgagee to pay the premium charges for mortgage insurance shall cease, and the Surgeon General shall, subject to the cash adjustment provided for in subsection (c) of this section, issue to the mortgagee debentures having a total face value equal to the value of the mortgage, and a certificate of claim as hereinafter provided. For the purpose of this subsection, the value of the mortgage shall be determined in accordance with rules and regulations prescribed by the Surgeon General, by adding to the amount

of the original principal obligation of the mortgage which was unpaid on the date of; default, the amount the mortgagee may have paid for (A) taxes, special assessments, and water rates, which are liens prior to the mortgage; (B) insurance on the property; and (C) reasonable expenses for the completion and preservation of the property and any mortgage insurance premiums paid after default; less the sum of (i) an amount equivalent to 1 per centum of the unpaid amount of such principal obligation on the date of default; (ii) any amount received on account of the mortgage after such date; and (iii) any net income received by the mortgagee from the property after such date: Provided, That the mortgagee in the event of a default under the mortgage may, at its option and in accordance with regulations of, and in a period to be determined by the Surgeon General, proceed to foreclose on and obtain possession of or otherwise acquire such property from the mortgagor after default, and receive the benefits of the insurance as hereinafter provided, upon (1) the prompt conveyance to the Surgeon General of title to the property which meets the requirements of the rules and regulations of the Surgeon General in force at the time the mortgage was insured, and which is evidenced in the manner prescribed by such rules and regulations; and (2) the assignment to him of all claims of the mortgagee against the mortgagor or others arising out of the mortgage transaction or foreclosure proceedings, except such claims that may have been released with the consent of the Surgeon General. Upon such conveyance and assignment, the obligation of the mortgagee to pay the premium charges for insurance shall cease and the mortgagee shall be entitled to receive the benefits of the insurance as provided in this subsection, except that in such event the 1 per centum deduction, set out in (i) hereof, shall not apply.

"(e) DEBENTURES; FORM AND DENOMINATION.-Debentures issued under this part shall be in such form and denominations in multiples of $50, shall be subject to such terms and conditions, and shall include such provisions for redemption, if any, as may be prescribed by the Surgeon General with the approval of the Secretary of the Treasury, and may be in coupon or registered form. Any difference between the value of the mortgage determined as herein provided and the aggregate face value of the debentures issued, not to exceed $50, shall be adjusted by the payment of cash by the Surgeon General to the mortgagee from the Medical Facilities Mortgage Insurance Fund.

"(f) DEBENTURES; EXECUTION; NEGOTIABILITY; ETC.-Debentures issued under this title shall be executed in the name of the Medical Facilities Mortgage Insurance Fund as obligor, shall be signed by the Surgeon General, by either his written or engraved signature, and shall be negotiable. All such debentures shall be dated as of the date of default as determined in accordance with subsection (d) of this section, and shall bear interest from such date at a rate determined by the Surgeon General with the approval of the Secretary of the Treasury, at the time the mortgage was accepted for insurance, but not to exceed 3 per centum per annum, payable semiannually on the first day of January and the first day of July of each year, and shall mature ten years after the date thereof. Such debentures shall be exempt, both as to principal and interest, from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by any Territory, dependency, or possession of the United States or by the District of Columbia, or by any State, county, municipality, or local taxing authority. They shall be paid out of the Medical Facilities Mortgage Insurance Fund, which shall be primarily liable therefor, and they shall be fully and unconditionally guaranteed as to principal and interest by the United States, and such guaranty shall be expressed on the face of the debentures. In the event the Medical Facilities Mortgage Insurance Fund fails to pay upon demand, when due, the principal of or interest on any debentures so guaranteed, the Secretary of the Treasury shall pay to the holders the amount thereof which is hereby authorized to be appropriated, and thereupon to the extent of the amount so paid the Secretary of the Treasury shall succeed to all the rights of the holders of such debentures.

