2 74 1 ship acceptable to the Secretary under which each dwelling unit is individually owned and each such owner holds an 3 undivided interest in the common areas and facilities which 4 serve the project. 5 (h) The term "cooperative" means any nonprofit cor6 poration or nonprofit housing trust which has consumer7 oriented sponsorship with no identity of interest with the 8 builder, and which is organized for the purpose of con9 struction, rehabilitation, or acquisition of housing and related 10 facilities which meet one of the following requirements: 11 12 13 14 15 16 17 18 (1) the permanent occupancy of the dwelling units will be restricted to members of the cooperative; or (2) the individual dwelling units, upon completion of the construction or rehabilitation of the project, are to be sold to purchasers eligible for mortgage insurance under the provisions of section 401 or 402, with the cooperative continuing to provide community 19 facilities for the owners of such dwelling units, 20 (i) The term "experimental property" means property 21 which involves the utilization and testing of advanced tech22 nology in property design, materials, or construction, or 23 experimental property standards for neighborhood design, 24 which will provide data or experience which the Secretary 25 deems to be significant in reducing building costs or improv 75 1 ing building standards, quality, livability, or durability, or 2 improving neighborhood design. 3 (j) The term "advances" means insured mortgage pro4 ceeds advanced during construction or rehabilitation. In 5 addition to being made for the purpose of financing improve6 ments to the property and the purchase of materials and 7 building components delivered to the property, such insured 8 proceeds may, with the approval of the Secretary, be ad9 vanced for the purpose of providing funds to cover the cost 10 of building components which have been assembled and 11 specifically identified for incorporation into the mortgaged 12 property, but which are located at a site other than the 13 mortgaged property. 1 (k) The term "nonprofit", when used with respect to 2 any organization, corporation, association, sponsor, or other 3 entity, means an entity which is organized for purposes 4 other than the making of a profit or gain for itself or for 5 persons identified with it, and which is in no way controlled 6 by or under the direction of any other person seeking to 7 derive any profit or gain therefrom. 8 (1) The term "State" includes the several States and 9 Puerto Rico, the District of Columbia, Guam, and the Virgin 10 Islands. Such term may also include American Samoa, the 11 Canal Zone, Midway Island, and the Trust Territory of the 12 Pacific Islands where the Secretary determines the use of 76 1 particular mortgage insurance programs are feasible and 2 desirable. 3 (m) The term "Secretary" means the Secretary of 4 Housing and Urban Development. 5 6 GENERAL INSURANCE AUTHORITY SEC. 2. (a) The Secretary is authorized, upon applica7 tion by the mortgagee or lender, to insure mortgages and 8 loans, upon such terms and conditions as he may prescribe, 9 and to make commitments for the insuring of such mortgages 10 and loans prior to the date of their execution or disburse11 ment thereon. At any time prior to final endorsement for in12 surance, the Secretary may increase the amount of, amend, or extend any commitment, subject to the limitations on the 14 amount of the mortgage or loan in effect at the time of such 15 final endorsement. 13 16 (b) To be eligible for insurance under this Act a mort17 gage or loan shall have been made by, and be held by, 18 a mortgagee or lender approved by the Secretary as respon19 sible and able to service the mortgage or loan properly. 20 20 (c) To be eligible for insurance under this Act, the mort21 gage transaction shall be determined by the Secretary to be an 22 insurable risk. The Secretary may accept for insurance as an 23 insurable risk a mortgage transaction involving property lo24 cated in an older and declining urban area if the community 25 is carrying out or is committed to carrying out community de ICHIGAN. + 77 1 velopment activities deemed sufficient by the Secretary to 2 arrest such decline and contribute to the revitalization of the 3 4 area. FLEXIBLE MORTGAGE AMOUNTS 5 SEC. 3. (a) The Secretary shall not insure a mortgage 6 covering property in any area which exceeds, for that part 7 of the property attributable to dwelling use, the appropriate 8 prototype cost for the area (1) by more than 10 per centum 9 in the case of a mortgage insured under section 402 or sec10 tion 502 and (2) by more than 80 per centum (or such 11 lower per centum in any area as the Secretary determines 12 to be appropriate to prevent the diversion of mortgage credit 13 from moderate cost housing) in the case of a mortgage 14 insured under section 401 or section 501. 15 (b) Prototype costs shall be determined at least annually 16 by the Secretary on the basis of (i) his estimate of the con17 struction costs of new dwelling units of various sizes and 18 types in the area suitable for occupancy by persons assisted 19 under sections 402 and 502, and (ii) his determination of 20 reasonable allowances for the cost of land and site improve ments. The Secretary in determining an area's prototype 22 costs shall take into account the extra durability required 23 for economical maintenance, and the provision of ameni24 ties designed to guarantee safe and healthy family life 25 and neighborhood environment. Further, in the develop 78 1 ment of such prototypes, emphasis should be given to en2 couraging good design as an essential component of such hous3 ing and to producing housing which will be of such quality 4 as to reflect the architectural standards of the neighborhood 5 and community. The prototype costs for any area shall be6 come effective upon the date of publication in the Federal 7 Register. 8 (c) As used in this section the term "construction costs" 9 means those cost items which are normally reflected in the 10 amount of home mortgage or multifamily mortgage insured 11 under section 402 or section 502, except the costs of land 12 and site improvements. 13 14 INTEREST RATES SEC. 4. (a) The Secretary shall from time to time pre15 scribe the maximum interest rates which mortgages or loans 16 eligible for insurance under this Act may bear. The rates pre17 scribed shall be those rates which the Secretary finds neces18 sary to meet the mortgage or loan market. The Secretary 19 shall establish the maximum interest rate or rates on insured 20 mortgages at such a level or levels as will assure that dis21 counts generally do not exceed 4 per centum of the original 22 principal obligation of the mortgage. 2 23 (b) Whenever the interest rate prescribed pursuant to 24 subsection (a) exceeds 7 per centum per annum on the 25 amount of the principal obligation outstanding at any one |