§ 222.254 Prepayment premiums.

(a) The service branch shall have the responsibility for payment of all adjusted premium charges which are due and payable to the Commissioner upon the prepayment of an insured mortgage during the period of ownership by the serviceman. The mortgagee shall be responsible for payment of any such adjusted premium charge upon prepayment of an insured mortgage after the mortgagee has been notified by the Commissioner that the period of ownership by the serviceman has been terminated.

(b) In the event that the principal obligation of any mortgage accepted for insurance is paid in full prior to maturity, the mortgagee shall within 30 days thereafter notify the Commissioner of the date of prepayment and shall pay to the Commissioner an adjusted premium charge of 1 percent of the original principal amount of the prepaid mortgage: Provided, That when such payment in full prior to maturity occurs during the period of ownership by the serviceman the adjusted premium charge shall be paid to the Commissioner by

the service branch.

(c) In no event shall the adjusted premium exceed the aggregate amount of premiums which would have been payable if the mortgage had continued to be insured until maturity.

(3) Where the final maturity specified in the mortgage is accelerated solely by reason of payments to principal to compensate for

(i) Damage to the mortgaged property;

(ii) The conveyance of the mortgaged property pursuant to condemnation proceedings or in lieu of condemnation proceedings; or

(iii) A release of a part of such property if approved by the Commissioner: (4) Where payment in full is made pursuant to a court order or of a delinquent mortgage on which foreclosure proceedings have been commenced, or for the purpose of avoiding foreclosure, if the transaction is approved by the Commissioner.

§ 222.255

Pro-rata refund in the event of prepayment.

Upon such prepayment the contract of insurance shall terminate and the Commissioner will refund to the service branch or to the mortgagee, as the case may be, for the account of the mortgaportion of the current annual mortgage gor an amount equal to the pro-rata insurance premium and insurance charge in the case of open-end advances theretofore paid which is applicable to the portion of the year subsequent to such payment, computed from the first day of the month following the month

(1) Where at the time of such prepayment there is placed on the mortgaged property a new insured mortgage;

(2) Where the final maturity specified in the mortgage is accelerated solely by reason of partial prepayments made by the mortgagor which do not exceed in any one calendar year 15 percent of the original face amount of the mortgage, plus any increased amount resulting from open-end advances made pursuant to § 203.44 of this chapter.

vided, That no such refund will be made in any case where the prepayment occurs in the twelfth month of the premium year.

(b) Provisions applicable to condominium units. Where the mortgage involves a condominium unit, the Commissioner shall not object to title by reason of the following matters:

(1) Violations of a restriction based on race, color or creed, even where such restriction provides for a penalty of reversion or forfeiture of title or a lien for liquidated damage.

(2) Easements for public utilities along one or more of the property lines, provided the exercise of the rights thereunder do not interfere with any of the buildings or improvements located on the subiect property.

(3) Encroachments on the subject property by improvements on adjoining property, provided such encroachments do not interfere with the use of any improvements on the subject property.

(4) Variations between the length of the subject property lines as shown on the application for insurance and as shown by the record or possession lines, provided such variations do not interfere with the use of any of the improvements on the subject property.

(5) Customary buildings or use restrictions for breach of which there is no reversion and which have not been violated to a material extent. Added: August 4, 1969

SPECIAL PROVISIONS APPLICABLE ONLY TO MORTGAGES INVOLVING CONDOMINIUM UNITS

§ 222.265 Changes in the plan of apartment ownership.

The mortgagee shall notify the Commissioner of any changes in the plan of apartment ownership and in the administration of the property. Such notification shall be given either at the time of the conveyance of the property or at the time of the assignment of the mortgage. Any changes in such plan shall require approval by the Commissioner. Added: August 4, 1969

(a) When a family unit is conveyed or a mortgage is assigned to the Commissioner, the family unit and the common areas and facilities (including restricted common areas and facilities) designated for the particular unit shall be undamaged by fire, earthquake, tornado, or boiler explosion, except if the property has been damaged, either of the following actions shall be taken:

(1) The property may be repaired prior to its conveyance or prior to the assignment of the mortgage to the Commissioner.

(2) With the prior approval of the Commissioner, the property may be conveyed or the mortgage assigned to the Commissioner without repairing the damage. In such instances, the Commissioner shall deduct from the insurance benefits either his estimate of the decrease in value of the family unit or the amount of any insurance recovery received by the mortgagee, whichever is is the greater.

