11

1 by the Secretary on the basis of (i) his estimate of the con2 struction costs of new dwelling units of various sizes and 3 types in the area suitable for occupancy by persons assisted 4 under sections 402 and 502, and (ii) his determination of 5 reasonable allowances for the cost of land and site improve6 ments. The Secretary in determining an area's prototype 7 costs shall take into account the extra durability required 8 for economical maintenance of assisted housing, and the pro9 vision of amenities designed to guarantee safe and healthy 10 family life and neighborhood environment. Further, in the 11 development of such prototypes, emphasis should be given 12 to encouraging good design as an essential component of 13 such housing and to producing housing which will be of such 14 quality as to reflect the architectural standards of the neigh15 borhood and community. The prototype costs for any area 16 shall become effective upon the date of publication in the 17 Federal Register.

18

19

(c) As used in this section the term "construction costs" means those cost items which are normally reflected in the 20 amount of a home mortgage or multifamily mortgage insured 21 under section 402 or section 502, except the costs of land

22 and site improvements.

24

INTEREST RATES

SEC. 4. The Secretary shall from time to time prescribe

25 the maximum interest rates which mortgages or loans eligible

12

1 for insurance under this Act may bear. The rates prescribed 2 shall be those rates which the Secretary finds necessary to 3 meet the mortgage or loan market; except that the rate pre4 scribed with respect to any mortgage insured under this Act 5 (exclusive of premium charges for insurance and service 6 charge, if any) after June 30, 1974, shall not exceed 6 per 7 centum per annum on the amount of the principal obligation 8 outstanding at any time (unless the commitment to insure 9 was issued on or before such date).

10

WATER AND SEWER FACILITIES

11 SEC. 5. No mortgage which covers new construction 12 shall be approved for insurance under this Act if the mort13 gaged property includes housing which is not served by a 14 public or adequate private community water and sewerage 15 system, unless the property is situated in an area where the 16 establishment of such a system is determined by the Secre17 tary not to be economically feasible and where the Secretary 18 determines that the absence of such a system will not create 19 a significant environmental hazard. The economic feasibility 20 of establishing such public or adequate private community 21 water and sewerage systems shall be determined without 22 regard to whether such establishment is authorized by law 23 or is subject to approval by one or more local governments or public bodies.

24

13

1

APPROVAL OF TECHNICALLY SUITABLE MATERIALS

2 SEC. 6. The Secretary shall adopt a uniform procedure for 3 the acceptance of materials and products to be used in struc4 tures approved for mortgages or loans insured under this Act. 5 Under such procedure any material or product which the 6 Secretary finds is technically suitable for the use proposed 7 shall be accepted. Acceptance of a material or product as 8 technically suitable shall not be deemed to restrict the dis9 cretion of the Secretary to determine that a structure, with 10 respect to which a mortgage is executed, is an insurable or 11 special risk.

121

13

CONSUMER PROTECTIONS

SEC. 7 (a) The purpose of this section is to help protect 14 the interests of homeowners, cooperative members, and 15 tenants in residential properties covered by mortgages in16 sured under this Act by requiring that specified minimum 17 standards be met and specified actions taken in connection 18 with such mortgage insurance.

19

(b) (1) Where the mortgage involves a property which 20 is approved for mortgage insurance prior to the beginning of 21 construction or rehabilitation, the seller or such other person

22

23

as may be required by the Secretary shall deliver to the

mortgagor a warranty that the property is constructed or

24 rehabilitated in substantial conformity with the plans and

14

1 specifications (including any amendments thereof, or changes

2

3

or variations therein, approved in writing by the Secretary)

on which the Secretary based his valuation of the property 4 or estimate of the cost of rehabilitation. This warranty shall 5 apply with respect to such instances of substantial noncon6 formity to the plans and specifications approved by the Sec7 retary as to which the mortgagor has given written notice. 8 to the warrantor within three years (one year in the case of 9 rehabilitation) from the date of conveyance of title to, or 10 initial occupancy of, the property, whichever first occurs, and 11 shall contain or be subject to such conditions and require12 ments, including the provision of performance bonds, letters 13 of credit, or the establishment of escrow accounts in appro14 priate cases, as the Secretary finds necessary to assure that 15 such warranty will be effectively enforceable against the 16 warrantor in accordance with its terms. The warranty re17 quired by this paragraph shall be in addition to, and not in 18 derogation of, all other rights and privileges which the mort19 gagor may have under any other law or instrument. The 20 Secretary is directed to permit copies of the plans and 21 specifications (including any amendments thereof, or changes

22

2 23

or variations therein, approved in writing by the Secretary) 23 for the properties covered by warranties under this para24 graph to be made available in the appropriate local offices 25 for inspection or for copying by any mortgagor or war

15

1 rantor during such periods of time as the Secretary deems

2 reasonable.

3 (2) Except in the case of experimental property, a 4 mortgage or loan secured by residential property may be, 5 insured under this Act only where the Secretary finds by 6 inspection that such property meets the requirements of all 7 State laws, or local ordinances or regulations, relating to the 8 public health or safety, which may be applicable thereto, 9 and that there exist no structural or other defects which 10 seriously affect the use and livability of the property.

11

(3) Where the mortgage involves multifamily housing, 12 the Secretary shall require the mortgagor to be regulated 13 or restricted as to rents or sales, charges, capital struc14 ture, rate of return, and methods of operation to such extent 15 and in such manner as to provide reasonable rentals to 16 tenants and a reasonable return on the investment. Any in17 crease in rentals by the mortgagor shall be made only after 18 reasonable notice has been given the tenants setting forth 19 the basis for such increase, and such increase shall be review20 able by the Secretary for compliance with this paragraph. 21 Such regulation and restriction shall remain in effect until

2 2

22 termination of all obligations of the Secretary under the 23 mortgage insurance and during such further period of time 24 as the Secretary shall be the owner, holder, or reinsurer of

25 the mortgage.