132 1 to receive (in lieu of the insurance benefits prescribed in 2 section 601) an insurance payment in an amount equal 3 to the unpaid principal balance of the mortgage plus 4 5 6 7 8 9 10 11 (1) any unpaid mortgage interest; (2) reimbursement for such costs and attorney's fees as the Secretary finds were properly incurred in connection with the defaulted mortgage and its assignment to the Secretary; and (3) any proper advances of funds made by the mortgagee under the provisions of the mortgage. (b) After acquisition of the mortgage by the Secretary, 12 the mortgagee shall have no further rights, liabilities, or 13 obligations with respect to the mortgage. 14 PROJECT MORTGAGE INSURANCE CLAIM SETTLEMENT 15 SEC. 604. (a) The failure of the mortgagor to make any 16 payment due under or provided to be paid by the terms of a 17 project mortgage or loan insured under any section of title 18 V shall be considered a default under such mortgage and, 19 if such default continues for a period of thirty days, the mort20 gagee shall be entitled to receive the benefits of the insurance as hereinafter provided upon assignment, transfer, and deliv22 ery to the Secretary within a period and in accordance with 21 23 rules and regulations to be prescribed by the Secretary of 24 25 (1) all rights and interests arising under the mortgage so in default; 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 133 (2) all claims of the mortgagee against the mort gagor or others, arising out of the mortgage transaction; (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 or for the account of 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. (b) Insurance claims shall be settled by the Secretary 16 (1) by a payment to the mortgagee which, at the option of 17 the Secretary, shall be in cash or debentures or a combination 18 of cash and debentures having a total face value equal to the 19 value of the mortgage and (2) by the issuance to the mort20 gagee of a certificate of claim as provided in subsection (e). 21 Where the claim is paid in cash, it shall be in an amount 22 equivalent to the face value of the debentures that would 23 otherwise be issued plus an amount equivalent to the in24 terest which the debentures would have earned, computed to a date to be established pursuant to regulations issued by the 25 134 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: 5 (1) Items to be deducted from the original principal 6 face amount of the mortgage shall be the sum of 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (A) that part of the original principal obligation that has been repaid; (B) 1 per centum of the unpaid balance of the orig inal 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 orig inal 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 135 1 amount of the mortgage shall be the sum of such amounts which are liens prior to the mortgage; 3 (A) taxes, special assessments, and water rates. 4 5 6 བ 7 8 9 (B) insurance on the property; (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 com 24 puted pursuant to subsection (b), the Secretary, in his dis 136 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. 7 (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 expenses incurred by the mortgagee in connection with the 18 foreclosure proceedings (or the acquisition of the mortgaged property otherwise) and the conveyance thereof to the Sec 19 20 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 such certificate, an increment at the rate of 3 per centum per annum which shall not be compounded. If the net amount |