"(g) CERTIFICATE OF CLAIM; DIVISION OF EXCESS PROCEEDS.-The certificate of claim issued by the Surgeon General to any mortgagee shall be for an amount which the Surgeon General determines to be sufficient, when added to the face value of the debentures issued and the cash adjustment paid to the mortgagee, to equal the amount which the mortgagee would have received if, on the date of the assignment, transfer, and delivery to the Surgeon General provided for in this section, the mortgagor had extinguished the mortgage indebtedness by payment in full of all obligations under the mortgage, and a reasonable amount for necessary expenses incurred by the mortgagee in connection with the foreclosure

proceedings, or the acquisition of the mortgaged property otherwise and the conveyance thereof to the Surgeon General. Each such certificate of claim shall provide that there shall accrue to the holder of such certificate with respect to the face amount of such certificate, an increment at the rate of 3 per centum per annum which shall not be compounded. If the net amount realized from the mortgage, and all claims in connection therewith, so assigned, transferred, and delivered, and from the property covered by such mortgage and all claims in connection with such property, after deducting all expenses incurred by the Surgeon Geenral in handling, dealing with, acquiring title to, and disposing of such mortgage and property and in collecting such claims, exceeds the face value of the debentures issued and the cash adjustment paid to the mortgagee plus all interest paid on such debentures, such excess shall be divided as follows: "(1) If such excess is greater than the total amount payable under the certificate of claim issued in connection with such property, the Surgeon General shall pay to the holder of such certificate the full amount so payable, and any excess remaining thereafter shall be retained by the Surgeon General and credited to the Medical Facilities Mortgage Insurance Fund.

"(2) If such excess is equal to or less than the total amount payable under such certificate of claim, the Surgeon General shall pay to the holder of such certificate the full amount of such excess.

"(h) ACQUISITION OF PROPERTY BY CONVEYANCE OR FORECLOSURE.-The Surgeon General is hereby authorized either to (1) acquire possession of and title to any property, covered by a mortgage insured under this section and assigned to him, by voluntary conveyance in extinguishment of the mortgage indebtedness, or (2) institute proceedings for foreclosure on the property covered by any such insured mortgage and prosecute such proceedings to conclusion. The Surgeon General shall so acquire possession of and title to the property by voluntary conveyance or institute foreclosure proceedings as provided in this section within a period of one year from the date on which any such mortgage becomes in default under its terms or under the regulations prescribed by the Surgeon General: Provided, That the foregoing provisions shall not be construed in any manner to limit the power of the Surgeon General to foreclose on the mortgaged property after the expiration of such period, or the right of the mortgagor to reinstate the mortgage by the payment, prior o he expiration of such period, of all delinquencies thereunder. The Surgeon General at any sale under foreclosure may, in his discretion, for the protection of the Medical Facilities Mortgage Insurance Fund, bid any sum up to but not in excess of the total unpaid indebtedness secured by the mortgage, plus taxes, insurance, foreclosure costs, fees, and other expenses, and may become the purchaser of the property at such sale. The Surgeon General is authorized to pay from the Medical Facilities Mortgage Insurance Fund such sums as may be necessary to defray such taxes, insurance, costs, fees, and other expenses in connection with the acquisition or foreclosure of property under this section. Pending such acquisition by voluntary conveyance or by foreclosure, the Surgeon General is authorized, with respect to any mortgage assigned to him under the provisions of subsection (d), to exercise all of the rights of a mortgagee under such mortgage, including the right to sell such mortgage, and to take such action and advance such sums as may be necessary to preserve or protect the lien of such mortgage.