(b) If the property has been damaged by fire and such property was not covered by fire insurance at the time of the damage, the mortgagee may convey the property or assign the mortgage to the Commissioner without deduction from the insurance benefits for any loss occasioned by such fire if the following conditions are met:

(1) The property shall have been covered by fire insurance at the time the mortgage was insured.

(2) The fire insurance shall have been later canceled or renewal shall have been refused by the insuring company.

(3) The mortgagee shall have notified the Commissioner within 30 days (or within such further time as the Commissioner may approve) of the cancellation of the fire insurance or of the refusal of the insuring company to renew the fire insurance. This notification shall have been accompanied by a certification of the mortgagee that diligent efforts were made, but it was unable to obtain fire insurance coverage at reasonably competitive rates and that it will continue its efforts to obtain adequate fire insurance coverage at competitive rates. Added: August 4, 1969

§ 233.1 Scope of subpart.

Mortgages and loans financing construction or rehabilitation of one- to four-family dwellings (or one- to elevenfamily dwellings in the case of mortgages or loans meeting the requirements of section 220 of the Act) and which involve the utilization and testing of advanced technology in housing design, material or construction or experimental property standards for neigborhood design, 'may be insured under section 233 of the Act. To be eligible, a mortgage or loan shall also meet the requirements of the applicable home mortgage or home improvement loan program under section 203, 213, 220, 221 or 234 of the Act.

§ 233.5 Incorporation by reference.

(a) To be eligible for insurance under this subpart, a mortgage or home improvement loan shall meet the eligibility

requirements for insurance under § 203.1 et seq. (Part 203, Subpart A); § 213.501 et seq. (Part 213, Subpart C); § 220.1 et seq. (Part 220, Subpart A); § 221.1 et seq. (Part 221, Subpart A); § 234.1 et seq. (Part 234, Subpart A); § 235.1 et seq. (Part 235, Subpart A); § 237.1 et seq. (Part 237, Subpart A); or § 809.1 et seq. (Part 809, Subpart A) of this chapter, except that:

Amended; October 28, 1968

(1) The prescribed tests of economic soundness or acceptable risk shall not be applicable.

(2) In lieu of establishing mortgage limits upon the basis of a percentage of the Commissioner's estimate of appraised value, or replacement cost, or cost of repair and rehabilitation, as required by the applicable section under which the mortgage or loan would otherwise be eligible, the mortgage limits shall be determined by applying the percentage prescribed by the pertinent section to the following:

(i) In cases involving new construction, such percentage shall be applied to the Commissioner's estimate of the cost of replacing the property using comparable conventional design, materials, and construction, or of using advanced housing technology or experimental property standards, whichever is the lesser.

(ii) In cases involving repair and rehabilitation, such percentage shall be applied to the sum of:

(a) The Commissioner's estimate of the value of the property before repair and rehabilitation; plus

(b) The lesser of either the Commissioner's estimate of the cost of replacing

the improvements using comparable conventional design, materials, and construction, or of using advanced housing technology or experimental property standards.

(3) The limitations upon maximum mortgage amount in a case involving a nonoccupant owner shall not be applicable.

(4) In cases involving home improvement loans, instead of establishing mortgage limits upon the basis of the Commissioner's estimate of the cost of such improvements, the limits shall be determined on the basis of the Commissioner's estimate of the cost of replacing the improvements using comparable conventional design, materials, and construction, or of using advanced housing technology or experimental property standards, whichever is the lesser.

(b) For the purposes of this subpart, all references in Parts 203, 213, 220, 221, 234, 235, 237, and 809 of this chapter to sections 203, 213, 220, 221, 234, 235, 237, and 809 of the National Housing Act shall be construed to refer to section 233 of the Act.

Amended: October 28, 1968

§ 233.15 Eligible property require

ments.

To be eligible for insurance:

(a) The mortgage or home improvement loan shall relate to property involving the utilization and testing of ad

vanced technology in housing design, material, or construction, or experimental property standards for neighborhood design.

(b) The Commissioner shall make determinations as follows:

(1) That the property is an acceptable risk, giving consideration to the need for testing advanced housing technology or experimental property standards.

(2) That the utilization and testing of the advanced technology or experimental property standards involved will provide data or experience which the Commissioner deems to be significant in reducing housing costs or improving housing standards, quality, livability, or durability or improving neighborhood design.

(c) The dwelling shall be approved for insurance by the Commissioner prior to the beginning of construction or repair, rehabilitation or improvement.