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excess of $40,000, and (iv) 70 per centum of such value in excess of $40,000; except that in the case of rehabilitation, the foregoing limitations upon the amount

of the mortgage may, in the discretion of the Secretary, be based upon the sum of the estimated cost of rehabilitation and the Secretary's estimate of the value of the

property before rehabilitation, rather than upon the appraised value of the property;

(2) contain amortization provisions satisfactory to the Secretary requiring payments by the mortgagor not in excess of his reasonable ability to pay as determined by the Secretary and within such term not ex

ceeding 40 years as the Secretary shall prescribe; and

(3) be executed by a mortgagor who shall have paid in cash or its equivalent from his own funds or resources, on account of the property, an amount equal to the higher

of the closing costs or 3 per centum of the Secretary's

estimate of the cost of acquisition, or such larger amount

as the Secretary may require.

(c) Where the mortgage involves a one-family unit in

a condominium, the Secretary shall establish such require22 ments as he deems appropriate for the protection of the con

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sumer. The mortgage covering the condominium unit shall

24 contain such provisions as the Secretary determines to be

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1 necessary for the maintenance of the common areas and

2 facilities and the condominium project.

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(d) The mortgage shall have a principal obligation

4 not in excess of an amount equal to 85 per centum of the

5 amount computed under the provisions of subsection (b) 6 (1) if the mortgage involves—

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(1) a newly constructed dwelling which the Secretary determines has been completed within twelve months of the sale being financed with a mortgage insured under this section but which has not been

approved by the Secretary for mortgage insurance or approved by the Administrator of Veterans' Affairs for guaranty, insurance, or direct loan under chapter 37 of title 38, United States Code, prior to the beginning of construction; or

(2) a mortgagor who is not the occupant of the property, except that this requirement for a reduction in the principal obligation of the mortgage shall not be applicable where

(A) the mortgagor is in the military service and his failure to occupy the property is by reason

of his service assignment;

(B) the mortgagor and mortgagee assume responsibility, in a manner satisfactory to the Secre

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tary, for the reduction of the outstanding principal amount of the mortgage, in the event the mortgaged

property is not (prior to the date of the eighteenth amortization payment of the mortgage) sold to a purchaser acceptable to the Secretary who is the occupant of the property and who assumes and agrees to pay the mortgage indebtedness; or

(C) the mortgage covers experimental prop

erty and the Secretary approves the waiver of such requirement.

(e) The seller, builder, or such other person as the Sec12 retary may designate, shall deliver to the mortgagor (prior 13 to the completion of the sale) a written statement setting 14 forth the amount of the appraised value of the property, as 15 determined by the Secretary. Where the property is to be 16 rehabilitated by the owner thereof and the amount of the 17 mortgage is not based on the appraised value of the property, 18 the Secretary shall furnish such owner a statement of the 19 Secretary's estimate of the appraised value of the property

20 after the proposed improvements are completed.

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HOMEOWNERSHIP ASSISTANCE

SEC. 402. (a) For the purpose of assisting lower income 23 families in acquiring homeownership, the Secretary is author24 ized to make, and to contract to make, periodic assistance

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payments on behalf of such homeowners. The assistance shall

79-555 O 72-4

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1 be accomplished through payments to mortgagees holding 2 mortgages which meet the requirements of, and are insured. 3 under, this section. Assistance payments shall not be made 4 under this section (and mortgages shall not be insured un5 der subsection (h) or (i)) with respect to eight, or more 6 dwellings constructed as part of a single development unless 7 the governing body of the locality in which the develop8 ment is located has by resolution specifically approved such 9 development.

10 (b) The assistance payments to a mortgagee by the 11 Secretary on behalf of a mortgagor shall be made during 12 such time as the mortgagor shall continue to occupy the 13 property which secures the mortgage. Such payments may 14 also be made on behalf of a homeowner who assumes a 15 mortgage insured under this section with respect to which 16 assistance payments have been made on behalf of the previ17 ous owner, if the new homeowner is approved by the Secre18 tary as eligible for receiving such assistance. The Secretary 19 is also authorized to continue making assistance payments

20 where the mortgage has been assigned to the Secretary.

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(c) The assistance payment shall be in an amount not

22 exceeding the lesser of—

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(1) the balance of the monthly payment for principal, interest, taxes, insurance, and mortgage insurance

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premium due under the mortgage remaining unpaid after applying 20 per centum of the mortgagor's income; or

(2) the difference between the monthly payment for principal, interest, and mortgage insurance premium which the mortgagor is obligated to pay under the mortgage and the monthly payment for principal and interest which the mortgagor would be obligated to pay if the mortgage were to bear interest at the rate of 1 per centum per annum.

(d) The Secretary may include in the payment to the mortgagee such amount, in addition to the amount computed 12 under subsection (c), as he deems appropriate to reimburse 13 the mortgagee for its additional expenses in handling the 14 mortgage.

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(e) Procedures shall be adopted by the Secretary for 16 recertifications of the mortgagor's income at intervals of two 17 years (or at shorter intervals where the Secretary deems it 18 desirable) for the purpose of adjusting the amount of the 19 assistance payments within the limits of the formula de20 scribed in subsection (c).

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(f) The Secretary shall take such steps as he deems

necessary to assure that the sales price of, or other consider

23 ation paid in connection with, the property with respect to

24 which assistance payments are to be made is not inflated or 25 excessive.

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