"(1) HANDLING AND DISPOSAL OF PROPERTY; SETTLEMENT OF CLAIMS.-Notwithstanding any other provision of law relating to the acquisition, handling, or disposal of real property by the United States, the Surgeon General shall have power to deal with, complete, rent, renovate, modernize, insure, make contracts or establish suitable agencies for the management of, or sell for cash or credit, in his discretion, any properties conveyed to him in exchange for debentures and certificates of claim as provided in this section; and, notwithstanding any other provision of law, the Surgeon General shall also have power to pursue to final collection, by way of compromise or otherwise, all claims against mortgagors asigned by mortgagees to the Surgeon General as provided in this title: Provided, That section 3709 of the Revised Statutes shall not be construed to apply to any purchase or contract for services or supplies on account of such property if the amount thereof does not exceed $1,000. The power to convey and to execute in the name of the Surgeon General deeds of conveyances, deeds of release, assignments, and satisfactions of mortgages, and any other written instrument relating to real property or any interest therein heretofore or hereafter acquired by the Surgeon General pursuant to the provisions of this part, may be exercised by the Surgeon General or by any Assistant Surgeon General designated by him, without the execution of any express delegation of power

or power of attorney: Provided, That nothing in this subsection shall be construed to prevent the Surgeon General from delegating such power by order or by power of attorney in his discretion, to any officer, agent, or employee he may appoint.

"(j) DEFAULT OR PAYMENT; RIGHTS OF PARTIES.-In the event that a mortgage insured under this title becomes in default through failure of the mortgagor to make any payment due under or provided to be paid by the terms of the mortgage and such mortgage continues in default for a period of thirty days, but the mortgagee does not foreclose on or otherwise acquire the property, or does not assign and transfer such mortgage and the credit instrument secured thereby to the Surgeon General, in accordance with subsection (d), and the Surgeon General is given written notice thereof, or in the event that the mortgagor pays the obligation under the mortgage in full prior to the maturity thereof, and the mortgagee pays any adjusted premium charge required under the provisions of subsection (c), and the Surgeon General is given written notice by the mortgagee of the payment of such obligation, the obligation to pay the annual premium charge for insurance shall cease, and all rights of the mortgagee and the mortgagor under this title shall terminate as of the date of such notice.

"(k) REISSUE OF PRIOR INSURANCE.-The Surgeon General, with the consent of the mortgagee and the mortgagor of a mortgage insured under this title prior to 19-, shall be empowered to reissue such mortgage insurance in accordance with the provisions of this section.

"(1) CREDITS AND CHARGES TO MEDICAL FACILITIES MORTGAGE INSURANCE FUND.-Premium charges, adjusted premium charges, and appraisal and other fees, received on account of the insurance of any mortgage insured under this title, the receipts derived from any such mortgage or claim assigned to the Surgeon General and from any property acquired by the Surgeon General and all earnings on the assets of the Medical Facilities Mortgage Insurance Fund, shall be credited to the Medical Facilities Mortgage Insurance Fund. The principal of and interest paid and to be paid on debentures issued in exchange for any mortgage or property insured under this title, cash adjustments, and expenses incurred in the handling of such mortgages of property and in the foreclosure and collection of mortgages and claims assigned to the Surgeon General under this section shall be charged to the Medical Facilities Mortgage Insurance Fund. "(n) INVESTMENT OF FUNDS.-Moneys in the Medical Facilities Mortgage Insurance Fund not needed for current operations of this title shall be deposited with the Treasurer of the United States to the credit of the Medical Facilities Mortgage Insurance 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 Surgeon General 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 subsection. Debentures so purchased shall be canceled and not reissued.

"DISSEMINATION OF INFORMATION

"SEC. 708. The Surgeon General is hereby authorized and directed, to collect and make available, through publications and other appropriate means, information and statistics pertaining to medical facilities, insurance of mortgages under this title, the operations of group practice prepayment health service plans, the operations of health service associations, the provisions of health service contracts, and the scope of personal health services available thereunder.

"SHORT TITLE

"SEC. 709. This title may be cited as the 'Medical Facilities Mortage Insurance Act of 1954'."

SEC. 2. (a) Section 1 of the Public Health Service Act is amended by striking out "VI" and inserting in lieu thereof "VII”.

(b) The Act of July 1, 1944 (58 Stat. 682), is amended by changing the numbers of title VII to title VIII and by changing the numbers of sections 701 to 712, inclusive, and references thereto, to sections 801 to 812, respectively.