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1 Secretary. For the purposes of this section, the value of the 2 mortgage shall be determined by adding and deducting the 3 items specified herein from the original principal face amount 4 of the mortgage as follows:

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(1) Items to be deducted from the original principal

6 face amount of the mortgage shall be the sum of—

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(A) that part of the original principal obligation that has been repaid;

(B) 1 per centum of the unpaid balance of the original principal obligation, except that the Secretary may waive all or a part of the 1 per centum deduction, where the assignment is made at his request in lieu of foreclosure of the mortgage;

(C) net income received by the mortgagee from the property;

(D) any balance of the mortgage loan not advanced to or for the account of the mortgagor and which is not

delivered to the Secretary; and

(E) 2 per centum of the unpaid balance of the original principal obligation if the mortgagee failed to request

an extension of the time for the curing of the default and, where appropriate, a modification of the terms of

the mortgage.

(2) Items to be added to the original principal face

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1 amount of the mortgage shall be the sum of such amounts

which are liens prior to the mortgage;

(B) insurance on the property;

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(A) taxes, special assessments, and water rates.

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(C) reasonable expenses for the completion and preservation of the property; and

(D) mortgage insurance premium.

(c) At the option of the mortgagee, in the event of a 10 default under the mortgage, and in a period to be established 11 by regulations of the Secretary, the mortgagee may foreclose 12 on and obtain possession of or otherwise acquire the mort13 gaged property and convey title to the property to the 14 Secretary. The mortgagee shall also assign to him all claims 15 of the mortgagee against the mortgagor or others, arising out 16 of the mortgage transaction or foreclosure proceedings, ex17 cept such claims that may have been released with the con18 sent of the Secretary. Upon such conveyance and assignment, 19 the mortgagee shall be entitled to receive the benefits of the 20 insurance as provided in subsection (b), except that the 1 21 per centum deduction, set out in subsection (b)(1) (B), 22 shall not apply.

23 (d) In lieu of the amount of insurance benefits com24 puted pursuant to subsection (b), the Secretary, in his dis

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1 cretion, may (with respect to a mortgage loan acquired by 2 him) compute and pay insurance benefits to the mortgagee 3 in a total amount equal to the unpaid principal balance of 4 the loan plus any accrued interest and any advances approved 5 by the Secretary and made previously by the mortgagee 6 under the provisions of the mortgage.

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(e) The certificate of claim issued under this section 8 shall be for an amount which the Secretary determines to be 9 sufficient, when added to the face value of the debentures 10 issued and the cash paid to the mortgagee, to equal the 11 amount which the mortgagee would have received if, on the 12 date of the assignment, transfer and delivery to the Secretary 13 provided for in subsection (a), or conveyance as provided 14 for in subsection (c), the mortgagor had extinguished the 15 mortgage indebtedness by payment in full of all obligations 16 under the mortgage and a reasonable amount for necessary

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expenses incurred by the mortgagee in connection with the 18 foreclosure proceedings (or the acquisition of the mortgaged

19 property otherwise) and the conveyance thereof to the Sec

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retary or incurred by the mortgagee in connection with the 21 assignment of the mortgage to the Secretary. Each such cer22 tificate of claim shall provide that there shall accrue to the 23 holder of such certificate, with respect to the face amount of 24 such certificate, an increment at the rate of 3 per centum per 25 annum which shall not be compounded. If the net amount

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1 realized from the final liquidation of the mortgage, and all 2 claims in connection therewith, so assigned, transferred, and 3 delivered, and from the property covered by such mortgage 4 and all claims in connection with such property and from any 5 mortgage taken in the sale of such property (after deducting 6 all expenses incurred by the Secretary in handling, dealing 7 with, acquiring title to, and disposing of such mortgage and 8 property and in collecting such claims) exceeds the face 9 value of the debentures issued and the cash adjustment paid 10 to the mortgagee plus all interest paid on such debentures, 11 such excess shall be divided as follows:

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(1) If such excess is greater than the total amount

payable under the certificate of claim issued in connection with such property, the Secretary shall pay to the holder of such certificate the full amount so payable,

and any excess remaining thereafter shall be retained by

the Secretary and credited to the appropriate insurance fund.

(2) If such excess is equal to or less than the total amount payable under such certficate of claim,

the Secretary shall pay to the holder of such certificate.

the full amount of such excess.

MODIFICATIONS IN TERMS OF PROJECT MORTGAGES

SEC. 605. (a) The Secretary shall not consent to any

25 request for an extension of the time for curing a default under

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1 any insured project mortgage or project mortgage held by

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him or for a modification of the terms of such mortgage, ex

3 cept in conformity with regulations prescribed by the Secre4 tary in accordance with the provisions of this section. Such 5 regulations shall require, as a condition to the granting of 6 any such request, that, during the period of such extension 7 or modification, any part of the rents or other funds derived 8 by the mortgagor from the property covered by the mortgage

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which is not required to meet actual and necessary expenses 10 arising in connection with the operation of such property, 11 including amortization charges under the mortgage, be held 12 in trust by the mortgagor and distributed only with the con13 sent of the Secretary; except that the Secretary may provide 14 for the granting of consent to any request for an extension of 15 the time for curing a default under any project mortgage or 16 for a modification of the terms of such mortgage, without 17 regard to the foregoing requirement, where an exemption 18 from such requirement does not (as determined by the 19 Secretary) jeopardize the interest of the United States. 20 (b) Whoever, as an owner of a property which is secu21 rity for a mortgage described in subsection (a), or as a stock22 holder of a corporation owning such property, or as a bene23 ficial owner under any business organization owning such 24 property, or as an officer, director, or agent of any such 25 owner, (1) willfully uses or authorizes the use of any part

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